Making demands

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Cup holders, custom wheels, CD players, and spoilers are just a few of the options available in today’s increasingly customised automobile. With consumers demanding more and different options for their cars, trucks, vans, and sport-utility vehicles, automobile manufacturers are challenged to do a better job of forecasting demand, or risk upsetting a customer and losing a sale. Adding even more complexity to auto accessory demand forecasting, many accessories are installed on new automobiles at post-manufacturing centres. These centres are high-volume operations where having the right parts on hand is critical – just one unavailable accessory can bring the entire production process to a standstill.

With more than 1,200 accessory part numbers, Toyota Motor Sales, USA, understood the challenges intrinsic in providing the level of options that its customers demand. Toyota was experiencing greater business complexity and increased business volume regarding new models and parts. The spreadsheetbased system Toyota used to manage its supply chain processes was less than optimal. Toyota’s accessory supply administrators had to go into the spreadsheets to manually enter and extract critical vehicle information. The company then created several generations of spreadsheets that were used toforecast individual parts for vehicle options.

Toyota recognised that the process was inefficient and needed to be updated in order to maintain its competitive advantage. ‘We were looking to improve the system that was in place,’ says Joe Cammiso, Accessory Supply Manager for Toyota. ‘We recognised that other companies were most likely working with a more advanced system than we had in place.’

Automating forecasting
In order to improve forecast accuracy, Toyota executives determined that they needed to embark on a value chain initiative, focusing on supply chain management, which would drive inefficiencies out of the supply chain by automating the forecasting process. Streamlining Toyota’s internal processes was vital to achieving the automaker’s key goals: obsolescence reduction, inventory reduction, and premium freight reduction. A supply chain initiative would enable Toyota to handle its existing part numbers while also accommodating new part numbers and accessories. The end result was a positive impact on the automaker’s bottom line.

Embarking on a supply chain initiative in a company the size of Toyota required extensive research and thoughtful consideration. The original ideas for acquiring a demand planning solution began to germinate as far back as 1997. For several years, Toyota executives debated whether it could be done in-house. The decision-makers at Toyota came to the conclusion that i2 had the best supply chain technology on the market – and the best solutions to meet the complexity of their requirements.

‘We had managers who had previous i2 experience on the technical side. The familiarity with the product and the people was a motivating factor in our decision to go with them,’ states Cammiso.

Toyota chose i2 Demand Planner™ as the solution to forecast future demand for its automotive parts and accessories. Demand Planner provides an environment that combines the best statistical techniques, unlimited causal factors, and the ability to manage multiple inputs with best-in-class, multidimensional data representation and analysis in a user-friendly manner. With Demand Planner in place, Toyota’s Talon Project, which is designed to forecast and order accessories that primarily go on the vehicle after it has been manufactured, can now pull parts automatically.

‘Our parts and accessories range from something as simple as a cargo net that fits a series of vehicles to something as specific as a spoiler, which fits a specific colour and model of vehicle,’ Cammiso explains. ‘To predict future demand, we have to look at a lot of data with regard to what vehicles have been built and wholesaled in order to tie that vehicle to the products that are applicable to it. Then we have to look at future vehicle data to try to make a judgment on what the future demand would be for that product. Now,with Demand Planner in place, we are freeing up time in data-gathering and dataentry procedures that allows us to be more strategic.’

Through the Demand Planner implementation, Toyota’s forecasters now have more time to accomplish the primary functions of their jobs without being hindered by manual data-gathering and dataentry.

More time available
‘From a broad scope, the efficiency that we’ve seen allows our administrators to spend more time analysing data rather than gathering and key punching data,’ claims Cammiso. ‘Demand Planner allows them to get more deeply into what their intended function is and was always supposed to be.’ This increased time for analysis is enabling Toyota’s forecasters to get to the heart of what is driving demand. ‘It allows them to investigate issues that they identify during the ordering process that previously they might not have had sufficient time to look into,’ he adds. ‘They can contact the appropriate people and get more background as to what might be driving demand in a certain direction.’

This was something that was nearly impossiblefor Toyota before the implementation of Demand Planner. ‘Before, time constraints didn’t allow them to dig more deeply into a specific problem – Now they can analyse part numbers more effectively,’ Cammiso emphasises. Toyota’s Demand Planner implementation has also brought sweeping changes to Toyota across departments.

‘We’ve experienced an overall process change within the division that allows more formal regular communication among other groups. By freeing up time previously spent on data-gathering and data entry procedures, we’re allowing for greater overall communication within our group and between the supply, marketing, and sales groups, and even the purchasing department.’

Hidden parts, hidden costs

Uncovering the hidden cost of parts. By Philippe Lasnier

Although forecast planning is a key criteria for the automotive industry and helps to keep inventory levels steady, there appears to be another problem that is keeping the industry awake at night and this is the hidden costs of parts.

Many companies see it as important and strategic to introduce new parts that are technically superior or functionally different, yet this is costing car manufacturers $4000 – $22,000 per part due to the hidden costs associated with ongoing supplier relations, contract renewals, administration and invoicing.

By buying from the same supplier, who will usually have suitable substitutes or duplicate products, automotive companies can reduce their parts, and associated hidden costs, by up to 40 per cent, yet many are failing to benefit from such savings as they do not have the ability to analyse and fully understand their parts use. Parts information is often spread across multiple, disparate enterprise systems, giving manufacturers a blurred view of what parts are being bought and why. As a result, designers are not challenged when they introduce new parts and the bill of materials steadily grows, resulting in many companies missing out on the huge opportunity to cut costs because they do not have the information that they need to identify, let alone tackle the problem.

In order to stop their profits driving out of control, businesses must begin to look at the options available that will effectively help them to analyse their parts usage and make more strategic sourcing decisions. Such solutions, when integrated with existing business applications, can be used to: Centralise all parts information from all engineering groups in all countries and for all vehicle models; provide accurate and up-todate bills of materials at individual part level across multiple divisions and countries; and categorise all parts according to factors such as price, specification, hazardous material content, supplier reliability and availability.

These parts reuse and source applications to provide an invisible hand – guiding engineering teams to use parts that are commercially right for the business. With a clear view of parts purchased, engineers are therefore encouraged to remove duplications and buy more products from preferred suppliers.

There are also many other benefits that can be gained from parts reuse and sourcing solutions. Engineers can use them to conduct part searches and compare features. This saves valuable time and can lead to decreased design cycle time and faster introductions of new models. The greater visibility of parts and the reduction in the number of suppliers also reduces the supply risk.

The benefits and cost savings are there to be uncovered. But they will remain inaccessible, until automotive manufacturers put proper solutions in place to gain accurate and meaningful information about their parts. With hidden parts, there will always be hidden costs.

Philippe Lasnier is a solution specialist with i2 in Europe

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