The automotive industry has faced a growing number of shortages as organizations scrambled to meet production over the past few years. However, this is not surprising as many automotive manufacturers operate in silos among quality, supply chain and IT. This leads to suboptimal results for the organization as well as the overall automotive supply chain. As a result, many supplier delivery performance issues are addressed with an ad hoc “find it, fix it” problem-solving approach, which does not lead to the identification of systemic root cause or implementation of sustainable system solutions. Thus, delivery performance issues continually repeat.
Supply Chain, Quality and IT have historically operated in silos. To make matters worse, supply chain has never been a real priority. In most organizations, supply chain comes in as the third priority in technology improvement investments, if there are any funds left, after R&D and Quality investments. Over the years, the plant and C-level have rewarded supply chain departments with their ability to firefight and incur costly premium freight to get product to customers on-time. The C-level is now paying for years of neglect in light of all the supply chain disruptions since the pandemic outbreak.
Researching Essential Supply Chain Processes
As a result of all of these disruptions, QAD and Quistem jointly researched the supply chain problem. A two-part e-book titled “Delivering on the Promise of Delivery” and a podcast were created to provide solutions to our findings, and generate discussion and next actions around the issue. Included in our research is the development of 24 essential supply chain processes (also included below) that have been vetted with over 20 automotive manufacturers — including OEMs, Tier 1 and Tier 2 suppliers — as well as several automotive industry associations. In addition, through our QAD customer base, they were also vetted with Life Science, Industrial and Consumer Products industries. All participants agreed that these topics represent the key areas of concern regarding supplier delivery performance issues.
The key to future automotive supply chain success is to identify and manage the essential processes for sustainable delivery performance. Our comprehensive review of AIAG/Odette’s MMOG/LE version 5 and IATF 16949 helped us to identify the 24 essential processes that will improve the performance of the automotive supply chain. Organizations should consider integrating these into their existing management systems for better supply chain outcomes. Identification of essential supply chain processes also leads to better control of supply chain performance by monitoring key supply chain performance indicators.
These processes provide out-of-the-box guidance to suppliers to align strategies and tactics to meet these modern day supply chain challenges without having to navigate it on their own. Especially now, in light of constant disruptions, fluctuations in demand and workforce shortages, plants do not have time to build or research a method to help improve performance on their own. Our research has done this for you.
3 Supply Chain Processes You Should Automate Right Away
To date, we are actively working with organizations at the plant and corporate level in automotive and life sciences industries to use the 24 essential supply chain processes to identify gaps and improve supply chain performance. Our assessment process has been used with four organizations to date to identify ways to improve their supply chain processes. There are three common areas that we have identified areas to be improved: Production Scheduling, Work Instructions and Customer Complaints.
Production Scheduling
This is a topic of focus that all organizations want to improve. We have two findings.
First, while some organizations are repetitive in nature, they are not aware of QAD’s ability to provide schedules to sub-suppliers. In fact, one customer found this functionality hidden from the menu by IT. Instead, they are using Purchase Orders which are not effective in a repetitive environment. In one of our assessments, the customer suggested that by implementing scheduled orders with suppliers this will save them nine days of work per week! Yes, nine days of work.
Secondly, often customers do not take the time to fully automate the entire demand process from the customer to the sub-suppliers. In addition, some of this is due in part to the lack of knowledge due to the workforce shortages and the great resignation. Often supply chain personnel jump out of the process to use time-consuming, error-prone, low-visibility spreadsheets. One QAD customer who fully automated this process reduced inventory by 60%, increased inventory accuracy to 99.98% and decreased purchase orders from 100 to 5 per month.
Recently, a QAD automotive customer shared their map with us of how they fully automate the customer-to-supplier demand process.
Work Instructions
Work instructions are critical now more than ever due to the ever-changing workforce. We found again, with all four customers, that IT has either hidden the QAD automotive process maps or have not loaded them. QAD has over 1,800 work instructions already developed to help navigate the system, which is critical for new or backup employees. These are critical for your supply chain department at the plant to help them understand how to apply QAD solutions and will save your team thousands of hours developing them on your own. Also, we’ve found that our work instructions are far more detailed than when plants write them on their own. You can contact your customer success representative with QAD’s Global Standards team to assist you if you have any trouble in locating these “ready-to-use” work instructions. If your organization finds they are missing, QAD’s latest set of Effective On-Boarding (EOB) attachments, including work instructions, can be downloaded from the QAD Store.
Customer Complaints
We anticipate that customer complaints will rise significantly as vehicles sit in parking lots to most likely get retrofitted later outside of a normal plant environment due to recent part shortages. In today’s current environment many plants are leveraging manual systems that are not integrated with ERP, which makes the customer complaint and traceability process difficult. By not having an automated Enterprise Quality Management System (EQMS) that is integrated with ERP, through a case study, we found that this can cost an organization a $4M field complaint versus $90k. Our Customer Complaint Quality/Supply Chain Integration chart illustrates how this could be managed by integrating EQMS with core supply chain functionality in ERP.
Next Steps
We suggest you take the next actions to improve your supply chain processes today.
- Disseminate these 24 essential supply chain processes to your plants and ask them the following question: “What are your three most problematic areas?” After obtaining their response, begin to review existing processes and work instructions with Quality, Supply Chain and IT at the plant and question when they are not using automated processes. If you need help, don’t hesitate to reach out to Cathy or me.
- Listen to our Auto Supply Chain Prophets podcast to keep up-to-date on the latest customer results and actionable items from our guests based on our 24 essential supply chain processes.
- Download our ebooks to review our research and recommendations.
This article was co-written by Cathy Fisher, founder and president of Quistem, LLC.
