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01 November 2002

Getting auto supply chain in sync

Using agile manufacturing processes, OEMs and their component vendors aim to jointly produce customized vehicles.

By Gregory M. Delaere

The practice of just-in-time (JIT) manufacturing is rapidly shifting to a new trend-agile manufacturing-that is changing the dynamics among consumers, automakers, and their supplier base.

Agile manufacturing goes beyond JIT delivery. It enables original equipment manufacturers (OEMs) to produce multiple models, based on varying platforms, at the same manufacturing facility.

Agile manufacturing aims to reduce order-to-deliver time for the consumer with a higher degree of personalization by allowing higher efficiency and flexibility at the final assembly plant. However, agile manufacturing challenges the automotive component supply chain to meet the conflicting requirements of smaller orders at higher frequencies, shorter order-to-deliver time, and higher complexity.

Similar to challenges JIT practices presented by eliminating stockpiled component inventory from the assembly plant, agile manufacturing forces OEMs and suppliers to change fundamental manufacturing processes, including warehousing, delivery, and logistics.

Rather than producing similarly equipped and styled models in large production lines, OEMs run different models, with varying colors and options, down the line in a mixed order. As a result, rather than receiving large batch orders and delivering a few times per week, suppliers become inundated with thousands of small orders-in many cases down to a single piece.

These small orders must go to the right place (a specific assembly plant dock or line feed location) at the right time (often several deliveries per day) in the right order (one piece after another, as the OEM requests).

CONSUMERS DRIVE PLANNING

To assemble vehicles in this manner efficiently, OEMs plan ahead of time the proper mix of models, colors, and options according to consumer orders.

Based on either a fixed production sequence planned several days in advance or an ad hoc production sequence based on the order in which vehicle bodies leave the paint shop, OEMs ask suppliers to deliver components to match the production sequence. This allows a small number of components to be available at the point of assembly, with a small amount of safety stock off-line for use in emergency situations such as a component being damaged during assembly.

In addition, variations in the production sequence are eased because the proper component matching the next vehicle down the line is also the next component presented in the supply container or racking. This decreases assembly costs by requiring less line space and labor and increases quality by drastically reducing variations in operators' processes.

HARD ON SUPPLY CHAIN

Suppliers have some options to meet this sequenced delivery requirement. The easiest method is to continue producing components in batch, creating little impact on manufacturing. Components are then warehoused, usually at a location in close proximity to the final assembly plant. When sequence orders come to the supplier, components at the warehouse are simply repackaged in the right sequence and quickly delivered.

The operator handling repackaging, often aided by information-based tools, is responsible for inspecting and properly matching the component to the order. Using this method, suppliers can rapidly satisfy the OEM's agile manufacturing requirements. However, this procedure does very little to enhance the supply chain's efficiency.

Costs and quality issues involving warehousing and multiple handling of components are added to traditional processes. The opportunity to more closely match component production to actual orders is not realized. These issues are passed down the chain to lower-tier suppliers.

Some suppliers have decided to take full advantage of opportunities agile manufacturing provides. Rather than simply shuffle warehoused parts to match sequenced orders, they provide order information directly to their own manufacturing operations, right on the shop floor.

This enables suppliers to produce components in the same order in which they are required to be delivered, reducing their finished goods inventory of components in transit, lowering order-to-deliver time, and leveling their production flow and that of subcomponents.

GOAL: SYNCHRONIZE SUPPLY CHAIN

The ultimate goal is to synchronize demand through the supply chain by generating precise, timely orders at each tier. This practice occurs on a limited basis, but there are obstacles yet to overcome, such as better inventory control; accurately reporting production and scrap; and accurate bill-of-material usage data.

It may sound unbelievable to consumers that the entire automotive supply base is working in sync to produce their specific vehicles, but the truth is the industry is quickly moving in that direction.

The task of synchronizing demand through the automotive supply chain is not a simple one.

Because electronic data interchange (EDI) connectivity among OEMs and first-tier suppliers already exists, EDI has emerged as a primary method to deliver piecewise orders to supplement weekly and monthly forecasts.

Dealing with thousands of orders per day is quite different than dealing with just a few, necessitating the need for processes and procedures to change. Many suppliers have decided to use automated systems to make sense of the large amount of order information.

Using the repackaging method, these systems may be as rudimentary as printing a line on a pick list to inform a material handler which part to pack next. More elaborate systems provide visual cues on a computer screen (such as a part's picture), along with pertinent information (such as trim level, color, and option numbers) a material handler may use to determine which part to pack next.

The most elaborate systems indicate with sounds or lights in which bin or rack location the proper component may be found. The choice of component is then validated by using of proximity sensing mechanisms on those bins or by automatic identification (such as bar codes), reliably identifying the component and associating it to the exact piecewise order requirement.

COMPUTES EFFICIENT BUILD ORDER

When actually synchronizing components manufacturing, computer systems determine the most efficient build order at the supplier plants. This information is relayed to the plant, sometimes using high-level systems such as enterprise resource planning (ERP) systems and sometimes using systems integrated with the plant's manufacturing apparatus, such as manufacturing execution systems (MESs).

Plant-level planning personnel and production supervisors may use ERP systems to schedule the make activity. MESs may go a step further by informing shop floor personnel and machinery of the proper next piece to be built-and enforcing that order.

Maximal benefits in efficiency and quality may be realized by integrating MES, production controls systems, automatic ID and data collection systems, ERP systems, and upstream EDI systems. These allow production orders to reach the shop floor in a planned manner, using algorithms and instructions maintained by proper personnel. The orders may then both inform and enforce the proper build order of parts.

Communicating with the control layer of machinery, these systems ensure not only that the appropriate next part is being built but also that it is built correctly. This is accomplished by enforcing bill of materials, enforcing routings, validating test results, and associating process variables to the individual piece part by use of a serial number.

This in-station validation can be performed at each and every operation, continuing to make sure that the right part is built correctly every step of the way. When the part is complete, it also has a full pedigree on file, proving that it is the part purported-with quality intact.

VARIABILITY, COMPLEXITY RAISE RISK

This practice of poke-yoke, or efficient errorproofing operations, is extremely important when attempting agile manufacturing because the risk of introducing quality issues increases as the variability in the process and product complexity increases.

With an execution system tied to the control layer, variability and complexity may be quickly accommodated and validated. Without such an execution system, multiple model changeover and setups occur manually, taking much more time and providing much less confidence.

Agile manufacturing is not a pipe dream; it is a practice in use in varying degrees throughout the automotive industry. By closely synchronizing demand and acting efficiently on that information, OEMs and first-tier suppliers are reaping benefits such as lower cost, higher quality, and quicker order to delivery. That equates to not only higher profits for companies but also lower product price and personalized consumer vehicles.

This trend will continue to work its way through the supply chain, spreading across the first tier and working its way down through multiple subtiers. Barriers to utilization of these practices exist, but the industry is responding with both manual and automated methods to overcome these barriers, demonstrating the industry itself is flexible and quick to act. The automotive industry is becoming agile. IT

Behind the byline

Gregory M. DeLaere, president and chief executive officer of VIA Information Tools, Inc. in Rochester, Mich., has been involved in commercial aspects of manufacturing systems since 1986. He designed and programmed manufacturing information technology applications, including manufacturing systems that enable sequenced manufacturing in the automotive supply chain. His e-mail is greg.delaere@via-it.com.