Auto OEMs & Auto Components Consulting Services

Auto OEMs, auto part manufacturers and auto aftermarket players constantly struggle with the auto industry's highly cyclical nature, i.e. an economic boom is generally accompanied by high sales, while sales usually suffer during economic downturns.

industries

Auto and Auto Components

Vector Consulting Group has partnered with major names in the auto and auto components industry to create and implement radical solutions which have helped redefine industry benchmarks. These names include:

Clients

Client Speaks

We are a multi-brand car service company. We are sandwiched between brand companies offering high quality service at high prices and unorganized local garages offering ‘not-so-great’ quality at dirt-cheap prices. Our offer of high quality at reasonable prices is attractive to people looking to move away from unorganized garages. The challenge is beating single-brand service centers in service delivery. Parts management gets in the way – the number of components that a brand service center has to hold is much lower than what we (a multi-brand service company) have to stock. Expanding rapidly without solving the inventory conundrum can spell doom for a multi-brand service company.

What are the key challenges of managing operations in your environment, considering that you have aggressive growth plans?

"Vector Consulting Group, our partner on this transformational journey, showed us the merits of exploiting sales opportunities using existing infrastructure. Vector educated us on the benefits of improving ROI before we push for accelerated growth. Guided by the TOC approach, we are focused on improving services and inventory management, cluster by cluster.

You have started implementation of TOC (Theory of Constraints) processes for parts management and service operations. What has been the thinking behind this decision?

TOC implementation requires hub and spoke model. Therefore, as a first step, we grouped the company-owned workshops across India into clusters. Kicking off the implementation along with Vector Consulting Group in the Chennai cluster, we adopted processes of TOC replenishment for auto components while we created a hub and spoke model of inventory locations. This allowed for maximum aggregation benefits at the hub. We implemented TOC operations processes to cut down service lead-times. Our turn-around-times have dropped by more than 50 percent, our on-time performance has entered the 90s. We now guarantee that running repair jobs will be completed in four hours, we offer to pay a penalty if we fail to do so.
Component availability is in the high 90s. All in all, we have made the working environment stress-free for our operations team.
Sales (of restricted models) has gone up by more than 20 percent by value in the Chennai cluster where we are doing the first phase of implementation. Ticket size has gone up, thanks to the decoupling of inspection and actual repair work.

What key changes have you brought in?

We will roll this out in all clusters and then expand through franchisees whom we are promising an ROI of minimum 30 percent.
We are able to guarantee completion of running repair jobs in four hours from the time a car enters the service centre. Ultimately we want to be known as the dominos of car servicing market.

What next?

Manufacturing plans in the automobile plants are sensitive to the slightest changes in the market and the supply chain. Market upswing/downswing or disturbances in the supply chain cause the plant's schedules to become unstable quickly. This is true for both automobile companies and Tier 1 auto component manufacturers. At times, despite the best efforts of the purchase managers, schedules may not stabilize for a day or a shift. This is because plants face a shortage of complete kits for scheduled assembly for that day or the shift. So, as the month progresses, the WIP of incomplete kits balloons, and at the month's end, when more kits are completed, it drops with a huge spike of dispatches in the last week. This relentless struggle to complete kits during the month and the huge skew at the month-end together lead to significant capacity wastage. This prevents automobile companies and automotive component manufacturers from exploiting the full potential of their plants. In this situation, to keep their inventory levels low, the stronger players in the supply chain (usually automobile OEMs) tend to push the weaker players (usually automotive component manufacturers or dealers) to keep high inventory in the latter's books and warehouses. On the surface, this might seem like a good bargain for OEMs, but it is not. Burdened by excess inventory, the auto component manufacturers will struggle to organize the relevant raw materials or parts for the OEMs. This lack/mismatch of automotive components at the vendors' or component manufacturer's facility, in turn, leads to further rescheduling at the OEMs' plants.&nbsp;Vector’s auto consulting practice offers advisory and implementation expertise to both automobile OEMs and automotive component manufacturers. Vector enables manufacturing units to stabilize operations, increase plant output, and improve reliability.

Operations & Supply chain

availability of automotive components

Near

Reduction in lead time

Upto

Increase in on-time delivery

Increase in plant output

Reduction in overall inventory

Improved cash-to-cash cycle

Unlike in the days of Henry Ford (a time when variety was limited), today’s automobile manufacturing companies offer a huge choice of variants to customers. Competition activity and norm changes also necessitate new product introductions at a faster rate than ever. Since dealers stock as per forecasts and the auto OEM-prescribed sales targets for this large range of SKUs, each dealer would have very high finished goods stock, tying up space and cash in his warehouse. However, despite the high inventory, some popular models quickly become stocked out (loss of sale) while many slow models (e.g. demand may have shifted to new variants) have to be discounted (loss of margin). Curiously, what is stocked out at one dealer may be in excess at another!&nbsp;Vector’s auto consulting practice helps clients address the problem of vehicle availability without the necessity of maintaining large inventories. The firm’s custom solutions create a win-win reality for both automobile OEMs and dealers. How can automobile companies ensure ~100% availability at less than half the inventory?

Vehicle Distribution (for Automobile OEMs)

Improvement of availability

About

Reduction in dealer inventory

Eliminated or reduced the need for inventory liquidation sales

Increase dealer

An automobile original equipment manufacturers (OEM) spare parts business must ensure delivery of components to customers exactly when needed. However, ensuring component availability is a major challenge due to the enormous variety of auto components involved across the portfolio of the auto OEM's vehicles. To complicate things further, some of these parts are needed very infrequently. Consequently, whenever OEMs try to improve component availability, cash becomes tied up in slow-moving inventory! So, most automobile OEMs in India struggle to ensure component availability and financial viability. Many OEMs and OESs (original equipment suppliers) distribute auto components in the aftermarket through a network of distributors and small retailers. Stock movement in the channel based on forecasts and targets creates its challenges. Most distributors in the market are small businessmen who find it difficult to invest large sums as capital. When many auto components are inherently slow-moving, the speed at which stock rotates deteriorates because the channel partner is exposed to a smaller and highly variable demand in a restricted geography. This impacts their ROI and ability to restock when items are sold out. So, the daily working capital woes of a distributor forces him to restrict his business; many tend to service only a limited number of retailers (mostly large ones) whom he perceives as low credit risk. These conditions adversely impact the last-mile availability of components.&nbsp;Vector’s auto consulting practice has evolved innovative solutions, robust techniques and proven practices for addressing the long tail problem created by infrequently demanded auto components.

Auto Components and Services

Enhance to

Reduced inventory in supply chain

Increase sales of automotive components

Reduced turn-around-time

More than

Increase on time performance

In most auto R&amp;D departments, the addition of resources does not keep pace with the increase in workload. The enormous workload, the high uncertainty of the environment, and the heavy dependence on external suppliers make new product development (NPD) in auto and auto component manufacturing companies immensely challenging. The process is riddled with rework and delays in production stabilization &amp; launch. Even after launch, quality issues are not uncommon. Elevated stress levels of engineers are a serious concern.&nbsp;Vector’s auto consulting practice focuses on implementing simple yet effective rules to improve the flow of projects in the R&amp;D pipeline, reducing lead times and enhancing overall productivity in auto R&amp;D environments.

Research & Development

Reduced project lead time

Increased output without additional resources

Enhanced visibility and control over progress of projects

Reduced rework and improved quality of output

Rapid production stabilization

Reduced stress on people and other resources

Is your inventory profile skewed on the wrong side – too much at a point where there is minimal aggregation and too little at the point of highest aggregation?&nbsp;To do a detailed diagnostic on your company.

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Diagnostics Center

Vector’s unique solutions for auto OEMs and auto components manufacturers help them overcome constraints that hinder their organizational performance in new product development, manufacturing, distribution and sales.&nbsp;&nbsp;Over the years, Vector has worked with companies like Tata Motors – Commercial Vehicles (Spare Parts &amp; Services Division), Ashok Leyland, International Tractors Ltd. (Sonalika Tractors), Fleetguard Filters, JK Fenner (India) Ltd., TVS Motors and Royal Enfield to set new industry benchmarks in operational performance in different areas of business.

Auto and automotive business consulting services from Vector Consulting Group can enable companies to grow profits consistently whether the industry is going through an economic boom or a downturn.

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