Syncata Drives Channel Inventory to Industry Low

Situation: OEM wanted to give its dealers more control over vehicle order requests by providing an allocation system that would weigh vehicle availability against each dealer’s sales history and customer preferences. In the past, the number of automobiles and allocation mix
(i.e., models, options, and colors) to be produced was determined by zone managers and based solely on historical sales. Allocation took place without consideration of customer preferences from market to market, meaning that individual dealers had little, if any, ability to alter their own allocation.

Process: Syncata used Sybase, Microsoft Visual Basic and UNIX/C to construct the system, a network-based collaborative extranet, which allocates cars to the dealers using various factors, including market-specific consumer preferences. It also lets dealers modify their orders within the limits of their basic vehicle allocation. The CPFR system lets dealers choose from roughly 500 options for configuring vehicles in their monthly orders; it then consolidates those orders to the individual plants for factory production.

Results: “We’ve created a demand optimization system that delivers hard data from the North American dealerships, allowing the factory to plan their distribution of vehicles based on actual customer demand,” said Ujj Nath, co-founder and CEO of Syncata, which specializes in helping automakers use demand-driven forecasting to reduce inventory levels, transaction costs and lead times. The system also serves as the business intelligence engine behind OEM’s demand-driven production forecasting process.

The company’s channel inventory went to 38 days, according to Automotive News, a weekly trade magazine, which charts weekly domestic and imported car and light-truck inventories. The findings put OEM in the industry’s top two percent. Seventy days is the industry average.

“From a tactical standpoint, we understood the success of this project hinged on our ability to collaborate effectively with our dealers,” said the V.P. of corporate planning and logistics.

“This CPFR initiative has been able to accommodate dealer requests 95 percent to 98 percent of the time, it has dramatically reduced the number of dealer trades and given the
factory better visibility over customer tastes,” he added.