New link for the chain

Efforts to improve the competitiveness of the UK automotive supply chain have largely focused on improving the vehicle manufacturer/first-tier supplier relationship. But about five years ago, Cardiff Business School’s Lean Enterprise Research Centre (LERC) identified that a big competitive advantage could be gained by integrating raw material suppliers with component suppliers and assemblers along the […]

Efforts to improve the competitiveness of the UK automotive supply chain have largely focused on improving the vehicle manufacturer/first-tier supplier relationship.

But about five years ago, Cardiff Business School’s Lean Enterprise Research Centre (LERC) identified that a big competitive advantage could be gained by integrating raw material suppliers with component suppliers and assemblers along the supply chain.

Professor Peter Hines, co-director of LERC, explains: ‘Companies tend to optimise themselves rather than the whole supply chain, so the chain is not as strong as it might be.’

In 1994 Hines and his team were doing benchmarking exercises in Japan, working mainly with Toyota. Hines realised that many UK component suppliers were performing below world-class standard. In many cases, the productivity of UK final assemblers/component suppliers was 50% lower than the best in the world, says Hines.

‘So we identified a part of the supply chain where Toyota was not that far ahead at the time, which could give us an opportunity to get in the lead. That part was integration of raw material suppliers.’

Three years later, the first co-ordinated network of three key supply tiers was launched, with academic support from Cardiff Business School.

The participants in the Lean Processing Programme, or Leap, are British Steel Strip Products; two of the main automotive steel service centres, British Steel Distribution and Steel & Alloy; and six of the UK’s leading press-based component makers: Albion Pressed Metal, GKN Sankey, Tallent Engineering, LDV Press Operations, Krupp Camford and Wagon Industrial Holdings.

Leap is the first project to follow the supply chain from steel mill to arrival at (but not including) the vehicle manufacturer. The three-year project is sponsored by the Government-backed Innovative Manufacturing Initiative. However, Leap participants provide the biggest contribution through manpower commitments.

British Steel was the prime mover in organising Leap and its decision to get involved was twofold, says Dr James Sullivan, a member of the Leap project team from British Steel Strip Products. ‘We had a vested interest in improving the UK situation. We supply a lot of steel to the automotive industry just over 20% of group turnover and we were concerned that UK-based car manufacturers might switch sourcing abroad. We wanted to try to keep the component business in the UK, for the benefit of the UK economy.’

The objective of the programme is to increase the competitiveness of the whole automotive supply chain by applying ‘lean thinking’.

This originates from studies of the Toyota Production System, developed by Toyota’s former chief engineer, Taichii Ohno. At its core is the identification of waste in a production setting, defined as all those activities which do not directly contribute to creating value for the customer. Ohno defined seven waste categories: overproduction; waiting; transporting; inappropriate processing; unnecessary motion; unnecessary inventory; and defects.

To identify and quantify opportunities for improvement or removal of waste, Leap uses ‘value stream mapping’, a new set of techniques to identify waste within companies and through the supply chain. It was developed by Hines and his colleagues at Cardiff in 1995.

Hines explains: ‘Value stream mapping is a series of tools drawn from a variety of different academic and practical backgrounds, designed to identify wasteful activity which has a negative impact on cost, quality or timely delivery of a product. The techniques give a qualitative picture and enable us to look at what we can do differently to reduce waste.’

Internal improvements can have a quick result (see page 27) while inter-company improvements can take longer to feed through.

‘Mapping at an inter-company level reveals many opportunities to reduce waste,’ says Chris Butterworth, industrial project manager for Leap. ‘Some of the biggest opportunities come from these inter-company wastes. They can be identified and tackled by value stream mapping along the whole supply chain. By working collaboratively you can become leaner.’

One inter-company project in progress aims to flatten the demand profile in one supply chain. Hines predicts it could reap multi-million pound savings.

‘Demand tends to vary, so companies can find themselves either working overtime or short-time,’ says Hines. This is inefficient.

Oddly, underlying demand is often near level at the customer end but becomes increasingly erratic by the time it reaches the steel mill. Hines’ group is investigating why demand goes patchy so that it can eliminate the causes. Batch production and bulk orders have been identified as two causes of this corruption in the demand flow. ‘We’re aiming to introduce a more regular flow of information and production flow in smaller amounts,’ Hines says.

The first year of Leap was spent in mapping 23 different products through the three tiers of the supply chain. The next phase is focusing on implementing improvements as a result of the analysis.

Each Leap site has an appointed project ‘champion’. The project is guided by a steering group of company managing directors, which provides a forum to focus on intra- and inter-company improvements.

Improvements arising from Leap so far include, in one company, a £122,000 cost reduction achieved by removing waste and reorganising the manufacturing process. In another, a 50% cut in machine set-up time was achieved, slashing both the product lead time and inter-process inventory.

British Steel is applying lessons from Leap in its other market sectors and has set up similar projects with other customer chains. But, says Hines, work still remains to be done. ‘The perfect supply chain does not yet exist, and is a goal for all to continuously strive for.’