Considerable cost savings through collaborative S&OP
Status: Production for the world market
A Japanese automobile manufacturer with a special focus on the North American market uses North American plants to meet demand in the local market and for worldwide export.
Challenge: Low flexibility and long delivery times
Whether it’s the financial crisis, the diesel scandal, incentive-driven additional sales, or global trade wars: the plans of automobile manufacturers are subject to numerous political, social and, of course, economic factors that cannot always be fully planned and predicted. In the automotive industry, long-term and resilient sales planning is essential—regardless of cause of the market changes. This is where the foundation is laid for later planning processes such as purchasing negotiations with suppliers or the dimensioning of internal production capacities. If production planners are unable to initiate immediate packages of measures due to a lack of information and transparency, the result is incorrect, unadjusted market inventories and thus a long period of capital commitment, reduced flexibility in the markets, and often reduced earnings due to sales with marketing campaigns and other incentives.
In the case at hand, the customer had low ordering flexibility and long delivery times over and above the general challenges, which led to high opportunity costs.
Solution: Customized S&OP
Introduction of a collaborative S&OP involving sales, production, product planning, and logistics in 2018.
Every flexis customer solution is based on an in-depth analysis phase, in which all of the company’s interrelationships and processes are considered. In this case, the flexis experts first clarified which basic planning tasks a solution should support and then developed a customized software concept for the participating business units. The ultimate solution supports the planners in answering the following questions:
- Which products with which features will I sell in the future?
- Which product will I sell when, in which market and with which configurations?
- Which product will I produce when and where, and with which volume in order to optimally serve the respective markets?
- What capacities do I have to provide and can I serve the markets flexibly and reliably with the fastest possible lead times without excess stocks?
- Where are my requirements and my capacities not in balance?
- Which of my monthly plans or alternative scenarios are the most profitable?
- How can I utilize all my production facilities to capacity in a way that allows me to best serve all markets by shifting?
- How can I optimize my planning—including all sales investments and capacity investments—and thus ideally align KPIs such as inventory reach in the market, inventories in the supply chains, turnover rate, and delivery times?
In order to improve and optimize all these factors, proven flexis software modules were adapted and rolled out in the following areas to facilitate ideal business process
- Sales planning with forecasting for the markets and intelligent ordering at the plants
- Sales/Customer Ordering to optimally satisfy market / customer requirements
- Production planning to provide an ideal profitable production program
- Capacity planning in-house and for the supply network to provide ideal capacities and flexibility and to generate coordinated working time models
- Logistics planning to ideally plan the flow of goods between plants and markets
The result was a comprehensive, highly flexible Sales & Operations planning solution that can be easily extended. The various functional software components are now used to plan demand-oriented material requirements on a daily, weekly, monthly, and annual basis and with the necessary granularity. The relevant company divisions benefit from a fact-based planning horizon of up to 15 years with a retrospective 5-year history view, which is updated monthly with current figures such as sales data or inventory numbers.
Result: Sustainably improved KPIs
The introduction of the flexis Sales Planning solution has resulted in a consistently more stable production program for the customer. Sales and production planners now operate with a better understanding and increased quality and granularity of the sales forecast. Thanks to the collaborative exchange of information in real time, managers have a high level of transparency regarding all requirements and capacities. With the implementation of the flexis solution, opportunity costs were reduced by 25%, lead times from production to sales were cut by 30%, and outbound logistics costs were reduced by more than 10%. Due to the improved sales planning, a reduction of required marketing and incentive budgets is even expected in the future.