OEM Capacity Management

Optimizing OEM Capacity Management Through Partnership

November 29, 2018

Regardless of the industry, the complexity of today’s global supply chains makes them difficult to manage. This is in part due to the management requirements of a mix of supplier-partners near and far while maintaining optimal performance.

But if you are reading this, then you are likely fully aware of these challenges. You don’t really need a rundown as you are living with them every day. Instead, you need answers, or at least some suggestions as to how to achieve capacity management optimization. Sometimes the answer is as simple as looking to your strategic metal fabrication partner.

Why Capacity?

Let’s face it, measuring capacity can often be the toughest part of working with supplier-partners. Sure, many can claim there is capacity to spare, but the devil is in the details – and this includes how supplier-partners can adjust to changes in demand.

OEM Capacity Management

Another challenge is the ability of an OEM’s supply chain management team to handle the diversity of its relationships. These include working with everyone from electronic component manufacturers, plastic injection molding companies, and even metal fabricators.

Just the variety of processes and requirements can be a nightmare, as it can be difficult to align the availability of parts and assemblies from various suppliers without taking on excess inventory. Then there are external factors, such as material shortages, tariffs and change orders which can wreak havoc on the best-laid plans.

As such, balancing available capacity can be just as important as optimizing capability and this leads us to the important part – how your metal fabrication partner can help.

Simplification

For OEMs, the need for transparency in their supply chain has led many to develop relationships with suppliers who might not be important strategically.

Why do OEMs do this? Maybe it is the need to ensure proper documentation or maybe it is a legacy relationship which the OEM has long since outgrown. Either way, managing relationships with hundreds, if not thousands, of suppliers can be a drag on the effectiveness of the supply chain management team.

This is where a metal fabrication partner can help – especially when part of their role is assembly – as the partner can take over the management of the underlying vendors, thus freeing up the OEM’s team to focus on improvements and not documentation.

Ending Value Leakage

Even with delivery dates, purchase orders, and long-term contracts, supplier-partners can miss deadlines, and this can lead to a phenomenon known as ‘value leakage’. In addition, accurately defining what levels of service are acceptable can complicate the ability to execute in a just-in-time (JIT) environment.

From the perspective of an OEM, this often means needing to deploy teams to help supplier-partners through endless rounds of root cause analyses and then to oversee the implementation of corrective actions. This is another opportunity for value leakage as key people are deployed to fix yesterday’s problems rather than strengthening the organization for the future.

What can be done? In the case of metal fabricators, this is an opportunity for them to work closely with their OEM partners not only to develop the system to manage planning and delivery, but also to take responsibility for these programs. This can be done through a combination of managed inventory and by updating the organization’s RACI matrix to ensure metal fabrication partners play a key role.

Inclusive Planning

Another way in which OEMs get into trouble is by not including their supplier-partners in planning. Sure, everyone has a master schedule and they will hold roundtables and other discussions to communicate the plan for the year.

Heavy Equipment Sales

However, truly inclusive planning takes this a step further by sharing the raw data used for scheduling with key partners, not just when the plan is being developed, but throughout the year. Only in this way can metal fabricators work with their OEM partners to spot trends in the data which will impact availability in the coming weeks and months.

For this reason, tasking metal fabricators with helping an OEM to better manage capacity starts with better planning. Only in this way can capacity be optimized to meet the challenges which will come up along the way.

No Silver Bullet

While there is no silver bullet when it comes to capacity management, metal fabricators can help OEMs by providing the ability to simplify supplier-partner relationships, end value leakage, and improve planning.

In this way, OEMs can improve the effectiveness of their supply chain management team while realizing the benefit of increased stability – both of which will have a tremendous financial benefit over the long run.

See how Capacity Management plays into the Miller Customer Experience by touring this value-added solution.