Case Study
Most manufacturers for the auto industry use marginally accurate demand forecasting to build a supply that includes 40-80 days of stock which stays for long at the distribution centers and on dealers’ lots. This has been a misjudgment and conception on the part of the manufacturers where they expect customers to push and shove for the cars in football field sized lots. (Boyer, R. and Freyssenet, M. 2000) The problem is that it not a guarantee that all those cars will be bought and in reality, not all of them have been bought. In their attempts to create solution, the companies are discounting the auto mobiles to get them off their hands. Mass production was not at all that bad in beginning stages of auto production. Demand was unlimited. It’s different today with more demands coming from customers, overabundant supply and global competition. Companies have to tried to get more out of their suppliers by having them sell harder but it have proven to do more damage. (Womack, J., Jones, D. and Roos. D. 1990),This is halting R&D and merging. Not for strength in numbers but in desperation. In the end, customers are buying cars they did not intend to buy.
With build to order, companies will realize that profitability will come from building the right product at the right time and not from optimizing cost. (Lazonick, W., and O’Sullivan, M. 2000)
Sales Forecasting
This involves the manufacturer’s sale department, national sales companies and dealers. The basis for production programming becomes the demand forecast. It is an initial stage that the national sales requires of the dealers to supply what their annual volume forecast says several months before the end of the calendar year. This forecast in many cases commits the parties to predicted volumes. (Womack, J., Jones, D. and Roos. D. 1990),Responsible dealers must often have this orders supplied up to 90 days before production. This result in a heavy reliance on discounting and a high level of sales from stock.
Production Programming
This stage has the aim of finalizing production volumes and begins with the first programming meeting which reviews regional sales prediction issues. The production program
1. Sets the production parameters for the next period on volume, model and trim level
2. Gives product in short supply across the manufacture’s national and regional markets according to the vehicle’s profitability and pricing, regional competitive pressure, and the power of regional sales organizations.
3. Give to the markets major items or constraint options.
The programming meeting is a central and strategic steering instrument on top of an operational decision point on future vehicle production.
This also allows for but a few changes in the month prior to actually building the car. (Boyer, R. and Freyssenet, M. 2000)
Order Entry
Here, a salesperson enters a stock order from a customer into the system. It is processed by the national sales company and is submitted to the manufacturer’s headquarters where is it computer checked for build feasibility and expanded into an individual parts list. That is when it goes into the order bank becomes available for scheduling. A four step process is followed that includes
1. Allocation checks
This does not fall under the national sales company. By the time the order is keyed in, the order’s financial clearance and other formalities should be completed
2. Build-Feasibility check
This has to do with the order being of the required type and quality specified for the particular model in the particular market and model year.
3. Bill-of-Material conversation
Here, the code in which the order has come in is converted to a bill of materials.
4. Transfer to order bank
This end stage is in order entry is to move the order as a bill of material to the order bank, where it will remain until the system gives it to a build time in a company and moves it into the plant’s schedule for production. (Lazonick, W., and O’Sullivan, M. 2000)
This are processes which when followed will avoid the inconveniences as those of sale forecasting hence higher profits and satisfaction of the customer.
Bibliography
Womack, J., Jones, D. and Roos. D. (1990), The Machine That Changed the World, Rawson Associates, New York
Boyer, R. and Freyssenet, M. (2000), The Future once again is open
Lazonick, W., and O’Sullivan, M. (2000), Maximising shareholder value: A new ideology for corporate governance, Economy and Society
