Recently I was watching a video interview with David Thomas, the Director of Global Capacity Planning for Ford Motor Company. Among other things, he’s been leading the charge at Ford to deliver a global capacity management solution. He describes the process as a jigsaw puzzle. The challenge with getting a global view as he puts it, is if the pieces “don’t fit together, you don’t see the right picture.”
Ford’s challenges to global capacity management
In the interview, David describes the challenges facing Ford in fitting the pieces together. One of which is its extensive legacy. Ford has been around for 100 years and the five main regions of the company (North and South America, Asia, Europe and Middle/Eastern Africa) grew up individually. There wasn’t a need to move data and information between the regions because they had different products, teams and organizations.
Over the past few decades, the auto industry, like most other industries, experienced unprecedented changes that drove a need to transform capacity management from a regional to a global view. The 2008 downturn hit suppliers extremely hard, putting some out of business. But in 2010, an upturn in demand in emerging regions like Brazil, India and China meant capacity required varied significantly by region. But that demand didn’t match what companies had available in those areas. Thus, a global view of capacity management was required to combat these newly emerged supply chain constraints.
The other challenge David highlighted for global capacity managers was the difficulty in collaborating without the regions being connected. Capacity planning sits between demand (including product development), sales and marketing, and supply. For David’s first 10 years, he didn’t have a single phone call with anyone in any other region. Now there’s a constant need to collaborate across regions during the sales and operations planning (S&OP) cycle and on longer-range capacity planning conversations like battery technologies and autonomous vehicles. The supply chain is more interdependent than ever. Components sourced in one region are being consumed by demands in other regions. “Regional issues cause global problems and global solutions have regional implications,” explains David.
Misalignments with demand and /or supply are costly. If you’re building products customers don’t want, you have money tied up in inventory and marketing programs, and have to work harder to try to move vehicles. David describes inventory as “… dead money, it’s not making money, it’s costing money.” Supply constraints mean your customers aren’t getting the product they want, when they want it. Minimizing inventory and holding costs and maximizing revenue is a critical competitive differentiator. What’s needed is the most efficient supply chain with the lowest inventory possible so you can move the most product possible.
The 5 parts to global capacity planning
It sounds easy, but as David points out, it’s a journey to make it happen. “Connecting data, processes and people is the critical enabler.” Drilling down on the need to connect them there are five puzzle pieces needed to see the complete global capacity picture:
- System Integration: Data will typically reside in multiple enterprise resource planning (ERP) systems and various point solutions. You must be able to seamlessly incorporate all this information as well as close the loop back to the execution systems based on the decisions made during planning cycles.
- Data Integrity: By integrating all data onto one platform, people will have confidence in the data integrity of the global capacity management system. There is only one version of the data and all involved will see any updates to that.
- Scalability: The scale of the data and computing power required to model a global multi-tier supply chain and explode demand and supply across the integrated supply chain is enormous, but the ability to scale is essential. An approximate model is not enough.
- Configurability: No two global manufacturers have the same requirements and processes. The platform must be configurable to support regional and global processes. This includes analytics, planning rules, views and workflow. This configurability will also enable processes to evolve over time without customizations. The platform should also support the creation of extensions to automate, streamline and integrate with existing systems and processes.
- Simplicity: Finally, it needs to be relatively easy to deploy and easy to use. You can’t have ERP-type deployment times with only system experts able to turn it on. It must be deployed in months and be utilized by all levels of planning to provide the insights for timely planning and decision support.
Capabilities needed to drive success
With these pieces of the global capacity planning puzzle in place, you’ll still need certain capabilities to drive your way toward success. These include:
- On-demand planning will let you net and explode through multiple tiers of the supply chain in minutes or even seconds, not hours and days.
- Rapid simulations will allow you to model plan alternatives and “what-if analysis” to understand the impact of proposed changes or unexpected events and capacity disruptions.
- Alerts that notify you when plans aren’t going as expected. You’ll not only be aware something has changed, but can immediately understand the impact of the change. This ensures the highest priority risks are actioned first.
- End-to-end supply chain visibility allows all supply chain executives to view current plans, performance to plans, financial implications and take timely action to course correct as required.
- Seamless collaboration across global and regional planning allows all functions to work together and respond quickly during planning cycles and in course correct mode.
David stresses the value of an integrated global capacity management platform to help you get what every company wants – to get the right product to the right people at the right time, more effectively and efficiently than your competitors. Have a listen to David’s interview here and let us know what you think.
For more insights into global capacity management check out this white paper.