To optimize operations and uptick production, original equipment manufacturers (OEMs) must practice effective capacity planning.
Thomas Kowal, the president of consulting firm Seraph, identifies the top five causes of an OEM crisis: incorrect capacity planning, labor availability and insufficient training, new suppliers and new technologies, and constant or late engineering changes.
We recently sat down with Kowal to discuss how OEMs can combat these challenges.
Thomas Kowal, President at Seraph
Nolan Beilstein (NB): How can OEMs practice more effective capacity planning?
Thomas Kowal (TK): Effective capacity planning is essential for OEMs to optimize their operations, improve production efficiency, and meet customer demand while controlling costs.
Some ways OEMs can practice more effective capacity planning include:
- Forecasting: OEMs can use historical data and market trends to predict future demand accurately and identify potential capacity constraints.
- Collaboration: OEMs should work closely with their suppliers to share information and coordinate their efforts. This can help to avoid bottlenecks, reduce lead times and improve overall supply chain efficiency.
- Automation: Automating repetitive tasks can help OEMs improve productivity and increase output without additional labor costs.
- Continuous Improvement: OEMs should continually review and refine their capacity planning processes to identify areas for improvement. This can involve analyzing performance metrics, collecting customer feedback, and benchmarking against industry best practices.
A good example to highlight in capacity planning is the automotive manufacturing industry, as managing inventory effectively to ensure smooth production and acceptable costs is a big challenge.
There are several best practices for manufacturers to consider to manage their inventory more effectively, including maintaining accurate inventory records, implementing Just-In-Time (JIT) and Just-In-Sequence (JIS) inventory management, establishing safety stock levels, managing supplier relationships, and utilizing inventory management software.
OEMs are also focusing more on "local for local.” There has been too much risk and cost related to premium freight in the last few years, and based on geopolitics, there are concerns that this will be a new normal.
Capacity planning goes much deeper in today’s economic environment than the previous years. We need to look at where the material is sourced, the risk factors of that location (i.e., areas of Africa and Asia Pacific), and how it impacts the entire value chain.
NB: How can disconnections between management and the factory floor be remedied?
TK: There are so many "buzzwords” related to resolving disconnections between leadership and the workforce, including communication, visualization, and connecting.
The key to moving beyond lip service to realization of the benefits of these concepts resides in discipline and actual work. Leadership has to have specific tools and processes in place to use on the floor. For example, Manage Daily Improvements (MDI), Layered Process Audits (including plant management), and Gemba Walks. All of these tools come down to a basic concept: if the management team and leadership genuinely want to effect change, they need to spend time on the floor, implement consistent, effective processes, and, most importantly, solve problems for the front line.
Their one job is to provide the assembly and indirect workers with the tools and support needed to empower them to achieve and ultimately overachieve their targets. This also relates to the psychological impact of making the organization believe that they can reach higher targets, and this is done by doing burst builds and simulating perfect scenarios. At the same time, the team should focus on one area and make it "state of the art” and then let that spread step by step through the plant. Seeing is believing.
NB: How does Seraph minimize the risks of new suppliers and technologies?
TK: To effectively minimize the risks inherent in onboarding new suppliers and/or implementing new technologies, utilizing a holistic review of the supplier is key. Most OEMs focus on an audit with questions about line capacity and quality poka-yokes / control plans. However, there is so much more that impacts poor production.
When working with our OEM clients, Seraph ensures the focus is broadened to include all the factors impacting production, including people (skills), financial (health, can they invest in the people and equipment), maintenance, logistics, and warehouse operations.
NB: How can OEMs be prepared to combat Black Swan events?
TK: OEMs need to develop contingency plans for different scenarios that could arise due to Black Swan events, such as supply chain disruptions, shifts in consumer demand, or sudden regulation changes. For that reason, diversifying suppliers can help minimize the impact of disruptions.
Relying on a single supplier can create a single point of failure in the supply chain. If that supplier experiences disruptions or goes out of business, it can have a significant impact on the OEM’s operations. In addition, diversifying suppliers can also create competition among suppliers, leading to better pricing and terms for the OEM, improving flexibility, and enhancing supply chain resilience. By working with multiple suppliers, OEMs can ensure that their operations continue smoothly despite unexpected events.
In addition, maintaining a certain amount of inventory must also be addressed when evaluating production capacity. Just-in-time inventory can reduce inventory costs to the lowest possible level. However, there is a commensurate danger that adequate inventory may be unavailable if the supply chain suffers for any reason. Manufacturers must therefore understand the different risk levels associated with each supplier (especially critical suppliers). Their understanding of these risks will inform, in part, the amount of inventory kept on at any given time.
Finally, several OEMs, including Mazda, Nissan, and Toyota, have created disaster response teams to support continued production in areas identified as being vulnerable to natural disasters via yearly monitoring. This is an effective strategy so long as recovery team members are highly skilled managers who know how to run a plant, think creatively, and communicate effectively.
