Shifting gear

Capacity management in the automotive industry

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Operating in the automotive industry has always been challenging. Long and complex supply chains, unpredictable demand patterns, changing regulations — not to mention planning-to-production processes that can take up to five years — have all caused headaches for car manufacturers, or original equipment manufacturers (OEMs), for many years.

The global recession in 2008 and 2009 and the lasting damage it caused to the global economy have made things even harder. Collapsing demand and many other factors have squeezed the car industry and hit suppliers particularly hard.

Now, demand is picking up, and OEMs are responding by increasing their production and parts orders to suppliers. But the suppliers are still being cautious after the recession and have neither the capacity nor the capital expenditure plans necessary to deal with the increased demand.

In this new environment, the constraints on the automotive supply chain are even more prominent, and OEMs are struggling to manage these problems as demand levels rise. In today’s globalized market, OEMs are challenged to forecast demand and their parts orders to suppliers with accuracy. With planning and development lead times of four or five years, changes in demand are inevitable. But the OEMs also struggle to manage these changes efficiently. The complexity of automotive supply chains and the lack of spare capacity at the suppliers make this even harder.

There are solutions to these problems. With the right focus, OEMs can improve the accuracy of their forecasts and their ability to manage changes more effectively. 

EY Omni-channel report 2015

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