The automotive industry: A turn for the better
U.S. car makers and their suppliers are developing best practices to combat rising oil prices, a struggling economy and global competition.
By Tom Andel, Editor in Chief -- Modern Materials Handling, 3/1/2008
American auto makers have had it. Perhaps the last straw came at the end of 2007 when Toyota Motor Corp. beat out Ford Motor Co. for the nation's No. 2 spot in the automotive pecking order. For the year, Toyota's sales rose 3.1% while Ford's declined 12%. General Motors didn't do much better—its car sales fell 10%.
To ease its pain, Ford has been cutting production so it wouldn't have to offer steep discounts to clear vehicles. In fact, it is restructuring its business to be profitable at lower demand. Remember the saying, “As GM goes, so goes the nation?” There's truth in that old saw.
Theauto industry's pain is being felt in other industries. Textiles, for example, are highly dependent on automotive—including carpet, leathers and all the fabrics that go into a car. Norbert J. Ore, C.P.M., chair of theInstitute for Supply Management Manufacturing Business Survey Committee, told Modern that automotive is not growing at a rate that drives economic growth across dependent industries. Ore is optimistic that the weak dollar will help ease some of manufacturers' discomfort in the short run. In the long run, automakers will have to model Ford's strategy: Restructure. Where materials handling is concerned, that's an opportunity. Restructuring will require more flexible product flows and more universal data flows.
Improving product flow
The next big thing for the automotive industry where materials handling is concerned is flexibility—all the way up to the final trim chassis line.
For the last 100 years, that line has been a fixed conveyor system. Today Volvo and GM are implementing flexible assembly lines to keep up with customer demand at a moment's notice. Making this change wasn't easy in such a mature industry. Just look at the assembly plants built in North America in the last 10 years.
“They all have traditional assembly lines,” says Robert Wolf, program manager for International Automotive Components North America (www.iacgroup.com) in Dearborn, Mich. When it was part of Lear Corporation two years ago, the organization was a leading supplier of door trim panels and headliner trim panels. Today, it has more than 70 locations in 16 countries specializing in interior systems, carpet and acoustics products and exterior parts. Wolf believes the materials handling industry can play a major role in helping North American automotive suppliers become more competitive.
“In 1997, flexible manufacturing was almost unknown in the automotive world,” Wolf adds. “Then the industry tried to change out of their traditional automatic guided vehicle (AGV) applications because at the time the Big 3 thought they would build more assembly plants. GM, Ford and Chrysler even collaborated on a comprehensive list of requirements for its MH vendors. Only one manufacturer responded, and ended up with almost 70% of their AGV market within 4 to 5 years.”
Today flexibility is more than just AGV or conveyor. The opportunity to sell those systems into automotive is cyclic—at best every three years and at worst every time a new plant is built. The problem, according to Wolf, is that materials handling vendors were used to selling to 100-year-old companies that didn't know how to make cars very well in the modern age. Even the MH companies needed to go back to their drawing boards.
“Every company needs to find out how they fit into a modern day assembly plant,” says Wolf. “OEMs don't have R&D to study the next best way to make an assembly plant for materials handling. They rely on their suppliers to be experts. The company that develops that relationship with the automotive OEM can execute.”
Jervis B. Webb Company (www.jervisbwebb.com) is doing so by way of the food and beverage industry. It won a contract at Anheuser Bush for truck loading. According to Wolf, this work will challenge the fixed-conveyor paradigm.
“The technology is robust, they just need a vision,” he says. “What it will take is for a major OEM to commit to doing a modern day assembly plant and that will be the catalyst [for flexible manufacturing] worldwide.”
A new flexibility
Rick Heft, application specialist for Webb's Smart Handling Group, says it's the worldwide supply chain that's changing the way his company interacts with the automotive world. That interaction is taking tangible form in the company's automatic guided carts (AGCs).
“These are allowing us to design assembly lines that are extremely low cost and flexible so that any changes that the industrial engineers or line people or management request, we'll alter the workstation location and orientation.”
Global sourcing drives product changes which drive line changes. Instead of buying a handful of parts and assembling them on the line, automotive suppliers purchase modules. That saves money and time but can cause havoc because the line has to be rebalanced. Sometimes a workstation will be eliminated, or it will be reconfigured. The SmartCart technology, with magnetic tape guidance and RFID tags glued to the floor, allows changes over a lunch hour or over a weekend without calling in a mechanical and electrical crew. This is how GM's Saturn Sky and Pontiac Solstice convertibles are built. Heft feels this technology puts his company in a good position no matter what direction the automotive industry chooses with future plants.
“If the total number of new plants in automotive is flat, the best thing we have to offer is the flexible manufacturing low cost method of assembly,” he says. “It will be a growth area where people are looking at retooling and where they don't want to run a traditional chain conveyor any more.”
Webb's purchase by Daifuku Co. (www.daifuku.com) also makes it a stronger player in the global automotive market.
“We're getting more opportunities to work on flexible assembly lines in the Tier 1 world,” says Heft. “That's where we used to sell power and free conveyor every four years. Now we're showing them how at the end of a model period these SmartCarts can do the same task and still have residual value.”
One automotive supplier made that case when it lost a portion of its business with a major customer. It was able to decommission some of its SmartCarts and has the option to put them to work in another plant. That's the ultimate in materials handling flexibility, and it's the new performance benchmark for materials handling suppliers and managers working inside and outside automotive.
“We have to be flexible to reconfigure our line presentations at a moment's notice based on the latest customer requirements,” says Todd Yaney, a Chrysler executive on loan to the Automotive Industry Action Group (www.AIAG.org). “The robotics systems used in assembly and material delivery, having different end effectors and tools, also allow you to present a lot more material complexity in a much smaller space.”
Yaney adds that the work being done by AIAG to standardize how suppliers communicate with the automotive industry will also improve how the automotive industry does business around the world.
A level playing field
Automakers deal with a variety of global suppliers. Depending on how these suppliers communicate with the suppliers, this can feel like more trouble than it's worth. Some suppliers have yet to adopt electronic data interchange (EDI) or even bar coding. That's why the industry worked with the AIAG to develop a way to introduce these companies to world class material management requirements and to show them where they rank in living up to them.
It takes the form of a program called MMOG/LE, Materials Management Operations Guidelines and Logistics Evaluation. This is a global supplier self-assessment tool that helps vendors do business with different customers using a common medium. It's a Microsoft Excel file with questions weighted on a scale of 1 to 3 relating to service requirements such as electronic communications. The tool is part of the price of admission to do business with Chrysler and Ford, as well as Renault, Peugeot, and Bosch.
“With the global sourcing we see today, the MMOG is being used quite a bit by suppliers in the emerging markets with respect to materials management, bar code labeling, scheduling, and what they should be doing for electronic communications,” says Morris Brown, program manager for materials management at AIAG.
Across the enterprise
Where EDI is concerned, electronic communication goes beyond supplier/customer interfacing and extends to supply chain security. Traceability took on new urgency in 2001 when Ford and Firestone became embroiled in a fight over whose product was responsible for a spate of accidents involving the automaker's Explorer SUV. This news hit just as global cost pressures were peaking. Business processes like outsourcing, consignment warehousing, vendor-managed inventory and electronic Kanban based on the Toyota production method were catching industry attention.
Enterprise resource planning (ERP) supplied the informational infrastructure that enabled global companies to take advantage of these best practices. Today, in the automotive world, build to order is the next step in the evolution of that infrastructure.
“Build to order is very important in Europe, and OEMs have built innovative production programs with greater flexibility,” says Wolfram Schimd, manager of global automotive industry and product marketing for Infor (www.infor.com), one of the world's largest suppliers of business software. “If you order a BMW in Europe, you can change the car until 11 days prior to production. In the U.S. the challenge for OEMs is the green initiative and rising oil prices. They need to compete with Japanese OEMs that are investing in North America. That requires operational flexibility and being closer to consumer demand.”
Consumer behavior changes with the political climate and the price of oil. Suppliers in the automotive industry need a library of strategies to deal with consumers in their established markets as well as in emerging ones. Suppliers to those OEMs must be equally agile while presenting a consistent face and reliable service to their customers.
Lean management—driving all waste out of the supply chain—contributes mightily to these goals, as do integrated processes and a transparent supply channel. The leaders in the automotive industry—and the leaders serving them—are finding ways to make each other a lot more comfortable during these painful times.
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