Automotive : Supply Chain Planning

Boost performance by cutting stocks and improving the service rate by overhauling the processes and deploying supply chain planning tools
Case study
07/16/2015

Context and challenges

Our customer is a leading automotive equipment supplier, who observed high stock levels and an inappropriate distribution of stocks between all the distribution centers, plus a service rate that was not befitting of the resources deployed.

A benchmark of the correlation between the stock volumes and the service rate confirmed the findings of the diagnostic and revealed the need for urgent transformation actions, especially since the Group’s worldwide presence was expanding and it needed to stay abreast of the competition, in particular in emerging countries.

Moreover, the customer wanted to capitalize on the project of supply chain planning (process and system) overhauling which had been realized by one of its main business units and that was starting to bear fruit after a ramp-up lasting several quarters.

Our customer then decided to review the supply chain processes and the tools that support them in all the business units in order to adopt best practices.

Against this backdrop, the company launched a major program with the following operational targets:

  • Implement multi-level DRP, with integrated management of standardized stock targets and the operational deployment of stocks
  • Empower the factories for their service rate and stock levels
  • Simplify article codification
  • Provide broader and shared visibility of management data (stock, service rate, etc.)

The purpose of the program is to make stock gains, improve service rates and facilitate the harmonization of processes, organizations and tools.

Approach and methodology

The customer called on Argon Consulting to provide assistance with their transformation plan. The success of this assignment demanded expert knowledge of supply chain processes and systems and the capacity to work in an international context.

The first step consisted in defining harmonized target processes.

The project team conducted a comprehensive review of the processes within the project scope : forecasting and demand management, S&OP, stock management, deployment, production planning, economic controls and links with the execution processes (order to cash, production, transport).
A number of workshops analyzed the existing situation and defined the target processes. The most important challenge in this phase consisted in harmonizing the practices of the Group’s various business units.

Design of the target processes :

  • Based on internal and external benchmarks to contribute to the improvement of performance in the new organization
  • Systematically aimed at enhancing collaboration between players for quick and efficient decisionmaking cycles
  • Aimed at facilitating arbitration, for example in decisions to redeploy stocks in the distribution network

In the second phase, the project team helped the IT staff to select the ERPs and build systems solutions, so that the tools were aligned with the target processes.

On the basis of the definition of the target processes, the selection of the tools had three goals :

  • To support the new functional needs identified by the definition of the target processes
  • To guarantee a better transfer of information and frequent updates
  • To improve visibility and access to the information

The third phase consisted in deploying the new processes and the information system in all the business units and zones concerned.

This complex worldwide deployment demanded an in-depth understanding of the tools in the various geographical regions, in particular for the integration and migration strategy.

Another significant challenge consisted in making teams from different cultures and in different time zones work together, while sticking to the overall schedule.

The transition to the target model was organized into several tightly synchronized sub-projects :

  • Ramp-up of the applications
  • Deployment of new codifications
  • Change management

Results

Right from the first deployments, the performance of supply chain controls improved significantly through improved visibility and data quality. Decision-making and arbitration were facilitated and decentralized through a more collaborative approach. Finally, exchanges within and between the business units were made easier through the harmonized processes.

After 2 years :

  • Measured stocks had dropped by 20%
  • The service rate had improved significantly throughout the network, including a 5-point increase for products with high added value
  • The operating budget of the information systems had dropped substantially, mainly thanks to the rationalization of the tools and shared application support