If you’re an automotive manufacturer, you may be asking yourself, “Why is it so difficult to get an accurate demand forecast?”
Lots of reasons. First of all, demand forecasting is inherently challenging. But now with the global chip shortage, supply chain disruptions, and demand volatility, it can feel like your team is just guessing to come up with demand forecast numbers.
Unfortunately, when demand forecasts are inaccurate, inventory and production problems become very real very quickly. Overproduction creates additional inventory carrying costs and risks. Underproduction may carry fines and puts your relationship with your customer at risk.
S&OP for Automotive
More automotive manufacturers are shifting to a Sales & Operations Planning (S&OP) model. Rather than using annual or semi-annual production plans, S&OP is an iterative process that gets your teams and data pulled together to produce new demand numbers monthly.
As our S&OP team says, “Automotive manufacturers are finding themselves always in firefighting mode, continually solving one problem after the next. With S&OP, instead of putting out fires, you’re preventing them.”
Companies embrace S&OP when they want to become more proactive. The S&OP process essentially becomes the rhythm of the business, like a drumbeat, keeping everyone moving at a steady, sustainable pace.
Using IHS (Information Handling Services) data with S&OP
One of the challenges of any planning process is that your plan is only as good as the data it is based on. It’s easy to lose sight of the big picture, and that’s where a subscription to a data service can help.
The challenges of getting good suppler forecasting data are that:
- Each destination has unique complexities and supply chain issues.
- Planners frequently have different philosophies about safety stock and replenishment inventory.
- Your destination inventory planning system could be calculating values using outdated settings or for different geography.
The point is that data is going through a series of subjective and objective evaluation processes before it gets into your S&OP plan. Industry data comes straight from the destination itself, enabling you to get a reality check on your EDI/supplier forecasts.
When you know that 300 cars of this make and model are being built every day, and you know you supply 50% of these 3 components, you can do the math that tells you how many parts to produce. You can use these numbers to question your supplier forecast to arrive at a more accurate demand forecast.
Getting started with S&OP
If you’re curious whether Sales and Operational Planning processes could work for your business - or you’d like to incorporate more advanced S&OP techniques - reach out to our team. MCA Connect is a manufacturing consultancy and technology integrator that helps manufacturing companies improve business outcomes using world-class processes, like S&OP. We align people, processes, and technology to maximize operational efficiencies, and we have a talented pool of S&OP manufacturing experts ready to help.