The automotive sector should focus their business strategies on Integrated Business Planning and demand management, says consulting firm Oliver Wight. According to the firm, this combination will help automotive suppliers respond to the accelerating demand without overstocking and risking unsellable surpluses.
In the recently released white paper (‘Speed agility and cost-efficiency; the future of the automotive supply chain’), supply chain consulting firm Oliver Wight assesses how automotive companies can balance the accelerating demand for products versus the operational costs associated with servicing growth. Theme's considered include growth, profitability, cycle times, demand, and supply chain complexity.
According to Oliver Wight, the key lies in adopting Integrated Business Planning (IBP) combined with mature demand management, as this “will give automotive suppliers the control they need over their operations, but also provides the foundation for improved supply chain management and collaboration.” IBP will allow suppliers to identify future demands and reach the required level of performance without overstocking.
Les Brookes, CEO at Oliver Wight, explains: “Gone are the days when automotive companies can keep significant buffer stock – the recession taught everyone the dangers of getting caught with that stock when things change. But without the extra supply to fall back on, it is crucial automotive suppliers improve their planning beyond the three-to-six-month execution window in order to see what’s coming down the pipeline.”
For an IBP to be effective, it should incorporate diverse business processes and plans from individual business functions into one cohesive company plan and, by integrating sales and marketing plans of the organisation’s products, enable the development of effective long-term supply chain plans. The process also provides for performance measuring and most importantly, control over demand management.
The firm states that successful IBP provides a ‘rolling horizon’ that continually updates the 36-month forward view. It identifies issues and business or financial gaps in order to adequately respond to these business threats. For IBP to succeed, leadership needs to take ownership of the process and people, and as behaviours, processes and tools need to be aligned, communication is key. In addition, finance must fulfil a role throughout the entire process and focus on value-added financial analysis instead of only forecasting. Another essentiality is good collaboration with the supply chain as this can have a big impact on the company’s effectiveness and profitability. According to the firm, operating costs can be reduced by 50% as a result of good supply chain collaboration.
“Organisations must equip themselves with the right processes, tools and people to gear up for growth. Integrated Business Planning provides a holistic view of demand and a clear vision of the future, so automotive companies can extract more profitable value from complex supply chains as the market recovers,” concludes Andrew Walker, Associate at Oliver Wight.
* Oliver Wight is an in 1969 established business improvement consultancy that educates, coaches and mentors people to lead and sustain change to achieve business excellence and outstanding business performance. The firm has offices in Europe, South Africa, North and South America, and the Asia-Pacific region.