1. LEVERAGING
THE POTENTIAL
VCG employs the 'Theory of Constraints’ philosophy to bring about quantum
jump in performance of organizations in its target industry clusters.
Automobile & Consumer Retail Engineering Equipment
Auto Components Goods & Construction Manufacturing
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2. Nuggets on Auto Industry
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3. Auto Industry Constraints
Despite putting efforts of few decades into Lean and JIT, the fact
remains, that most auto supply chains have months of excess
inventory hidden in warehouses of the weaker partner in the
supply chain; while the stronger one manages the mess of
frequent rescheduling and stock-outs.
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4. How to create a win-win supply chain that covers not just
the supplier's supplier but also the OEM, distributer and
the retailer?
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5. Auto Industry Dilemma
#1 Current auto Industry
reports suggest that the
average inventory for car
dealers has nearly doubled
from 20 days to 40-50 days.
On one hand we can blame
the demand situation for
this. But how is that the
industry which claims to
have implemented Just-in-
Time is facing this
situation?
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6. Evaluating Operation Performance
Auto component manufacturers
#2 usually tend to evaluate their
operation performance by
analyzing the delivery as per the
monthly/weekly schedules of OEM.
When the schedules are highly
erratic at a daily level, the KRA is
not an indication of how well one
has met the needs of OEM.
The only right measure is the
guarantee for availability, despite
the erratic schedules.
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7. Selecting the Right Partners
It is high time Auto companies realize the fact that proximity
is not just a matter of geography.
The ability of a partner to
react to the changing
requirements is dependent
not on the geographical
distance but on the level of
inventory between the two
entities.
#3
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8. Inventory Management
Auto companies produce according to market forecasts and like any
forecast it isn’t exactly accurate.
But at the same time,
they want JIT delivery
of components.
Resultant effect is
high inventory at the
component vendor’s
warehouse.
#4
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9. Inventory Management
#5
Most auto OEMs have very low component inventory where
there is maximum chances of aggregation, while they have
much higher level of finished goods inventory.
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10. Inventory Management
Auto manufacturers ignore the fact that if inventories are
pushed on to the dealers, it makes them incapable to respond
to the market needs.
#6
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11. Wrong Assumption of Implementing JIT & TPS Principles
By asking the suppliers to keep
the excess and unwanted
component inventory at the
transporter's godown, while
having lean inventory of
components in their shop-floor,
most auto OEMs tend to think
that they have implemented the
principles of JIT and TPS.
#7
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12. Wrong Assumption of Implementing JIT
Just by moving the component inventory Just in Time from the
transporter warehouse to assembly plants, OEMs can’t claim to
have implemented JIT.
#8
To get the real benefits the principle of pull has to be
implemented in the entire supply chain.
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13. JIT Approach
Just-in-time means that, in a flow
process, the right parts needed in
assembly, reaching the assembly line at
the same time they are needed and only
in the amount needed. A company
establishing this approach throughout
can approach zero inventories. From the
standpoint of production management,
this is an ideal state.
~ T. Ohno
#9
Most Auto companies have taken the above statement literally and
implemented the pull system only between the vendor warehouse and
their assembly point, while at the distribution side, it is a typical push
system.
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14. :) Thank You
©2012 Vector Consulting Group. All Rights Reserved.
©2012 Vector Consulting Group. All Rights Reserved.