World Class Manufacturing -World Class Manufacturing -Integrating the Automotive Supply ChainIntegrating the Automotive Supply Chain

Professor Andrew Graves42nd ACMA Annual Session& National Conference2nd September 2002

• Centred at MIT - International Research Network

100 researchers, 30 universities, 6 continents100 researchers, 30 universities, 6 continents European H.Q. – University of Bath, UKEuropean H.Q. – University of Bath, UK

• Comprehensive, Systematic View of the Industry• Data Driven /Analysis Oriented, Comparative Research• Programme Activities:

Comparative Research - Industry BenchmarkingComparative Research - Industry Benchmarking Policy Analysis - Corporate StrategyPolicy Analysis - Corporate Strategy Close Interaction with Industry,Government & LabourClose Interaction with Industry,Government & Labour

• Broad-based Global Sponsorship

OverviewOverview - - International Motor Vehicle ProgrammeInternational Motor Vehicle Programme

EUROPEEUROPE

• Government & Industry / NAAMSA

• Sloan Foundation (US)• Canadian Fed. & State Govern’ts• US Dept. of Commerce

• Chrysler• Ford• GM• Honda• Nissan• Toyota• Leading Suppliers (US & Mexico)

• BMW• Fiat• Ford• Honda• Mercedes-Benz• Nedcar• Nissan• Renault• Toyota• Volvo• Volkswagen

• Unipart• GKN• Lucas• Johnson Matthey• T & N

• Auto companies (JAMA)

• Auto suppliers (JAPIA)

• Auto companies• Government• FAPM - Suppliers

• KAMA - Auto companies

• Argentina & Brazil

JAPANJAPAN

AUSTRALIAAUSTRALIA

KOREAKOREA

SOUTH SOUTH AFRICAAFRICA

SOUTH AMERICA SOUTH AMERICA

MAJOR IMVP PARTICIPANTSMAJOR IMVP PARTICIPANTS

• EC (DG III)• DTI (Automotive Directorate)• CLEPA (Suppliers))

• Goldman Sachs-------------------------

-------------------------

NORTH AMERICANORTH AMERICA

IMVP research is being conducted in 6 main areas

Manufacturing Practice

Research and Development

Supply Systems

Environment and Mobility (IVHS)

Distribution Systems and Markets

Strategy and Policy

Cross-Industry Benchmarking

INDUSTRY CLOCKSPEED

FRUITFLIES

INFO. SYSTEMS CHIPS AUTOS AERO

GEOLOGY

CIVILS

Professor C. Fine, MIT

THE AUTO INDUSTRY IS IN THE MIDDLE OF A REVOLUTION

FROM MASS TO LEAN PRODUCTION

MASS

Some Western

Assemblers

Traditional

Suppliers

LEARNING

Many Western

Assemblers

Transplant

Suppliers

LEAN

Japanese

Japanese

Suppliers

Traditional mass producers will have tobecome lean to survive

LEAN PRODUCTION IS DRIVEN BY A SIMPLE PRINCIPLE:

Eliminate all costs which do not add value to a product or process

LEAN PHILOSOPHY

What are the benefits of lean ?

Reduced CostsReduced Costs Improved QualityImproved Quality Reduced Cycle TimeReduced Cycle Time

1317

26

1921

25

19

25

31

23

35

58

23

35

56

26

41

79

0

10

20

30

40

50

60

70

80

90

100

Pro

ducti

vit

y

(hours

/V

ehic

le)

J / J J / NA US/ NA US&J / E E/ E NIC

Parent Location/ Plant Location

Best

Weighted Average

Worst

ASSEMBLY PLANT PRODUCTIVITY - 1989

12

16

24

13

1821

14

22

31

15

24

34

20

29

37

20

29

38

50

87

210

29

34

45

2728

33

0

10

20

30

40

50

60

70

80

90

100

Hours

per

veh

icle

J / J J / NA US/ NA US & J / E E/ E NIC SA AUS KOR

Plant Location

Best

Average

Worst

ASSEMBLY PLANT PRODUCTIVITY - 1994

Lean vs. Mass Benchmarking

ASSEMBLY PLANTASSEMBLY PLANT

MassMass LeanLean

Direct Hours/Car 25 11

Defects/100 cars 200 75

Hours stock 32 3

Repair Area 14% 4%

% Employees in Teams 1% 70%

Hours Training/Year 173 380

SUPPLIER PLANTSUPPLIER PLANT

MassMassLeanLean

‘000 Units/Head 5.0 0.9

% Defects 2.5% 0.025%

Batch Size 287 125

Set up time in mins. 44 3

Stock turns/year 32 94

% Employees in Teams 54% 80%

EXPLAINING THE MANUFACTURING GAP

Plant Scale Build Complexity Level of Automation Management Policies Product Design for Manufacture

5 POSSIBLE FACTORS:5 POSSIBLE FACTORS:

PARTSSUPPLIER

PARTSSUPPLIER

PARTSSUPPLIER

TOOLINGSUPPLIER

FINAL ASSEMBLY IS THE “MOMENTOF TRUTH” FOR THE ENTIRE PROCESS

IT GETS DISPERSED OVER THE SUPPLY WEB

HUNDREDS OR THOUSANDS OF MILES AND THREE TO TEN YEARS

TOOLINGSUPPLIER

ASSEMBLYSUPPLIER

ASSEMBLERASSEMBLERDESIGNERDESIGNER

A PRODUCT DESIGNA PRODUCT DESIGNSTARTS OUT FROM ONE POINTSTARTS OUT FROM ONE POINT

Make-Buy Complexity:Make-Buy Complexity:Product Development on a Supply WebProduct Development on a Supply Web

Whitney, et al, “Agile Pathfinders in the Aircraft & Automobile Industries - A Progress Report”

FABRICATIO

N TOOLS

SPECIFICATIO

NS

ASSEMBLY TOOLS

DESIGNS

DESIGN P

ARTS

ASSEMBLIESDESIGNS

PA

RT

S

SPECIFIC

ATIONS

ASSEMBLYSUPPLIER

WHO HAS THE POWER IN THE CHAIN ?

Make Buy Strategy

Customers

IBM

INTEL

MICROSOFT

ASSESSING AND FORECASTING WHICH STAGES OF THESUPPLY CHAIN WILL BE HIGH-PROFIT, HIGH LEVERAGE

© Prof. C Fine, MIT

Issues for Industrial Competitiveness

• Identify world’s best practice

• Benchmark your performance against the best

• Don’t imitate competitors, but develop leaner and more focused strategies

• Focus upon managing the whole system - not parts of it

• Bring together individuals with knowledge and control

• Eliminate ‘frozen layer’ of management

• Re-assess Training & Education

CONCLUSIONS

WESTERN VMs AND SUPPLIERS CLOSED GAP

WITH JAPANESE

KEY DRIVER – LEAN MANUFACTURING

TECHNIQUES

POWER SHIFT FROM VMs TO MEGA-SUPPLIERS

BUT – STILL POOR PROFITABILITY

WHAT IS NEXT BEST PRACTICE ?

Build to OrderBuild to Order

The Three Day CarThe Three Day Car

Build to OrderBuild to Order

The Three Day CarThe Three Day Car

3DayCar objective3DayCar objective

“ To develop an organisational and process framework within which a customer’s need for a vehicle can be fulfilled in three days, from order placement through manufacture and delivery.”

The research teamThe research team

• International Car Distribution ProgrammeInternational Car Distribution Programme Marketing & Finance

• Cardiff Business School, Lean Enterprise CentreCardiff Business School, Lean Enterprise Centre Systems & Organisation

• School of Management, University of BathSchool of Management, University of Bath Environment & Technology

–

3 member / 14 person consortium

SponsorsSponsorsEPSRC: Engineering & Physical Science Research CouncilVM’s: Ford, Honda, Nissan, Peugeot, Vauxhall, VW

Suppliers: GKN, Thyssen Krupp Automotive, TI Group (Bundy), MTTA

Logistics / Axial, Institute of logistics & transportdistribution: Wallenius Wilhelmsen

Retail / Inchcape, Lancaster, NFDA, Dealers: Pendragon, Quicks

IT: BEA Systems, Cap Gemini, Keane

Finance: Goldman Sachs

Government: DTI

The issueThe issue

• ‘Shop-Floor Myopia’ - Manufacturers (‘VMs’) have spent last 15 years optimising the plant

• IMVP assembly plant and enterprise benchmarking suggests Europe and US now matching Japan

• But at detriment to whole order fulfilment chain (Japanese amongst the least flexible)

• Identify the scope for new entrants in a ‘3 day’ market

• Examine the environmental & resource impact of a large scale move to ‘3 day’ cars

The issueThe issueSubstantial savings could berealised if VMs moved from ‘stock-push’ to ‘build-to-order’

– Flexible production– Integrated players– Modularisation and alternative body-

structures– Order amendment– Open order pipeline– Demand segmentation, distribution centres

1st tier

OrderOrder schedulingscheduling

ProgrammeProgramme PlanningPlanning

DealerDealerNSCNSC

Customer

2nd tier

Raw Mat. PR

ES

S

WE

LD

PA

INT

AS

SE

M

TE

ST

DealerDealerD.C.D.C.

SequencingSequencing

Information flow

Physical flow

Basic order fulfilment systemBasic order fulfilment system

PurchasePurchase

1st tier

Prod.

controlProg’ing DealerNSC

Customer

2nd tier

Raw Mat. PR

ES

S

WE

LD

PA

INT

AS

SE

M

TE

ST

DealerD.C.

Purchase

3 Day Car probably demands 3 Day Car probably demands significant changes to systemsignificant changes to system

•Volume•Time

•Discount•Push•Stock

•Paint•Batching•C’straint

•Dealer & market allocation•Push

•Batching•Push•Trading

•Instability•Forrester•Batching

•Fluctuations•Wrong stock•Temporary•Batching, quality, labour,

shutdown, volume, IT

•Long PDI, t/o customer loss

Generic Model - Av. TimesGeneric Model - Av. Times

• Order entry Dealer-Manufacturer 3.8 days• Order bank 9.8

days• Scheduled orders 14.1 days• Sequenced orders held 6.0 days• Physical production FFD-EOL 1.4 days• Loading at factory 0.9 days• Distribution to dealer 3.8 days

‘ ‘ 39.8 Day Car ’ Capability39.8 Day Car ’ Capability

• Theoretical current best practice OTD leadtime: 11 days

• Average OTD leadtime (Europe):

40 days

• 40 to 50 days stock held in the system

Clearly, we currently cannot build the 3DayCar !

SummarySummary

Current problemsCurrent problems

Vehicle Complexity - internal, ext. variety

Tooling costs - single piece flow v EOS

Capacity constraints - vm’s & suppliers

Schedule / build unreliability - paint

Visibility - IT legacy, lack of standards...

3DayCar requirements3DayCar requirements

Real-time information flow: ‘responsiveness’

Total visibility across supply chain

– Systems integration – Compatibility of bespoke EDI systems

Feedback and demand management– Checking capability and delivery, as promised

Selective disclosure of information

Minimum cost

– Implementation / installation– Training & maintenance

Reliability, ‘Scaleability’, Flexibility

From..

To..

Tier

1

Tier

2

Tier

3

Batch processing

Bespoke EDI

Transactions

Web-based

Tier 2Tier 1 Tier 3

Order pipelineOrder pipeline

ResponsivenessResponsiveness

ANX, ENX, WebEDI..

3Daycar 3Daycar extranetextranet

Tier 2

Tier 1

Tier 3 Tier 2

XM

LX

ML

>Order bank

>Plant capacity

>Supplier capacity

>Parts inventory

>Logistics capacity

>Assembly sequence

SummarySummary THERE WILL NOT BE A DEFINITIVE THERE WILL NOT BE A DEFINITIVE

3DAYCAR I.T . SYSTEM MODEL !3DAYCAR I.T . SYSTEM MODEL !

• Solutions are dependent on existing infrastructure and individual choices by VMs and suppliers:

– Total communication package: Covisint

– Independent: Volkswagen, Supply On.. (Bosch)

• Moving from rigid assumption based to permission based systems requires long term strategy

• Information systems critical to all BTO scenarios– Initially: functions merged and number of systems reduced– Ultimately: aim for real-time information exchange online

between all key players to allow the system to act as an optimised whole

Future Production Future Production TechnologyTechnology

‘Solving the bottlenecks to flexible production’

Supplier OpportunitiesSupplier Opportunities

Alternative Paint StrategiesAlternative Paint Strategies

1. Painted Body Stores

• De-couple paint

2. New Painting Systems

• Batch size of one & no solvent emissions

3. Alternative body construction

• Thermoplastic in-mould coloured panels

Agile Paint systemAgile Paint system

New painting technology imminent:

- Batch sizes of one & no purging with solvent

- No paint pre-mixing

Overcomes batch problem..but

- Reliability

- Assembly line constraints:

3DayCar proposal to increase

manning to remove constraints

PBS only necessary for unreliability

Dynamic Body Dynamic Body constructionconstruction

1 Frame part-assembled

2 Order tagged to vehicle

Body Paint Assembly

Current order leadtime v potential:

3 Build completed toorder using modules

De-coupling / flexibility..

Future solutionsFuture solutions

Alternative body structures / materials:

Independent Body & Panels (IBP),

composites

New assembly strategies: Micro Factory

Retailing (MFR) - building close to customer

New product strategies: ‘Plug and play’,

‘mix and match’, ‘lifecycle’

Communication / trading portals: Direct

links between marketing, supply, logistics and

product development.

ConclusionConclusion

Many VM’s now focusing on BTO:Renault - Nissan, BMW, Ford

Current ‘push’ system chronically inefficient - encourages overproduction, massive stock levels, fails to satisfy customers, and requires discounting

Need to focus on:1. Real customer demand, rather than the assembly plant2. Supply Chain Integration

Build to Order is inevitable - it will impact everyplayer – from dealer to supplier to manufacturer