Automotive Trucks information on net.

If one could only select a single adjective to describe the automotive industry, the most apt descriptor would likely be: complex. Here in automotive, market segments are large and diverse--from passenger and light vehicles to heavy trucks and equipment. Industry value nets are comprised of an intricate web of suppliers, automakers and retail dealerships. Not to mention that automotive is a global game--with design, manufacturing and distribution occurring on virtually every continent.

And doing business in automotive has only become more complicated over time. Intense competition for market share generated a frenzy of mergers and acquisitions that frequently left larger companies with complex--if not unwieldy--organizations and infrastructures. Outdated forecasting practices coupled with inflexible manufacturing facilities and fast-changing business dynamics have resulted in substantial overcapacity and complicated inventory management practices that have sliced margins. To top things off, the innovation race has multiplied the technological complexity of vehicles and the processes used to produce and service them, thereby increasing time-to-market, lifecycle costs and the potential for quality problems. This can lead to safety issues and contribute to rising governmental regulation, which adds yet more time, cost and (no surprise here) complexity

To keep business opportunities from getting mired in all of this complexity, auto companies need a different approach--one that allows them to cost-effectively produce the innovation demanded by customers, team with partners to drive down development time and costs and enter new markets when and where appropriate.

Counteracting increased complexity requires business processes that are fully integrated--end-to-end across the company and with key partners, suppliers and customers--so that auto companies can respond with flexibility and speed to any customer demand, market opportunity or external threat.

Meridian Automotive Systems Inc., which supplies bumpers and other parts to Ford Motor, General Motors and DaimlerChrysler, said it wants to go public. The Dearborn, Michigan-based company filed a prospectus with the Securities and Exchange Commission saying it wants to raise up to $173 million through the sale of common stock. The preliminary document did not indicate the number of shares, the price range or even the exchange it wants to be listed on. All of that information is expected in later filings.

Meridian is also offering $250 million in senior subordinated notes due 2012 and replacing an existing senior credit facility with a $150 million term loan and a $125 million revolving facility. It plans to use the money from the IPO, the notes offering and the new credit facility to primarily repay outstanding debt.

Meridian said it supplies parts for 15 of the 20 best selling vehicles in North America as well as a large number of popular lights trucks, sport utility vehicles and passenger cars, according to the SEC filing.
The company has posted significant net losses in 2000 and 2001 as well as the first six months ended June 30, 2002. After posting net income of $10.4 million in 1999, Meridian reported net losses of $12 million in 2000 and $57 million the year after that. It also recorded a net loss of $6.6 million for the six months ended June 30, 2002 before the cumulative effect of an accounting change. The net losses resulted primarily from debt-related interest costs, the company said. As of the end of June, consolidated total debt was nearly $500 million, according to the filing.

Pamela Lopker bought a Ford Expedition recently. The dealership said she would get it in six weeks. It took seven. Lopker has a problem with that. "It only takes 72 hours to build a car," she points out. So, where's the delay? It's in the supply chain.

Lopker is the founder, chairman, and president of QAD Inc. (Carpinteria, CA), an enterprise resource planning (ERP) supplier. Needless to say, she's been studying these sorts of supply chain issues for a while. Here are some of her thoughts on why there are problems in communicating from one company to another, and what she thinks needs to be done to help accelerate order to delivery of cars and trucks.

AD & P: Why does it take six weeks to get automotive parts to automakers?

Lopker: Automotive production starts when you order a car from the car dealer. The dealership periodically places those orders to the automaker. The automaker plays around with these actual orders to create "wish-to-be" orders, which the automakers call their "marketing forecast." Then they decide what they're going to tell the next layer down, the Tier 1 suppliers, to make in terms of seats, carpets, big-buy parts, and so on.

Each link typically adds a week for receiving and processing orders, developing requirements, and placing orders to the next supplier down. The delays in information flow are all from internal processes, usually because suppliers tend to batch things up. That's how you get to a minimum of six weeks to make your part. We need to adjust the batches to lots of one. We need to have information flowing continuously through the supply chain so we can be reactive to actual customer demand.

AD & P: I though EDI was supposed to speed the flow of communications?

Lopker: Electronic Data Interchange (EDI) is a point-to-point distributed model. It's more of a rigid technology. EDI works well from the OEMs to the Tier 1 suppliers, but that's because there are only a dozen OEMs and only a hundred Tier 1 suppliers. When you go from the hundred Tier 1s to the thousands of Tier 2s, the cost of having tight EDI links for every partner combination becomes prohibitive. EDI works very well for very tight relationships, where you have few partners doing 80% of the business. The new XML standards are much more flexible, but still fairly expensive to set up between two partners. XML is good for faster, lightweight connections, between trusted trading partners.

AD & P: Is data transmission the only problem?

Lopker: The real issue is in processing production information into orders. The state-of-the-art today is to run material requirements planning (MRP) nightly or weekly, planning production orders, and then using that production plan. We need to go to more of a rate-based manufacturing model rather than a work order-based manufacturing model. We need to be able to reschedule manufacturing on the fly, resequence production according to actual demand coming through the supply chain. If I have three blues and five reds coming down a production line and a couple of the blues are not in demand yet, but my next order is for a purple, I need to be able to put in that purple and move the blues back.

AD & P: But wasn't that the purpose of ERP?

Lopker: Yes. But did ERP fulfill that vision? No. ERP's initial focus was on internal operations, not the connectivity of demand between enterprises. That is the next evolution in manufacturing management. We currently spend a lot of time developing processes for accounting, manufacturing, and distribution--once you get the order into the enterprise. But what value is there to saying you need 1,000 items when you already have 999 of those already sitting on the shelf somewhere in the pipeline? We need to change that to a system based on the continuous pull of what is actually required by the car dealerships. It is the pull signal that goes through the series of tier suppliers that support the dealership.

AD & P: Isn't there supply chain management (SCM) software supporting those sorts of inter-enterprise communications you're talking about?

Lopker: Up to now, the supply chain model promoted by enterprise and supply chain software vendors has been what I call "Communist command-and-control." Each of the vendor's software basically has to be the center of the universe and everybody has to hook up to it. Supply chain partners aren't buying into that model.

Information management in the supply chain has to follow a distributed model that lets everybody maintain their own systems and their own connections to their customers and suppliers. Yet, the model must also pass information through the supply chain. Future distributed information chains won't be just EDI; they will be a mix of things: EDI, Internet, XML, some sort of comma delimited files, and periodic batch file transmissions.