Cars on demand

Car makers must start producing cars to suit individual consu mers, not building for stock. It will mean a radical rethink of how cars are made, says Liam O’Brien

The automotive sector has always had something of a patchy record for meeting consumer demand. For a finished product to take more than two months to reach the customer in any other manufacturing sector would be regarded as serious cause for concern, but in motor manufacturing it has always been accepted.

Although producers in other industries might fear losing business if their customers have to put up with lengthy lead times, car manufacturers have not, until fairly recently, been disconcerted by keeping customers waiting and having large sums of money tied up in unwanted inventory.

The historical stock-push mentality of car producers, rather than the demand-pull regime in other sectors, has meant that the car industry has focused on production volumes rather than producing exactly what customers want, when they want it.

The consequence has been that while it can take just 18 hours for a car to emerge from the end of an assembly line, it can take three months for the right car to reach the customer.

Alan Harrison, professor of logistics at Cranfield School of Management, says: `Up to now motor manufacturers have been very bad at this. They have been operationally focused and have concentrated on the efficiency of their production line. They have done this by focusing on just-in-time deliveries of components and keeping their stocks low. But they have then dumped finished cars on the distributors through the notorious allocation system.’

However, this seems to be changing. Motor manufactures are realising that the present production model, while great for maximising output, loads massive costs further down the chain. Keeping thousands of cars in a compound over an extended period because they are unsold often defeats the object of having a factory humming efficiently.

And with the increasing difficulty in many market segments for car makers to differentiate their product from competitors – all arguably having similar products and finance packages – many realise it is important to meet specific customer demand by building to order rather than building for stock.

Symptomatic of the sea change that is taking place in the industry is the Three Day Car project, funded by many of Europe’s top car manufacturers, tier-one suppliers and logistics companies. Researched by the Lean Enterprise Research Centre at University College Cardiff and Bath University’s School of Management, its goal is to make the industry more responsive to the customer, and it has set out to see what would be required to get a car built and delivered to the customer within three days of it being ordered in the showroom.

The academics involved in the project hope it will fuel new thinking and help wean the industry off producing as many cars as it can for a market that does not want them.

The days of manufacturers forecasting market demand many months in advance and then producing what often turns out to be inappropriate volumes are numbered, the researchers say. It is untenable for the large hidden costs involved in producing unwanted cars to be borne by car makers.

Three Day Car researcher Simon Elias says: `Historically manufacturers’ forecasts have been pretty awful. It is very difficult to do accurately, and invariably they have got it wrong and the cars are left sitting in a compound somewhere. It is basically flawed to have a system where you try to fit the customer to the car that is already built.’

The project is publishing its findings in stages and it will be complete by the beginning of next year. But some key conclusions have already been reached.

Motor manufacturers’ existing IT scheduling systems are hopelessly inadequate to the task and are not able to support anything approaching a three-day car, according to the research team headed by Professor Peter Hines. From dealer to factory floor, new IT is required for more efficient order intake, order processing and order scheduling.

Active demand management is little used in the motor sector, the team says so. The result is that customer demand has sharp peaks and troughs coinciding with new registration periods. The customer’s decision to visit the showroom is still invariably the cue for a sale, not active marketing by the manufacturer.

The Three Day Car team says the industry needs to make more effort to smooth out demand. Different forms of vehicle `ownership’ should be tried, with customers purchasing `mobility services’ rather than a car. This has the advantage of keeping the vehicle ownership with the motor manufacturer who is therefore able to even out demand to suit its production schedules.

On the factory floor the changes are likely to be dramatic. Most significantly present day monocoque construction methods may need to be replaced by modular structures. This will help get rid of the high tooling costs associated with building car shells, which force manufacturers to produce larger volumes to pay off their initial investment. The only car in the world that takes the module concept to its logical conclusion – and, says the Three Day Car team, the one that is likely to show the way for the rest of the industry – is the smart city car made by DaimlerChrysler. It has done away with the monocoque and replaced it with a safety cell onto which seven modules are fixed.

Apart from doing away with the high tooling costs associated with the monocoque, it greatly simplifies the production line. The Three Day Car team reckons it slices 40% off assembly times. The traditional paint shop bottleneck will also need to be sorted out if manufacturers are to have any hope of building to order within a short timeframe. The problems of the paint finish being spoiled by inconsistent paint mix or reaction with the metal surface are costly to manufacturers in time and money. Conservative estimates put the proportion of cars coming off the production line that need paintwork rectification as high as 10%. Pre-painted steel or plastic is one way to do away with the problematic paint stage. The smart car uses pre-painted body panels in a handful of basic colours, which are then mixed to offer the customer a range of colour combinations.

`There are huge constraints in the paint shop at the moment due to process stability. Manufacturers have huge quality reworks that require partial or complete resprays. Throughput could be speeded up by overhauling this area,’ says researcher Matthias Holweg.

The Three Day Car team is reluctant to say how long it will be before car makers adopt what it calls new generation car production, but believes economics will force them to move sooner rather than later. Steadily declining volumes per model serve notice on existing methods of production because at some stage car makers will reach a point where output volumes per model are so low that it will be uneconomic to produce in the traditional fashion.

Already a handful are inching towards the new processes, with Volvo and, to a lesser extent, Renault building to order a proportion of their output and reshaping production accordingly.

The Three Day Car team believes the industry could adopt its blueprint within five to 10 years. Holweg says: `It is not going to impact on the new Fiesta: it will be the next generation models that will see the benefits. We will have to wait for the model after the next one to see a completely new approach.’

Get smart: The production processes used to make the Smart city car point the way to making the three-day car a reality.