When local problems go global

Aerial view of parked cars

A story on Bloomberg recently caught my eye. It described how BMW is seeking compensation from Bosch for a car production stoppage. Apparently a production bottleneck at an Italian Bosch plant that makes steering gears for BMW caused missed deliveries, the impact of which caused a domino effect ultimately leading to shutdowns in multiple auto production plants:

“BMW AG will seek compensation from Robert Bosch GmbH after missing parts for models including the bestselling 3-Series sedan caused production stoppages in Germany, China and South Africa.”

What surprised me even more, however, was that not only was BMW seeking compensation for damages, but that they – as of the time of the writing of the article – were still sorting out how to mitigate the impact of the interruption:

“The financial fallout from the supply shortage is difficult to predict as the disruption is ongoing and it’s unclear when normal output can be restored, BMW spokesman Michael Rebstock said by phone. Still, auto production can usually be made up by adding extra shifts.”

How is it that two world-class companies like BMW and Bosch – who likely have top of the line IT systems – are finding it difficult to identify the fallout of a disruption, as well as when and how it can be rectified? If adding shifts is all it takes to do the job, shouldn’t it be a simple matter to determine when production will be back to normal?

If you are working in today’s global production supply chain you know it is not a simple matter at all. Preventing or sorting out these kinds of problems is complicated because supply chains have evolved into complex and sophisticated networks. As Mark Miller puts it:

“Twenty-first-century supply chains have evolved into world-wide inter-connected supply-and-demand networks with profound interdependencies – comprising vastly more complex operations and with greater exposure to the vulnerabilities of our uncertain world. “

As it turns out, BMW is not alone. A quick Google search on supply chain delivery failures reveals many similar stories:

There are many root causes for supply chain failures. One of the biggest is simply that corporations today struggle with understanding the scope of their supply chains and how they intertwine.

Unfortunately many companies, even some of the best in class, still rely on antiquated software that is only able to manage production at a localized level. Too often they have implemented MRP and MPS production management systems that come with their ERP but are philosophically rooted in 1980’s planning methodology, when manufacturing was much more regional and computing power was a fraction of what is available today. Since these systems are almost never up to the task of managing global supply chain problems, supply chain managers all too often try to take matters into their own hands and work out some kind of offline tracking solution using spreadsheets. Recent polls show that even today a majority of manufacturers still rely on Excel.

Excel often solves some aspect of these problems by giving planners the flexibility they need to track supply chain issues that their ERP is not equipped to handle. However, spreadsheet solutions are not scalable and lack the capability to take all the variables of the supply chain into consideration and offer an optimized plan. A spreadsheet cannot run complex alternate scenarios to answer questions such as “When could our supply chain recover to our original plan if we ran extra shifts?” in real time.

A 21st century supply chain planning system should help planners establish a resilient plan that prevents unexpected local problems from exploding into global stoppages in the first place. At Quintiq, we take pride in saying that our Company Planner master production scheduling system is the solution that “brings order to chaos.” It brings to bear Quintiq’s world record breaking optimization techniques on the modern supply chain, enabling it to automatically consider and adapt in real time to:

  • Multiple supply chain sourcing options in complex global networks
  • Transportation times and relationships between multiple plants and warehouses
  • Flexible inventory buffer windows
  • Complex resource capability rules
  • Balancing sometimes contradictory business goals such as maximizing on time delivery while minimizing inventory

Quintiq has helped dozens of world class manufacturers such as ABS, Sapa and Loro Piana improve control and performance in their supply chain with Company Planner.

As we saw from the BMW story, not being able meet these modern challenges can be catastrophically expensive – not to mention the hidden costs of negative marketing from having your supply chain failure story make headline news! Learn more about Quintiq’s unique optimization approach to tackling planning problems in your complex supply chain.

John Rogelstad

About John Rogelstad

Having started on the factory floor that led me to working from quality control to plant management, I'm passionate about manufacturing. I love figuring out what makes a plant tick, discovering its root problems and then working with employees to make improvements that make the plant run smoothly, predictably and reliably. In my spare time, I enjoy reading about human psychology and socio-economic ideas because in the end it's not the machines that determine whether systems work or not, it's the people who design and operate them!