The strategic approach to industrial production planning

If we go into a little detail about what we have observed at OPEO, and this is a finding established thanks to all of our clients who consult us or that we help, there are four really strategic areas that revolve around both the product, the footprint and then more generally, the value chain and finally the circular industry.

The product

Regarding the product, it is something that is long-term, we do have a rather massive trend, particularly on consumer goods, to ask the question of simplifying the hardware part of the product and instead putting the complexity on the software to be able to simplify flows, diversity and have industrial systems' costs that are easier to manage in terms of planning.

Because the more SKUs we have, the more complexity there is, and obviously, the industrial production planning becomes even more complicated.

For example, in the automotive sector, we can compare what Tesla does with what more classic manufacturers do. What classic manufacturers struggle with a lot is that often they launch a new car and plan fifteen, twenty different versions of the same car, but only one or two actually work, yet in their industrial system they have all possible options, thus they have all the stocks and consequently in terms of planning it is extremely complex to manage. 

In contrast, Tesla focuses on saying its car is simple, much like an iPhone, it's available in two or three colors, it has two or three seat options, two to three wheel options, there are few car options and instead they place value more on the software. 

The agile footprint

The second important topic, which is increasingly crucial, is the agile footprint. With what is happening currently, we are witnessing a significant return to protectionism, both from the Chinese and Americans… We came from a world that was opening up a lot and we are returning to a world that is closing. This means that every time I reinvest in a new factory, when I increase the capacity of my sites, I have to ask myself the question "what is the place where I should invest regarding the potential customs and regulatory barriers that I will face?".

Therefore, it is extremely important to have a very frequent "refresh", at least every six months, on several questions: "What is my footprint?" “Should I rather make my next investments in Europe, Asia, or in the United States?” And “how can I best allocate these investment envelopes to be as agile as possible regarding the market I have and the growth potential I have on the commercial side?”.

Traceability

The third topic is traceability. This subject is indirectly connected to planning but it is still important to realize that the final customer is increasingly demanding about what they purchase.

There are standards that are becoming more and more demanding in Europe, we have the AGEC standard coming for consumer goods, and so the more it goes, the more we need to be very good on end-to-end data, so I impose on my suppliers to also have very strong tracking. And this has several virtues, that of traceability to provide information to the final customer, regarding safety, product origin, but also that of planning because if I create this data chain at the interface of the factories, I will also be much more capable of doing track and trace, and thus be transparent on the different stages of my flow.

A sector that has been facing this for years is aerospace since we are on a complex chain, with tier one, two, three, four players sometimes and so they have been working together for quite some time to create this transparency. Planning efforts do not necessarily stop at the company or factory but they are also often at the interface with the rest of the supply chain.

The circular industry

Finally, the last topic is the circular industry. We are increasingly reflecting on thinking about flows, not only linear but also return flows on consumer goods in particular. For example, in the automotive industry, there are people thinking about recovering parts that are in the system, that are on cars, that are at the end of their life, to be able to remanufacture them and thus sell them as new.

So if we want to do this correctly, it means that we will not only need to be able to plan for new products, but also to plan at the same time for those we are going to remanufacture, thanks to a sorting system at the start, because we do not know exactly what will need to be done on the part.

Therefore, we need to think about these flows both to manage the two in parallel. And then after that, we will need to be agile enough to intersperse these remanufacturing flows into the existing flow. We are at the very beginning of the movement, it is a fundamental movement because in any case, decarbonization is an issue, but the real issue for the planet, in fact, is the utilization of materials. Materials being not infinite, we must limit the utilization of materials, thus we need to recycle and remanufacture much more.