Best Practices in Tier One Automotive Manufacturing

July 1, 2004
The automotive industry’s migration to a build-to-order paradigm is full of challenges, not the least of which is aligning the hundreds of component suppliers to an automotive manufacturer.

The move to mass customization, combined with the desire to take inventory out of the supply chain, is having an enormous impact on the automotive industry. Automotive manufacturers and their Tier One suppliers are moving from manufacturing large batches of identical components to having components delivered in sequence to manufacturing. Variously called Sequenced In-Line Supply (SILS), In-Line Vehicle Sequencing (ILVS), or Just in Sequence (JIS), some would view SILS as the practical implementation of a demand/event-driven, built-to-order manufacturing process.

European, rather than North American automakers led the way in adoption of SILS, with one of the first implementations occurring at Audi’s Ingolstadt plant in 1992. In North America, on average, slightly more than 500 components or modules are currently sequenced into the Big Three plants. Within three years, further product customization by manufacturers will lead to a doubling of SILS requirements to 1,000 components or modules.

SILS solves three interrelated problems. First—providing a customized product for the customer without incurring excessive manufacturing expense. Second—rapidly identifying and correcting upstream errors, particularly in the paint shop. Finally—compensating for inaccurate forecasts and schedules.

Some automotive manufacturers offer a large number of body styles, powertrains, paint/trim combinations and options so that dealers can sell to the exact customer specification, rather than having to discount whatever sits on the dealer lot. The number of combinations ranges from the Nissan Primera’s 820 build specifications to a theoretical 3.9 trillion for the Mercedes Benz E-Class. For some manufacturers, no two cars in final assembly are identical.

Fewer suppliers, more parts

Meanwhile, manufacturers have reduced their Tier One supplier base, but outsourced a greater proportion of the vehicle’s value. In 1986, 30,000 automotive suppliers competed in a $250 billion industry. Now there are around 5,000 suppliers, sharing an $800 billion pie. A manufacturer may only have 300 points of fit on final assembly, with each operation taking 90 seconds. So, Tier One suppliers now manufacture complete modules and the module specification is determined by the overall specification of the car. For instance, each Volvo S80 requires one of 2,880 different headliners due to differences in left/right hand drive, body style, sunroof, phone, door locks, air conditioning and interior color options.

SILS enables these companies to build large numbers of variants and re-sequence final assembly on short notice. SILS promotes rapid inventory turns, enabling Tier One suppliers to sequence without carrying excessive stocks. Research done by ARC Advisory Group found that good SILS plants achieve 132 inventory turns per year.

Respect software suppliers with SILS references. They know a lot about manufacturing techniques on the edge of the best-practice envelope. SILS requires event-driven collaborative production management solutions, integrated with business and automation systems that support error-proofing and enterprise-wide visibility. SILS contains good manufacturing practice, particularly error proofing, which could be adopted by aerospace and defense, high tech and perhaps medical device industries.

Simon Bragg, [email protected], is European Research Director for Enterprise & Supply Chain Services, at ARC Advisory Group.

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