Use Supply Chain Design Technology to Tackle Automotive Industry Challenges
LLamasoft has enabled some of the world’s leading automotive companies to turn common industry challenges into sources of competitive advantage.
1. Inbound Logistics
Dedicating time and resources to optimize inbound logistics sometimes takes a back seat to outbound logistics efforts. Controlling the inbound transportation network and evaluating alternate network designs can reduce costs, improve service times and minimize asset usage.
Here are a few examples of how automotive manufacturers and suppliers have leveraged supply chain design technology to create efficient inbound supply chains.
Network Optimization Map Showing Service Areas
2. Facility and Manufacturing
Demand for different automobiles shifts over time to new regions or different quantities, and suppliers and cost structures change as well. Facility locations and inventory levels should also change to keep in-sync.
3. Outbound Logistics
With endless combinations of mode, routes and carriers from which to choose, automotive manufacturers are turning to supply chain and transportation network design to simplify outbound logistics decision making. Here are a few examples:
Case Example: Service-Level Inventory Optimization
A tier-one automotive manufacturer leveraged breakthrough demand segmentation/inventory optimization technology for its service parts operation. By analyzing and automatically classifying the slow-mover demand patterns of the company’s service parts business, the inventory optimization recommended end-to-end stocking levels to better fit this irregular demand and meet target service levels at the lowest holding cost.
Mexico: Opportunity and Risk
Automotive manufacturers have plans to add considerable amounts of new production capacity in Mexico by 2016 due to rising labor rates in China and decreased lead-times of near-shoring.
But with export numbers rising, car makers are wondering whether Mexican infrastructure will be able to handle the surge. Rail will need significant fleet and track investment and ports are already crowded.
Supply chain design can help companies plan in advance to react rapidly to unplanned events in high-risk regions.
Using what-if analyses and simulation, companies can pre-plan optimal responses to events such as:
Download: Three Elements of an Effective Supply Chain Risk Management Strategy
Supply Chain Design Strategies for Automotive Companies
LLamasoft customers often identify 10 to 20 percent cost savings while maintaining or improving customer service levels through strategic supply chain design projects including:
Case Example: Route Optimization
A U.S.-based automotive supplier saw considerable opportunity for improving the utilization of their fleet trucks through backhaul optimization. Empty trucks that complete deliveries early in the day can be leveraged to pick up vendor supplies or perform cross-DC transfers, which are necessary because different area DCs stock different products. Transportation route design is used in an operational workflow to form optimal backhauls given empty truck locations and potential inbound pickups. The analysis yielded millions of dollars of costs savings opportunities.
Case Example: Network Optimization and Greenfield Analysis
A tier-1 automotive manufacturer utilized supply chain design technology to model its distribution network consisting of 15 parts distribution depots in the Asia-Pacific region serving 1,800 dealers. The objective was to model and analyze the existing network to determine the optimal number and location of depots to meet defined service requirements at lowest possible cost. The analysis included multiple network optimization scenarios and greenfield analysis of potential new locations. Multiple opportunities for improvement were uncovered which would increase total depot throughput by 9.4 percent, increase the number of dealers receiving 1-day service by 28 percent, and reduce weighted average outbound distance by 14 percent.
Total Landed Cost: Bridging the Inbound - Outbound Gap
Wide gaps between the inbound and outbound sides of the business are common in large automotive production operations. This divide can lead to uninformed business decisions because of a lack of focus on the entire end-to-end supply chain, which includes the interdependencies of many cost factors including transportation, inventory and tax.
A total landed cost analysis can bring together inbound and outbound operations to quantify all supply chain activities and costs incurred to fulfill a customer’s product demand.
Only by studying this “big picture” can a business answer key questions such as, ‘Is this customer segment profitable, given the supply chain costs?’ or, ‘Does it make sense to continue to manufacture this product?’