Automotive

The sector is undergoing major changes and needs to overhaul its operational chain

Context

Recent events have transformed this industry in unprecedented ways:

  • The crisis at the end of 2008 and the beginning of 2009 fundamentally altered the positioning of the principal players, characterized by a long crisis for US manufacturers (who are now recovering), a slowdown for the Japanese manufacturers (in particular, Toyota), strong resistance from the Europe an industry (especially the German makes and Fiat), and the strong growth of new players in the emerging countries (Tata and FAW)
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  • The shifting of demand from the traditional consumer countries (the United States and Europe) toward the emerging countries (particularly China, India, and South America) will lead to a significant relocation of industrial and development resources, not for low-cost production, but rather to be closer to demand
  • The need for the automotive industry to adapt to the constraints imposed by sustainable development is leading manufacturers to experiment with technological solutions that are very different from one other and are extremely risky (for example, electric cars)
  • The overhaul of market segmentation has resulted in the emergence of a low cost segment, including in Western Europe, the strengthening of the premium segment with attractive margins, and ferocious competition in the mid-range segment
  • Finally, increasing demand from Western consumers has given rise, on the one hand, to increasing vehicle customization and, on the other hand, to a gradual shift from product sales to the sale of services including, in particular, long-term comprehensive warranties, specific services for electric vehicles, pay per use, etc.

All of these developments are putting pressure on companies, for which cost optimization and margin control have become major issues.

Challenges

The challenges facing manufacturers

These major trends have left manufacturers facing numerous operational challenges. For example:

  • Innovation performance has become a major strategic issue in terms of strategic choices, speed, and efficiency. The management of innovation, development, and industrial manufacturing resources on a global scale represents a key lever affecting this performance. What skills, in which geographical region, and for which product development strategy? How should resources and projects be assigned? How can critical resources be rapidly deployed for priority projects? How can teams based all over the world work together effectively?
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  • Management of manufacturing capacity on a global scale has become even more complex: what investments must be made, in which emerging zones, and for which market and product family? What can be done about the issue of overcapacity in the West (reduction, flexibility, or productivity)? What is the right balance between localization and relocation, in view of increasing transport costs and service constraints?
  • The supply chain of new vehicles needs to be optimized further in order to reconcile increasing product complexity, globalization, and control of customer lead times, which are still long in spite of overcapacity; how can added value be shared with suppliers? What is the decoupling point between stocks and order allocation? What compromises should be made between assembly line costs and flexibility?
  • After-sales service is now a differentiating factor, but remains an important source of profitability; how is globalization impacting after-sales and, in particular, the spare parts distribution logistics networks - which have always been continental - and how can they be managed in order to improve availability and efficiency?

The challenges facing equipment suppliers

The challenges facing equipment suppliers in terms of innovation and industrial strategy are comparable to those manufacturers are facing, even if their industrial strategy is interconnected with that of their customers.
Supply chain performances remain very inconsistent between the different equipment suppliers as, despite the sector’s maturity, some of them still have significant room for improvement, whether in terms of stocks, particularly components, or production costs.

How can Argon Consulting help you?

We help manufacturers and equipment suppliers undergo the transformation required to meet the various challenges facing them, from assessing the issues in question to implementing all operational performance levers, by:

  • Managing and optimizing engineering resources (R&D Supply Chain), efficiency of innovation processes,  and lean engineering
  • Purchasing and optimizing the upstream supply chain (sourcing strategy, control of supplier performance, reduction of component stocks, deployment of VMI, and procurement performance in general)
  • Supply chain planning for the final production plants (forecasts, multi-site planning, capacity planning and optimizing the vehicle schedule list, and optimizing re-scheduling resources) or component factories (management of demand from assembly plants, capacity planning, etc.)
  • Controlling just-in-time and synchronous flows
  • Industrial performance and lean management (shorter, more reliable cycles and cost cutting)
  • Maintaining industrial equipment
  • Optimizing vehicle distribution logistics
  • Optimizing the spare parts supply chain, namely the spare parts service offering, target spare parts logistics plan, spare parts supply chain planning, stock reduction, and the efficiency of transport and warehouse logistics processes

 

Argon Consulting’s clients include:

Valeo, Michelin, Hutchinson, FIAT Group

Case Studies

Development of a stock reduction program
Identify the paths of improvement of industrial performance for an automotive equipment supplier
Assisting a car manufacturer in securing the industrial phases when launching new models
Boost performance by cutting stocks and improving the service rate by overhauling the processes and deploying supply chain planning tools