The Automotive Assembly Plant of the Future - · PDF fileThe Automotive Assembly Plant of the...

The Automotive Assembly Plant of the Future MESA conference

Düsseldorf, November 9th, 2010

Pier Manenti | EMEA Research Director | IDC Manufacturing Insights

© IDC Manufacturing Insights

About IDC Manufacturing Insights

A division of IDC

Develops industry research, benchmarking projects and advisory services on business process best practices and on the use of IT in manufacturing

Helps manufacturers improve their capabilities in key business process areas

Helps IT vendors to assess the market opportunities and better tailor offering to end-users’needs


IDC Manufacturing InsightsAreas of research

Asset Oriented Value Chain

Asset Oriented Value Chain

Engineering Oriented Value

Chain

Engineering Oriented Value

Chain

Technology Oriented Value

Chain

Technology Oriented Value

Chain

Brand Oriented Value Chain

Brand Oriented Value Chain

Product Lifecycle strategies

Product Lifecycle strategies

Supply Chain strategies

Supply Chain strategies

Operations Technology strategies

Operations Technology strategies

Emerging AgendaEmerging Agenda

Look at a domain

across segments

Look at a segment across

domains

Process Domains

Value Chains

Automotive, Aerospace, Machinery, …

High-tech, Semiconductor,…

Fashion, Food&Beverage,…

Chemicals, Pharmaceuticals,…


The automotive industry is very conservative

The manufacturing model for the automotive industry today has not fundamentally changed over the years– Henry Ford built the River Rouge

assembly plant in the 20s as a monument to his mass production principles with iron ore (from Ford mines) and rubber (from Ford plantations) coming into the factory and Model Ts coming out for a growing, ready market

– Large corporation still try to benefit from their critical mass for profitable volume manufacturing

Ford’s River Rouge Tool & Die Shop


The effect of mass production

Excess inventory– The sequential supply chain from tier suppliers to

the manufacturer and then to the dealership lot results in 180-200 day cycle time from raw material to ultimate consumer.

– McKinsey estimated that vehicle manufacturers waste $80 billion annually by producing non-demand inventory (inventory costs, insurance, damage costs, incentives etc.)

Suboptimal capacity utilization– Capacity utilization is suboptimal and

inconsistent. Most OEMs keep manufacturing facilities running at less than maximum capacity; worse, because of poor demand forecasting and capacity planning, they experience huge swings in utilizations.

Productivity challenges– Profitability is a major concern in the automotive

industry and productivity remains a key objective. Some manufacturers, especially American OEMs, struggle with high variability that leads to excess capacity in some plants.

– This creates a "productivity vise," in which OEMs lower prices and create other incentives to push vehicles that fill idle capacity, putting pressure on operations to become even more productive and tightening the vise with each cycle.

– The result: excessive use of discounts and other incentives that create large inventories and erode already small margins.


From Economy of Scale to Opportunities in Flexibility

In the last decade automakers have been moving away from a single view based on economy of scale and implement more flexible production models to better fit changing market demand.

This transition impacted assembly lines processes and forms the foundation of the future approach to assembly line manufacturing:– Multiple Vehicles on a Single Assembly Line– From Make-to-Stock (MTS) to Build-to-Order (BTO) – World Car– Distributed Assembly and CKD


Multiple Vehicles on a Single Assembly Line

It is estimated that platform-based design can offer consumers same number of models while reducing the number of unique architectures by 50%. Platform-based design offer significant benefits throughout engineering and service. Assembly manufacturing benefits:– Capacity utilization– Lower Inventories– Quality– Capital and Operating Expenses– Impact on Software

IDC Manufacturing Insights estimates savings are summarized in Table 2.

TABLE 2Savings

R&D 40%

Engineering 25%

Raw materials 20%

Production: methods, tools, inventories

30%

Logistics 20%

Source: IDC Manufacturing Insights, 2010


From Make-to-Stock (MTS) to Build-to-Order (BTO)

The benefits of BTO for customer satisfaction and brand loyalty are clear. But they are not the only benefits:

– Reduction in inventories– In some regions shorten the order-to-delivery-time– Thus BTO proponents argue there is a potential 10% additional profit of the retail

price of the vehicle. – Savings of a BTO strategy introduction are estimated of $500-$1500 per vehicle

[Goldmann Sachs 2000, Roland Berger 2000]Despite some obvious benefits, BTO is more common in Europe than North America and Japan, is still striving to find an acceptance worldwide.

– Leading automakers include BMW, Daimler, Renault and Fiat. BTO production will account for less than 20%.

– One important reason resides in the fact that BTO is a more appropriate manufacturing strategy for premium brands that generate profits through upselling customers a wide range of features and options. It is not an appropriate manufacturing strategy for OEMs selling high-volume or low cost vehicles with a limited range of options.

– Japanese manufacturers tend to eschew BTO and essentially make to stock, as they limit the number of customer specified features by offering vehicles that contain most features as standard


World Car

The "World Car" concept demands high level of standardization and common components. All models are based on the same platform and share at least 60% of parts and offer only a limited set of consumer options, an approach that suits the consumer base in emerging economies. – Manufacturing.

Modular design reduces manufacturing complexity, as assembly line processes and organizational structures are identical homogeneous across multiple plants, leveraging common structures, operational processes, equipments and degree of automation. Modular design uses simpler work instructions and tools, and can be done efficiently with less automation than standard design. Process commonality allows benchmarking and sharing of best manufacturing practices betweenplants.

– Supply chain. Common parts and streamline global sourcing and logistics process that governs worldwide transactions among plants and between plants and suppliers. From a demand fulfillment side, some plants can be designed as “swing” plants, that have excess capacity and the flexibility to manufacture any country’s variant.


Distributed Assembly and CKD

Tata Motors has greatly extended the basis CKD strategy for their compact car Nano. – The Nano’s modular design allows distribution of complete CKD,

which can be assembled by local assembly hubs and entrepreneurs located close to consumer. Tata took a CKD approach less for fiscal reasons, but more as a way to build distributed manufacturing facilities in India. Indian consumers are well familiar with this distributed assembly; in India, bicycle parts are sent to retail outlets in modular kits, and are assembled just-in-time based on the selection of product features made by the customer.

Some challenges: – Scalability of this model is questionable. Final assembly quality

issues (primarily noise, vibration and harshness (NVH) issues that lead to squeak and rattle problems), although the customer expectations in emerging economies may be still sufficiently low.

– Safety standards in established markets. Although the Nano passed the European crash worthiness after only few relatively small modifications.


Source: IBM BCS

China in 2015

China in 2050

Future outlook


MTS

ATO

/ETO

Single Large Plant Multiple Small Plants proximate to demand

Trend towards multi-plant

Tren

d to

war

ds m

ass

conf

igur

atio

n

Trends in Operations Management

MTO

Pro

duct

dyn

amic

s

Production dynamics

Multiple OutsourcedPlants

Global Multi-enterprise Orchestration

Local Manufacturing

Execution

Centralized Supply Chain

Planning

Centralized Detailed

Scheduling


Global Multi-enterprise Orchestration

The Global Plant Floor approach

The Global Plant FloorThe ability to harmonize, supervise and coordinate execution activities across company's and suppliers’ manufacturing operations. A unique virtual factory that consolidates the number of different manufacturing plants in terms of resources, processes, and products.

New approachNew approach


Factors Influencing the Global Plant Floor

From Multi-national to Truly Global - The accepted practice of large global enterprises has been to establish regional management structures with presence in individual countries. This well-reasoned multi-national approach allowed companies to tailor products to local tastes, market in tune to cultural motivators, and build local relationships. Companies aren't necessarily abandoning the tailored multi-national approach, but are evolving it to allow more movement of knowledge about markets from country to country. A truly global approach still involves an appreciation for local needs, but allows for a harmonization of business practices, consumer taste, regulations and so forth. Modular Products/Modular Trade - Modular products have well defined components with established standards based interfaces. Similarly, supply chains can be composed of many available suppliers of standard components (modular) or a small circle of individual suppliers (integrated). Integral architectures will look upstream into supplier factories to create a global plant network that includes both the company's facilities and those of their suppliers. Modular architectures will create a network focused downstream on the specific customer requirements. Multiple suppliers will deliver standard components, but the global plant network will include bulk assembly and postponed final assembly and packaging in what used to be distribution warehouses, retail outlets, or logistics facilities. Intelligent Automation and Digital Manufacturing - Investment in intelligent automation of the factory is critical to the development of the global plant floor. These massively multi-machine factory networks will be enabled by technology that provides for the acquisition and delivery of real time data as well as the ability to remotely control the equipment to initiate corrective action.


The Global Plant Floor approach in the automotive industry

Global coordination – Companies will operate a network of production facilities that blend into a single

virtual plant, with an ability to manage the network, yet allow for local variances in the assembly process that are required because of different levels of automation, products and regulations.

– They will have full visibility to assembly line performance, and quality and traceability of data, analyze differences and identify best practices that should be applied across different lines and plants.

– There will be real-time diagnosis/prognosis capability to identify potential issuesand rapidly assess the impact on the business. Each assembly line in the global plant floor will report the status of processes in real time.

Design for Capabilities – The global plant floor is not a network of identically equipped and provisioned

plants. The network will include existing plants with exiting assembly lines and often old automation systems. Moreover, plants in different regions may have a different mix of automated and manual assembly processes. Consequently, new vehicles will have to be designed to fit the capabilities of the appropriate plant network, as well as the optimum manufacturing and distribution strategy.

– Design for capabilities, combined with planning for capacity and accurate demand forecasting will allow OEMs higher degree of production planning and level balancing than today's practice of model by model and plant by plant.


Design for Capabilities

DurationResources Capacity

DurationResources

Conventional

Capabilities Based Network

Capabilities& Capacity:

•Tools•Labor•Materials

– For example, the design and manufacturing process of a mass-market car to be sold and therefore manufactured in an emerging economy may be optimized for a manufacturing plant with less automation and more manual processes. Moreover, vehicles may be assembled in joint venture operations with other OEMs, and often in knock down form. Conversely, low volume products for niche markets and manufactured in a developed economy must rely on automation.


Existing Applications Don't Support the Need for the Global Plant Floor

Bus

ines

s A

lignm

ent

IT Efficiency

Multiple Instance ERP

Specialty Applications

Single Instance ERP


Bus

ines

s A

lignm

ent

IT Efficiency

Multiple Instance ERP

Specialty Applications

Single Instance ERP

Operations Management

Platform

A Modern Operations Management Platform is Needed

Supporting a customer driven approach to operations management in globally integrated organizations dictates an evolution and elevation of the applications deployed to support operational processes

Supporting a customer Supporting a customer driven approach to driven approach to operations operations management in management in globally integrated globally integrated organizations dictates organizations dictates an evolution and an evolution and elevation of the elevation of the applications deployed applications deployed to support operational to support operational processesprocesses

A separate enterprise wide operational platform that is as important as the corporate financial ERP platform

A separate enterprise wide A separate enterprise wide operational platform that is as operational platform that is as important as the corporate financial important as the corporate financial ERP platformERP platform


The Fulfilment Execution System (FES)

The focus on customer fulfillment is driving the convergence of manufacturing and supply chain execution IT investments with order management investments into a single system that we call Fulfillment Execution System (FES). FES provides manufacturing companies a singular, closed-loop management of inbound material, production capacity, and outbound order fulfillment — all calibrated as close as possible to actual customer demand.The ability to identify a problem, isolate the root causes, understand the state of an execution processes and enable corrective actions as quickly as possible is what will distinguish a successful FES implementation.


A successful FES provides consistent processes, informed people, and open lines of communicationFES connects data gathered from plant floor devices and multiple business applications – to corporate level through decisions

support tools– by creating visibility and intelligence

on operational data – in the context of business process

workflows

Essential to this view is the ability to integrate IT systems and associate real-time operational data into the context of business processes.

Data Management

Workflow Management

Decision Management

Transaction Integration

Analytic Integration

Control

Collaboration

The Fulfilment Execution System (FES)


Key Initiatives, Top to Bottom

Governance and Execution Optimization

Complexity Reduction and Standardization

Digital Manufacturing

Plant Floor, MES and FES (Fulfillment Execution Systems)

Wireless and Cloud computing


Actions to Consider

Overall manufacturing strategy should shift from economy of scale to economy of scope, focusing on global flexible manufacturing capabilities. A "design anywhere, make anywhere, sell anywhere" strategy will lead to the formation of a global plant floor.Successful manufacturers will combine design for capability withplanning for capacity and accurate demand forecasting, allowing them higher degree of production planning and level-balancing.Manufacturers will have to undertake complexity reduction efforts and achieve higher level of standardization in product structures and the corresponding data models and IT systems.Manufacturers will need to invest in improving visibility into plant floor operation, and tools to enhance coordination, analytics and planning capabilities. Emerging IT technologies and operating models, especially in pervasive communication, cloud-based architectures, and mobile devices will provide a solid foundation for these efforts.


Thank You! Questions?

Pierfrancesco ManentiEMEA Research Director, IDC Manufacturing Insights

[email protected]

Please contact me on Please contact me on site for a copy of this site for a copy of this

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