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In 2002, Volvo Cars produced more than 400,000 automobiles. These have to be matched with customer preferences for model, engine, gearbox, and other options in countries worldwide. Advanced planning is necessary to be able to forecast long-term and short-term demand.
Accuracy is Essential
“Since we became part of the Ford Corporation, we have seen a greater focus on knowing exactly what is to be delivered to the customers who visit our dealers,” explains Jörgen Träff, Manager, Market Volume Planning. “Therefore we need a demand planning system that is flexible, easy to use, and easy to overview.”
Until recently, those responsible for forecasts in each country based their monthly figures on different types of statistical data and on their own assessments, which they compiled using tools chosen locally, often Microsoft® Excel®. Since the forecast data varied between different markets and sometimes was less than 100% reliable, Volvo Cars was forced to ensure that suppliers reserved extra production capacity, which was not always utilized. Inaccurate forecasts can mean that vital components are delayed, which results in lost business. Common Model
Now, short-term forecasting, i.e. up to one year, is being coordinated in a common model based on a combination of historical data, seasonal variations, and reports from independent analyst institutions.
To these, we can add local parameters such as advertising campaigns. All the variables are processed automatically in IFS/Demand Planning, an interactive graphical tool that is specially designed for market planning. Profitable Predictions
“Enormous savings can be made from knowing more exactly where, when and how customers in certain markets want their cars,” says Jonas Didoff at Cap Gemini Ernst & Young, who headed up the project at Volvo Cars. “We are looking at savings of millions of dollars every year thanks to better forecast management. Quite simply, it is a matter of basing planning to a higher degree on knowledge and less on speculation. Another important function enabled by the forecasting software from IFS is that it becomes a source of information for other groups in Volvo Cars. Now, company management gets an easily comprehended overview of historical data, outcomes and prognoses.” Rapid Implementation
Currently, IFS/Demand Planning is being implemented in Volvo Cars offices worldwide. Since the tool already exists as a standard component in IFS Applications, the implementation has been very swift. Using the IFS Connect integration platform, it was easy to integrate the tool with existing sources of sales statistics, among other things, at Volvo Cars. Easier Forecasts
The graphical interface makes it easy to understand and overview the information in the new system. It took no more than a couple of days training to get the 45 users up and running.
“The new tool makes it easier and more enjoyable to make forecasts,” explains Jonas Didoff. “The major savings arising from more correct forecasts lie in the fact that we will not have to buy flexibility from our suppliers to same extent as before.” Major Interest
According to Jörgen Träff at Volvo Cars, the greatest challenge now that the system has been fully rolled out is to get everyone to use the system and enter the information that is required.
“In the future, we hope to able to use the tool for medium-term and long-term forecasts of up to 10–12 years ahead. We are also looking at integration with other systems, such as purchasing, in the future. And I know that other companies within the corporation are following this project with great interest,” concludes Jörgen Träff. IFS/Demand Planning
- Automates forecasts for areas like sales planning and budgeting
- Has an intuitive, self-instructing graphical interface
- Handles seasonal variations
- Uses a wizard to easily create flows
- Is based on management by exception (MBE)
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