Automotive : Cutting Stock

Development of a stock reduction program
Case study
07/16/2015

Context and challenges

Our customer is a leading player in the automotive industry, who has been faced with a deterioration in stock levels for several years. Moreover, they have also observed a significant difference in performance in comparison with their main competitors who, for comparable activities, have stock coverage that is globally 20% lower. In an effort to improve the cash position in order to fund an ambitious plan for growth (industrial capital layout), Group management decided to launch a program to reduce stocks by 20% (i.e.,
more than €700 million) in three years.
To begin with, our customer asked each of the 15 business units to draw up an action plan to optimize their stock levels.
Once consolidated, these plans only reduced the stocks by one half of the target set by management.
Our customer decided to call on Argon Consulting to help some of the main business units to challenge their plans and to identify the additional levers required to achieve the target.

Approach and methodology

To begin with, in just a few weeks, Argon Consulting diagnosed the practices together with the key players from Production, Supply Chain, Marketing and Manufacturing. The main points covered by the diagnostic were:

  • Measurement of the performance of the current processes and any gaps with best practices
  • The identification of the impact and the feasibility of the implementation of a finite capacity planning tool on the existing organization and information systems
  • The identification of the impacts of the deployment of a new planning system, in terms of change management and needs for support
  • Construction of an implementation project plan: project team, internal and external contributors, key milestones and control mechanisms

A production process prototype was developed with a publisher of finite capacity planning and production scheduling solutions. Further to the process diagnostic, this prototype allowed us to:

  • Demonstrate the relevance of planning with constraints
  • Persuade management of the feasibility and the relevance of the initiative, despite the significant number of constraints to be modeled in the production process

The site approved the recommendations made by Argon Consulting: implementation of a 6-month change process covering mainly:

  • The re-engineering of business processes for forecasting, tactical and operational planning and the management of technical production data
  • The collection or production of technical manufacturing data
  • The implementation of a planning tool with constraints
  • Support in business change management

The deployment was organized around three projects:

  • The information system and interfaces, and data preparation
  • Overhaul of the business processes
  • Change control and management

Results

The transformation of site planning processes and tools enabled the site to professionalize its practices and to federate the different players around coherent data, rather than the previous individual monitoring processes.
The planning unit and the management team now have reliable information on the overload of critical means of production (personnel and equipment), which enables them to:

  • Validate the deadlines proposed to customers
  • Anticipate peaks in workload, identify medium- and short-term room for maneuver and better anticipate capital outlay needs
  • Better manage imponderables resulting from customer priorities

“Argon Consulting helped us to get to the essential point and to finally reap the rewards of finite capacity planning. Their consultants were determined to understand the specifics of our production processes and they were prepared to cooperate closely with our staff. This was the key factor in the success of the project.”