Allocation Question

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Old Feb 13, 2006 | 12:51 PM
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Ken,

How far in advance does a dealer know if they have allocations and for when?

Do they know they have X allocations for week Y, or do they place orders and the plant picks up what ever number of allocations they have for that week.
Old Feb 13, 2006 | 04:19 PM
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Great question.
Old Feb 13, 2006 | 06:01 PM
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I agree..great questions. Would like to know myself as I am waiting for my order to process.
Old Feb 13, 2006 | 06:08 PM
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Ken,
You've mentioned in previous posts to ask the dealer to see their "Estimated Shipments report" and "Final allocation by week report". Could you explain what these reports are and how to understand them if/when we get to see them?

Thanks,
Kevin
Old Feb 16, 2006 | 10:10 AM
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Hello!

I am sorry that I didn't reply sooner but I have been busy with several projects.

AND, this is a hard subject to tackle and explain in a few words. It would take me several hours face to face to truly explain the GM distribution system.

Once each month each dealer is provided with an opportunity to consense (agree to a specific quantity) of each model line for production the next month. The dealer works thru a worksheet and submits his desired quantities electronically to GM. Some models (Corvette) are not available in a quantity that exceeds what GM has published as available on their estimated shipments report.

Within a week, GM communicates to each dealer via the final allocation by week report, the exact number of each model the dealer will receive and the week in which each model allocation will actually occur.

Once the day arrives that the dealer has an allocation, the dealer must have an order in the system that is buildable within any constraints imposed by GM for that week.

Please find below more information on the distribution system.

Short answer: Dealers know two months in advance the estimated number of Corvettes that they will have produced, further dealers know one month in advance the weeks in which they will have allocations.

Ken Fichtner

More:

GM Vehicle Distribution System – Basic Explanation

Estimated Shipments Process

Distribution of the production schedule is based on the following:
• Controlled Allocation
• Available Days’ Supply (ADS)
• Forecast

These calculation methods are explained below.

GMVOM Timing Cycle

The Estimated Shipments process occurs each month, and is completed on Thursday of Week 1 in the GMVOM Timing Cycle.
NOTE: The Estimated Shipments and Consensus processes do NOT apply to Regional Consulting Center (RCC) dealerships. Also, constraints are distributed to RCC dealerships ONLY for constrained allocation groups.

Estimated Shipments Process Tasks

Plan Production Volumes
GM plans production volumes for each allocation group by analyzing several inputs, including marketing strategies, production estimates, production constraints, and dealers’ sales forecasts. During the analysis, GM must answer the following questions related to each of these inputs:
• Marketing strategies – How should GM position the vehicle in order to achieve maximum market penetration? Are there major advertising or incentive programs planned for specific periods during the year?
• Production estimates – How many vehicles can the plants produce for a specific period?
• Constraints – What models and options are available only in limited quantities because their production capacity is too low or their demand is too high?
• Dealers’ sales forecasts – What quantity of vehicles have the dealers determined that they can sell?
Dealers’ sales forecast quantities are an important factor in the production planning process.

Process Temporary Allocation Requests
Based on specific qualifying criteria, GM assigns temporary allocation quantities to dealers in order to supplement the normal sales planning and allocation processes.
NOTE: For information about the qualifying criteria, dealers should consult with their respective Zone Teams.
Calculate Estimated Shipments
GM calculates estimated shipments for each dealer based on the following inputs:
• The estimated production volume for the allocation group.
• A specific production period.
• A selected calculation method.

GM has three methods for calculating estimated shipments—Controlled Allocation, Available Days’ Supply (or ADS), and Forecast. The method that GM selects for calculating estimated shipments is based on:
• Whether or not the allocation group is a new vehicle line that is just being launched.
• Whether the demand for the allocation group is greater than or less than the supply.

CONTROLLED ALLOCATION CALCULATION METHOD

• When does GM use the Controlled Allocation method? GM uses the Controlled Allocation method during the launch of a new vehicle, at the time when demand is greater than supply and the marketing team wants to target a specific market. GM also uses the Controlled Allocation method when the long-term demand for a vehicle (such as the Corvette) exceeds the vehicle supply.
• How does the method work? When using Controlled Allocation, GM will typically allocate vehicles to the dealers based on a defined launch strategy or equitable distribution; for example, based on marketing strategies, GM may allocate a new pickup truck to dealerships that are located in rural areas.

AVAILABLE DAYS’ SUPPLY (ADS) CALCULATION METHOD

• When does GM use the ADS method? GM uses the ADS method the majority of the time.
• How does it work? GM allocates vehicles to the dealers with the lowest Available Days’ Supply (ADS). A dealer’s ADS is based on the dealer’s Total Availability and Daily Sales Rate for the allocation group.
• What is a dealer’s Total Availability? A dealer’s Total Availability is the quantity of vehicles of the specified allocation group that a dealer has available. This quantity is equal to the total number of vehicles in stock (on ground), in transit to your dealership, in system (orders that are being built), placed orders (orders that are ready to go to the production management system), and balance-to-go allocation (the dealer’s final allocation units that have NOT been submitted as preliminary orders or selected as placed orders for the current production period).
• What is a dealer’s Daily Sales Rate? A dealer’s Daily Sales Rate is the average number of units sold per day over a sales period of 1, 2, 3, or 12 months. GM determines which sales period to use for each allocation group. (GM uses 12 months only during the start-up and build-out periods for an allocation group.)
• What is a dealer’s ADS? A dealer’s ADS is equal to the dealer’s Total Availability divided by the dealer’s Daily Sales Rate. (For example, if a dealer’s Total Availability is 30 and its Daily Sales Rate is 2, then its ADS is 15.)

ADS Example Step 1 – Calculate Total Availability
The Allocation application calculates the total availability for each dealer after receiving the availability data. Remember that Total Availability includes balance-to-go.

ADS Example Step 2 – Calculate Daily Sales Rate
The Allocation application calculates the daily sales rate for each dealer by determining the dealer’s total sales for a defined sales period of 30, 60, 91, or 365 days and dividing the dealer’s total sales by the number of days in the sales period. (GM decides which sales period to use for each allocation group.)

ADS Example Step 3 – Calculate ADS
The Allocation application calculates each dealer’s ADS by dividing the total availability by the daily sales rate.

ADS Example Step 4 – Assign First Unit Based on ADS
GM determines which dealer has the lowest ADS, and assigns a unit to that dealer.
In this example, Dealer D gets an additional unit, making its total availability change from 2 to 3. The dealer’s ADS is also recalculated, and changes from 7 to 11. Remember, the ADS is calculated by dividing the total availability by the daily sales rate—in this example, 3 divided by 0.27 is 11.11 units (which is rounded down to 11).

ADS Example Step 5 – Assign Next Unit Based on ADS
GM determines which dealer has the lowest ADS, and assigns a unit to that dealer.
In this example, Dealer C gets an additional unit, making its total availability change from 3 to 4. The dealer’s ADS is also recalculated, and changes from 10 to 13. Remember, the ADS is calculated by dividing the total availability by the daily sales rate—in this example, 4 divided by 0.30 is 13.33 units (which is rounded down to 13).
At this point, only two units have been allocated; however, this step is repeated until all available units of an allocation group are allocated. Each time this step is repeated, the dealer with the lowest ADS earns a unit.

ADS Example Step 6 – Determine National ADS Bar
When the last available unit in an allocation group is allocated, the ADS of the dealer who received the last unit is called the “National ADS Bar.” The National ADS Bar is the allocation cutoff point.

Dealers that had a beginning ADS that was less than the National ADS Bar received at least one unit for the production period. Dealers that had a beginning ADS that was greater than the National ADS Bar received no units for the production period.
For example, if the ADS of the last dealer to receive a unit is 20, then the dealers who had a beginning ADS that was less than 20 would have received at least one unit for the production period. Dealers who had an ADS that was greater than 20 would NOT have received any units for the production period.

FORECAST CALCULATION METHOD
• When does GM use the Forecast method? GM uses the Forecast method when calculating estimated shipments for the sales outlook period (or month). The sales outlook period is shown in the last column of the table at the top of the Estimated Shipments report. The column heading is “Estimated Shipments [Month/Year].”
• How does the method work? GM calculates estimated shipments by using each dealer’s Sales History for the allocation group.
• What is a dealer’s Sales History? A dealer’s Sales History is the number of vehicles that the dealer sold during the same production period one year ago, or the average number of vehicles that the dealer sold during the same production period one and two years ago or one, two, and three years ago. (GM typically uses one year for vehicles that have a high production volume. GM may use two or three years for vehicles that have a lower production volume.)

Forecast Example Step 1 – Calculate Sales History
The Allocation application calculates each dealer’s 3-year sales history for the allocation group and production period. The application adds all dealers’ 3-year sales history values in order to get the total (or national) 3-year sales history for the allocation group and production period.

Forecast Example Step 2 – Calculate Average Actual Sales
The Allocation application calculates each dealer’s average actual sales by dividing the 3-year sales history by 3. The application adds all dealers’ average actual sales values in order to get the total (or national) average actual sales for the allocation group and production period.

Forecast Example Step 3 – Calculate the % to National Value
The Allocation application divides each dealer’s average actual sales value by the total (or national) average actual sales value in order to get a % to National value. (In this example, the total average actual sales value is 45.) The total of all dealers’ % to National values must equal 100 percent.

Forecast Example Step 4 – Calculate Estimated Shipments
The Allocation application multiplies each dealer’s % to National value by the planned production volume for the allocation group and production period. (In this example, the planned production volume is 51.) The resulting value is the dealer’s estimated shipments quantity for the allocation group and period. The total of all dealers’ estimated shipments values must equal the planned production volume.

Send Quantities to Dealers
After GM calculates the estimated shipments quantities, they are sent to Order Workbench where dealers may review them as input for their sales planning and forecasting activities.

How can a dealership get more product if its sales are better than expected?

When a dealership's sales are better than expected, the dealership and its Area Sales Manager can get more product by doing the following:
Increase the dealership's production consensus quantity for the next production period.
Increase the dealership's desired allocation quantity in the weekly Order Vehicles process.
Look for trade or purchase opportunities by using the Locate Vehicles screens in Order Workbench.

What is the Available Days' Supply (ADS) formula?

In the Estimated Shipments process, the Available Days' Supply (ADS) formula is used in order to distribute available production volumes fairly and responsively to dealers.

In the Constraints Distribution process, the ADS formula is used in order to distribute available constraints fairly and responsively to dealers.

How do I determine which vehicle constraints were distributed to my dealership?

You can determine which vehicle constraints were distributed to your dealership by accessing the View My Allocation Summary screen in the Order Vehicles section of Order Workbench.

What is the difference between a preliminary order and a placed order?

A preliminary order is a vehicle order that a dealer configures and submits to GM for selection during the Vehicle Order Selection process.

A placed order is a preliminary order that was submitted to GM by a dealer and was selected to be built. A placed order is any order that is at Event Code 2000 (Accepted by GM), but has not reached Event Code 2500 (Preferenced).
How does the Vehicle Order Selection batch process place my dealership's preliminary orders?

The Vehicle Order Selection batch process places your dealership's preliminary orders based on the following factors:
The priority code that your dealership assigned to each preliminary order.
Your dealership's final allocation quantity for the target production period (TPP).
Your dealership's desired allocation quantity for the TPP (if additional allocation is available).
Your dealership's distributed constraints quantities for the TPP.

How can I tell whether a preliminary order has been placed?

When a preliminary order is placed, the vehicle order event code changes to 2000 (Accepted by GM). You can view the current event code for an order by accessing one of the following screens:
Order Detail screen in the Manage Inventory section
Preliminary Order/Stored Configuration Detail screen in the Order Vehicles section

How much time do I have in order to change or replace placed orders?

For a specific target production period (TPP), you can change or replace placed orders until 9:00 PM Eastern Time on Tuesday.

Can I change (or replace) a placed order that is based on a national pattern order?

You can change both the model and content of a placed order that is based on a national pattern order; however, the model must be within the same allocation group as the national pattern order and the model and content must be within any applicable constraints.

What happens if I try to add a constrained or restricted option onto a placed order?

The system will reject your change, and the placed order will revert to its original content.

How can I track a sold order for a customer?

You can track a sold order for a customer by using the Vehicle Order Inquiry screen. You can access this screen by clicking the Go to Vehicle Order Inquiry link on the Manage Inventory drop-down menu.
Old Feb 16, 2006 | 07:06 PM
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Ken,
Will you please open a dealership in New Jersey. We need a dealer like you.
Old Feb 25, 2006 | 07:21 PM
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Ken

I agree.

You need to some how buy some other chevy dealerships and expand, and fast. The way you do business, you would have many, many customers to pay for your new dealership investments.

My area in Iowa has 2 Chevy dealers and they do not come close to the way you run a business. So please try to buy Rydell in Waterloo or Community in Cedar Falls. When you do I want to be your first customer.

Garry

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