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World Class Manufacturing - Integrating the Automotive Supply Chain Professor Andrew Graves 42 nd ACMA Annual Session & National Conference 2 nd September.

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Presentation on theme: "World Class Manufacturing - Integrating the Automotive Supply Chain Professor Andrew Graves 42 nd ACMA Annual Session & National Conference 2 nd September."— Presentation transcript:

1 World Class Manufacturing - Integrating the Automotive Supply Chain Professor Andrew Graves 42 nd ACMA Annual Session & National Conference 2 nd September 2002

2 Centred at MIT - International Research Network 100 researchers, 30 universities, 6 continents European H.Q. – University of Bath, UK European H.Q. – University of Bath, UK Comprehensive, Systematic View of the Industry Data Driven /Analysis Oriented, Comparative Research Programme Activities: Comparative Research - Industry Benchmarking Comparative Research - Industry Benchmarking Policy Analysis - Corporate Strategy Policy Analysis - Corporate Strategy Close Interaction with Industry,Government & Labour Close Interaction with Industry,Government & Labour Broad-based Global Sponsorship Overview - International Motor Vehicle Programme

3 EUROPE Government & Industry / NAAMSA Sloan Foundation (US) Canadian Fed. & State Governts 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 JAPAN AUSTRALIA KOREA SOUTH AFRICA SOUTH AMERICA MAJOR IMVP PARTICIPANTS EC (DG III) DTI (Automotive Directorate) ) CLEPA (Suppliers) Goldman Sachs NORTH AMERICA

4 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

5 Cross-Industry Benchmarking INDUSTRY CLOCKSPEED FRUITFLIES INFO. SYSTEMSCHIPS AUTOS AERO GEOLOGY CIVILS Professor C. Fine, MIT

6 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 to become lean to survive

7 LEAN PRODUCTION IS DRIVEN BY A SIMPLE PRINCIPLE: Eliminate all costs which do not add value to a product or process

8 LEAN PHILOSOPHY What are the benefits of lean ? Reduced Costs Reduced Costs Improved Quality Improved Quality Reduced Cycle Time Reduced Cycle Time

9 ASSEMBLY PLANT PRODUCTIVITY

10 ASSEMBLY PLANT PRODUCTIVITY

11 Lean vs. Mass Benchmarking ASSEMBLY PLANT MassLean Direct Hours/Car2511 Defects/100 cars20075 Hours stock323 Repair Area14%4% % Employees in Teams1%70% Hours Training/Year SUPPLIER PLANT MassLean 000 Units/Head % Defects2.5%0.025% Batch Size Set up time in mins.443 Stock turns/year3294 % Employees in Teams54%80%

12 EXPLAINING THE MANUFACTURING GAP Plant Scale Build Complexity Level of Automation Management Policies Product Design for Manufacture 5 POSSIBLE FACTORS:

13 PARTS SUPPLIER PARTS SUPPLIER PARTS SUPPLIER TOOLING SUPPLIER FINAL ASSEMBLY IS THE MOMENT OF TRUTH FOR THE ENTIRE PROCESS IT GETS DISPERSED OVER THE SUPPLY WEB HUNDREDS OR THOUSANDS OF MILES AND THREE TO TEN YEARS TOOLING SUPPLIER ASSEMBLY SUPPLIER ASSEMBLERDESIGNER A PRODUCT DESIGN STARTS OUT FROM ONE POINT Make-Buy Complexity: Product Development on a Supply Web Whitney, et al, Agile Pathfinders in the Aircraft & Automobile Industries - A Progress Report FABRICATION TOOLS SPECIFICATIONS ASSEMBLY TOOLS DESIGNS DESIGN PARTS ASSEMBLIES DESIGNS PARTS SPECIFICATIONS ASSEMBLY SUPPLIER

14 WHO HAS THE POWER IN THE CHAIN ? Make Buy Strategy Customers IBM INTEL MICROSOFT ASSESSING AND FORECASTING WHICH STAGES OF THE SUPPLY CHAIN WILL BE HIGH-PROFIT, HIGH LEVERAGE © Prof. C Fine, MIT

15 Issues for Industrial Competitiveness Identify worlds best practice Benchmark your performance against the best Dont 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

16 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 ?

17 Build to Order The Three Day Car

18 3DayCar objective To develop an organisational and process framework within which a customers need for a vehicle can be fulfilled in three days, from order placement through manufacture and delivery.

19 The research team International Car Distribution Programme International 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

20 Sponsors EPSRC: Engineering & Physical Science Research Council VMs: Ford, Honda, Nissan, Peugeot, Vauxhall, VW Suppliers: GKN, Thyssen Krupp Automotive,TI Group (Bundy), MTTA Logistics / Axial, Institute of logistics & transport distribution: Wallenius Wilhelmsen Retail / Inchcape, Lancaster, NFDA, Dealers:Pendragon, Quicks IT: BEA Systems, Cap Gemini, Keane Finance: Goldman Sachs Government: DTI

21 The 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

22 The issue Substantial savings could be realised 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

23 1st tier Order scheduling scheduling Programme Planning Planning Dealer NSC Customer 2nd tier Raw Mat. PRESS WELD PAINT ASSEM TEST Dealer D.C. Sequencing Information flow Physical flow Basic order fulfilment system Purchase

24 1st tier Prod. control Proging Dealer NSC Customer 2nd tier Raw Mat. PRESS WELD PAINT ASSEM TEST Dealer D.C. Purchase 3 Day Car probably demands significant changes to system Volume Time Discount Push Stock Paint Batching Cstraint 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

25 Generic 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 Capability 39.8 Day Car Capability

26 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 ! Summary

27 Current problems Vehicle Complexity - internal, ext. variety Tooling costs - single piece flow v EOS Capacity constraints - vms & suppliers Schedule / build unreliability - paint Visibility - IT legacy, lack of standards...

28 3DayCar 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

29 From.. To.. Tier 1 Tier 2 Tier 3 Batch processing Bespoke EDI Transactions Web-based Tier 2Tier 1Tier 3 Order pipeline

30 Responsiveness ANX, ENX, WebEDI.. 3Daycar extranet Tier 2 Tier 1 Tier 3 Tier 2 XML >Order bank >Plant capacity >Supplier capacity >Parts inventory >Logistics capacity >Assembly sequence

31 Summary THERE WILL NOT BE A DEFINITIVE 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

32 Future Production Technology Future Production TechnologySolving the bottlenecks to flexible production Supplier Opportunities

33 Alternative 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

34 Agile 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

35 Dynamic Body construction 1 Frame part-assembled 2 Order tagged to vehicle BodyPaintAssembly Current order leadtime v potential: 3 Build completed to order using modules De-coupling / flexibility..

36 Future 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.

37 Conclusion Many VMs 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 plant 2. Supply Chain Integration Build to Order is inevitable - it will impact every player – from dealer to supplier to manufacturer


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