Page 16 - MetalForming June 2012

Best Practices By Craig Fitzgerald
Capacity Management:
The Difference Between Good and Great
What a difference a few years makes. In 2009, North Amer- ican production and U.S. sales of light vehicles reached 8.6 mil- lion and 10.4 million, respectively, while, according to IHS Automotive, 2012 vehicle production is projected
Best Practices author Bob Dobrowsky recruited coworker Craig Fitzgerald, an automotive industry analyst with the Strategic Planning and Global Serv- ices Consulting Practice of Plante Moran, to prepare this special edition of Best Practices, taking a mid- year look at the U.S. auto- motive supply chain. www.plantemoran.com Craig.Fitzgerald@plante- moran.com
to reach 14.7 million units with sales of 14.2 million units. And, 2013 is looking even better—production forecasts are 15.4 million units with U.S. sales of 14.9 million units. With this kind of production and sales rebound, auto- motive-parts suppliers must be flour- ishing, right?
Not so fast. While this assumption seems logical, it ignores the capacity dimension of the relationship between volume and profit. Reports abound of production shortages for automotive parts. I just attended a conference where a Chrysler official admitted to assembly- plant shutdowns caused by parts short- ages. One week it’s investment castings, the next week it’s electronic components, and by month end, it’s tires and rubber
bushings. How can this be when the Fed- eral Reserve reports capacity utiliza- tion in the stamping and forging sector at 62.1 percent (as of fourth quarter 2011) and 65.9 percent for the motor- vehicle parts-manufacturing sector?
Three factors contribute to this apparent inconsistency. First, the gov- ernment data is misleading, reflecting all in-place equipment, whether mod- ern, fast and precise, or antiquated, slow and incapable of holding tight tolerances. In reality, suppliers’ sched- ules and output reflect in-place equip- ment capable of stamping parts effi- ciently and at a competitive press run rate. The difference between these two measures (theoretical versus practical capacity) is significant.
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14 MetalForming/June 2012
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