Suppliers feel the pace

The automotive industry is speeding up all the links in the supply chain. While some component suppliers are still struggling with established concepts such as just-in-time delivery or Kanban and Toyota’s lean manufacturing techniques, further important developments are under way. There are moves to cut the time between a customer order and delivery to 14, […]

The automotive industry is speeding up all the links in the supply chain. While some component suppliers are still struggling with established concepts such as just-in-time delivery or Kanban and Toyota’s lean manufacturing techniques, further important developments are under way. There are moves to cut the time between a customer order and delivery to 14, 10 or even three days, and that will test to the limit companies’ systems for getting materials to the production line.

Logistics expert Alan Harrison at Cranfield School of Management says the drive to reduce order to delivery times is one of three key issues being addressed in the automotive supply chain. The others are increased modular construction, and greater responsibility for first-tier suppliers.

With modular construction, car makers are breaking the vehicle down into zones, for example asking suppliers to create complete fascia panels, or door assemblies with electric window motors and glass installed. These systems are supplied either directly as modules to the plant or assembled in a supplier park nearby.

New supplier parks are springing up here and abroad and, says Harrison. The car makers are becoming more like ‘assemblers’, taking direct responsibility only for the powertrain and body. They do not want to hold a vast inventory of parts, so this and other responsibilities are increasingly being thrown on to tier-one suppliers.

As vehicle manufacturers insist on dealing with a reduced number of first-tier suppliers which supply modules, tier-one companies such as seat supplier Johnson Controls are being given greater responsibility to orchestrate smaller companies further down the supply chain in tiers two and three. They must ensure that sets of seats arrive in the right colour and sequence on the production line.

Johnson Controls makes seats as a tier-one supplier for Ford and was the first supplier to set up in a new supply park beside Ford’s Dagenham plant. It also supplies other companies worldwide, including Rover, Nissan, Toyota, and BMW. ‘Where there is no supplier park, we will set up local to the car maker,’ says Steve Skerrett, the firm’s Kings-Norton based quality manager.

Manufacturers are driving down the time taken from the customer placing an order in the showroom to producing a vehicle to their specification, with knock-on effects on the supply chain.

A couple of years ago Ford initiated the 14-day order-to-delivery concept as a trial for Fiesta production at Dagenham, when the average wait was 60 days. It involved setting up system changes in vehicle sequencing and system scheduling, and accelerating the processes used by dealers.

Dealers were invited to forecast the demand for a given model two months ahead, refine the estimate a month later and place a notional order within a fortnight of manufacture. As a result, manufacturing systems were already geared to meet a specific customer order. A large proportion of orders achieved the 14-days turnaround.

Ford is now looking at more sophisticated systems for dealerships and plants around Europe. A number of dealers will be installing terminals which give realistic 3-D visualisations of cars, so the salesman can build a virtual model to match a customer’s demands for trim, colour and options. As the model is built up with the customer, details will be transmitted simultaneously to the vehicle assembly plant via the Internet.

Some companies, like the Mercedes/ Swatch joint venture which produces the new Smart, are now targeting the 10-day car. Earlier this month Swatch and Mercedes opened 90 Smart car centres in nine countries around Europe (excluding the UK), where two-seater Smart cars are stored in stacks in a glass tower. A spokesman for Smart says there is only one link in the distribution chain, direct from the factory at Hambach in northern France to each distribution centre, with no importer.

When a vehicle is bought a computer directly orders a replacement from the manufacturing centre. The car is designed in modules to facilitate faster production with all component suppliers based on the main factory site. Total assembly of the vehicle in 140 stages takes only 4.5 hours.

An even more ambitious three-day order-to-delivery study programme is to be carried out jointly by three research institutes from January 1999, involving the Solihull-based International Car Distribution Programme (ICDP), the Lean Enterprise Research Centre at Cardiff Business School and University of Bath School of Management, in partnership with several big car makers including Nissan, Ford, Honda, Vauxhall and Peugeot.

Logistic systems for tracking vehicles and components during production are becoming more sophisticated. While some of the car makers are developing their own in-house systems for tracking materials, companies like Nissan subcontract their in-bound logistics to third party software houses like Exel and US-based Ryder. VW is developing a satellite-based logistics system which will help identify the location of car parts and assemblies anywhere in the world.

But all these moves are putting increasing pressure on suppliers’ systems, says Harrison.