Auto Suppliers Move Closer to Assembly Lines
Two years from now, a handful of fresh-faced assemblers will step foot on a brand new campus. But, they won’t be walking past an ivy-covered library or tailgating outside a large football stadium. Their campus will be a unique industrial park for auto part suppliers located just a hubcap throw away from the assembly line of a major automaker.
Ford Motor Co. (Dearborn, MI) recently unveiled plans for a 155-acre "supplier manufacturing campus" located near its assembly plant on the South Side of Chicago. The park will open next year and be fully operational in 2004. It will house a mix of both Tier 1 and Tier 2 suppliers.
Ford and a local developer, CenterPoint Properties Trust (Oak Brook, IL), are building the Chicago Manufacturing Campus on an abandoned industrial site. The land was formerly owned by LTV Steel and Republic Steel. Trees will be planted on the property and 10 acres will be set aside as natural wetlands.
The new supplier park will be located one-half mile away from a 78-year-old Ford plant that builds Taurus and Sable sedans. A special conveyor system will shuttle components and parts from the manufacturing campus to the 2.7-million-square-foot assembly plant.
"This is our first manufacturing supplier campus in the United States," says Roman Krygier, Ford group vice president of manufacturing and quality. "It is the first one anywhere that started with a mature assembly plant."
Although the Chicago facility traces its assembly roots to the Model T Ford, it is one of the leanest auto plants in the United States. In fact, earlier this year, it was awarded a Shingo Prize for Excellence in Manufacturing. The award, named for the creator of the Toyota Production System, recognizes manufacturers for streamlining their production processes and cutting out waste.
And, the Chicago plant is about to get even leaner as it adopts flexible manufacturing principles. In 2004, the facility will stop making the Sable and Taurus; production of those vehicles will shift to Ford’s Atlanta plant. Instead, the Chicago assemblers will make the brand new Ford 500 and CrossTrainer, which will debut as 2005 models. The 500 is a family sedan that is slightly larger and roomier than the Taurus. The CrossTrainer is a cross-over vehicle designed for up to seven passengers.
When the plant is reconfigured for the new products, it will feature a flexible body shop that allows one set of tooling to build multiple vehicle configurations. "This represents a major step forward in Ford’s revitalization plan," says Krygier. It will give the Chicago plant "the ability to quickly create unique and fresh products, share major components to save cost and ensure quality, and make extensive use of flexible manufacturing to match customer demand and maximize efficiency."
Cost SavingsAccording to Krygier, the supplier park will help the plant "increase flexibility, allow for quicker response to customer preferences, lower inventory costs, and help control shipping and capital costs. We are bringing in new production concepts and tooling that greatly enhance the plant’s flexibility and quality efforts. For example, an electrified monorail system and flexible tooling will allow rapid changeovers—even if we switch from a small car to a SUV."
Flexible manufacturing is critical to allow automakers to respond quickly to changes in customer demand and adjust products according to market trends. "Assembly plants must be capable of producing new products faster than ever before," says Dr. David Cole, director of the Center for Automotive Research (CAR, Ann Arbor, MI). "Close relationships between manufacturers and suppliers is part of the new flexible business model."
Cole believes the adoption of flexible manufacturing "represents a big step in the right direction for Ford." He says the company is on a quest to trim $700 from the cost of every vehicle it builds through supplier price concessions and engineering cost savings. "The supplier park is intended to help Ford reach that goal," notes Cole.
Earlier this year, the automaker announced an ambitious material cost-reduction program with its North American suppliers. Under the plan, Ford will receive 65 percent of implemented cost reductions, while suppliers receive 35 percent in the first year. This program, along with other material cost reduction efforts, is expected to slash $3 billion from supply and component costs by 2005.
Automakers have been putting extra pressure on their suppliers in an effort to control costs and boost quality. For instance, Ford is in the process of tripling the number of engineers assigned to work with suppliers to come up with cost-cutting ideas. The automaker is urging its suppliers to improve their manufacturing efforts and meet Ford’s Q1 quality standards. In addition, Ford is calling on suppliers to reduce their faulty parts per million by 25 percent.
Ford is not alone in its attempt to put pressure on suppliers through value engineering efforts. General Motors Corp. (Detroit) also is beefing up the number of engineers assigned to supplier relations. They are searching for ways to remove product features, find cheaper materials and redesign components to reduce costs and improve quality.
DaimlerChrylser Corp. (Auburn Hills, MI) recently implemented a plan that requires suppliers to sign contracts that assign financial responsibility for the cost of recalls and warranty work. The program is patterned after an agreement Toyota Motor Co. (Tokyo) has with its suppliers. It goes into effect with 2004 model year vehicles.
A recent survey conducted by Planning Perspectives Inc. (Birmingham, MI) revealed that auto suppliers find it much easier to conduct business with Japanese automakers vs. Detroit’s Big Three. According to the study of 279 North American suppliers, Toyota, Honda and Nissan are less prone to put pressure on suppliers to cut costs and are better at helping suppliers achieve quality goals. The suppliers criticized DaimlerChrysler, Ford and GM for their poor communication skills, conflicting policies, procedures and objectives, and disruptive last-minute engineering changes.
In-Line SequencingFord’s new manufacturing campus will allow suppliers to perform subassembly and in-line sequencing tasks. Sequencing lets operators go to one single point to get a component, eliminating wasted effort—a key principle of lean manufacturing. Parts such as instrument panels will be transported in build sequence directly to operators.
With subassembly, suppliers simplify the build process at the vehicle assembly facility. Modular components free up resources at the final assembly plants to focus on process quality and greatly reduce hours per vehicle. Instead of using much of their floor space processing components to make assemblies, it marries assemblies to produce a vehicle.
"Tight sequencing is critical," says CAR’s Cole. A primary benefit is a simplified assembly process. Additional benefits include reduced space requirements, reduced labor costs, decreased forklift traffic, reduced inventory, reduced scrap and improved quality. What the customer sees is a completed, fully tested, fully warranted modular component, such as a cockpit, delivered at the right location, for the right vehicle, at the right time.
With modular subassembly, automakers don’t have to do a lot of in-line testing. The supplier is responsible for this process. The final assembly plant only has to make a few attachments.
According to Cole, subassembly helps automakers reduce manufacturing costs. When a supplier manufactures components in a facility near the final assembly plant, it eliminates shipping costs and expensive containers. Additionally, the cost of carrying inventory is nearly eliminated.
Today, materials travel an average of 450 miles to Ford’s Chicago assembly plant. "Bringing key suppliers together will reduce the average trip to just 125 miles," claims Ford’s Krygier.
The close proximity also facilitates immediate feedback of quality issues that reduce scrap and improve throughput, which are also key principles of lean manufacturing. Above all, subassembly helps reduce time-to-market. With modular components, common systems and standards translate into speed and agility.
Supplier BenefitsNine suppliers plan to participate in Ford’s campus project, which is expected to employ up to 1,000 people. Six buildings totaling 1.5 million square feet are planned. Some suppliers will share the same building.
"It will play a vital role in the delivery of integrated assemblies and sequenced parts to the plant," says Jim Orchard, president of Visteon Corp. (Dearborn, MI), one of the suppliers participating in the new park. The company will assemble instrument panels, fuel tanks and engine coolant components.
Other participants include:
- Brose North America Inc. (Auburn Hills, MI), which will supply door components.
- Comau Pico (Southfield, MI), which will supply automated assembly tooling and equipment.
- Plastech Engineered Products Inc. (Dearborn, MI), which will supply injection and blow-molded plastic.
- Sanderson Industries (Atlanta), which will produce metal structural stampings.
- Summit Polymers Inc. (Portage, MI), which will supply injected-plastic consoles.
- S-Y Systems Technologies (Dearborn, MI), which will produce wiring harnesses.
- Tower Automotive Inc. (Grand Rapids, MI), which will produce stampings.
- ZF-Lemforder Corp. (Lapeer, MI), which will supply suspension components.
"Cross-tier supplier relationships will add significant value and will create synergistic opportunities between suppliers," explains Krygier. He claims that more than half of the Chicago plant’s external buying will come from the supplier campus.
Despite all the benefits, suppliers may encounter one potential drawback. "There’s a danger of being too close," warns Cole. "Suppliers will face the risk of losing employees to the final assembly plant, where wages traditionally are much higher." For instance, an assembler earning $12 an hour at a supplier might be tempted to walk to the assembly plant next door where wages might be $20 an hour.
Brazilian ExperimentsThe manufacturing campus concept has already been used by automakers outside the United States. For instance, Ford has a supplier park at its plant in Cologne, Germany, that assembles the Fiesta compact car.
Two years ago, General Motors Corp. (Detroit) unveiled a new assembly plant in Brazil that it claims is "a major step forward in the way automobiles are built." The Gravatai automotive complex assembles the Chevrolet Celta compact car.
According to Roberto Tinoco, director of manufacturing operations, the facility entails an extremely lean and efficient vehicle production system set inside of an "industrial condominium."
At the Gravatai automotive complex, GM and 16 suppliers joined forces to create a facility that functions as one plant. A codevelopment cycle replaces the traditional component development cycle. Tinoco claims the system shortens vehicle production time, reduces bottlenecks, keeps inventory down and drives costs out of the value chain
The supplier team that makes up the Gravatai complex represents 60 percent fewer suppliers and 50 percent fewer parts than would be necessary in a traditional manufacturing system. The GM vehicle assembly plant receives pre-assembled modules delivered just-in-time by neighboring suppliers that share space at "strategic entry locations to the production line."
Ford also recently unveiled an assembly line in Brazil that reshapes the boundaries of traditional supplier-manufacturer relations. The $1.9 billion Camacari industrial complex looks like any other auto plant from the outside. But, the way the plant operates inside is radically different.
Ford claims that it’s the first auto plant in the world to operate with a "sequenced modular assembly system," which allies the automaker and 33 "partners" that provide modules and services. Most of the suppliers operate within the complex, under the same roof, assembling parts for the Fiesta compact car.
Unlike other auto plants, suppliers share in the cost and ownership of the fully integrated complex, which is located in the Amazon region. In fact, the suppliers contributed $700 million to the cost of the project. In exchange, they get input into key decisions, such as determining production volumes. The suppliers also share logistics and maintenance services with Ford.
Suppliers include ArvinMeritor (exhaust systems); Benteler (front and rear suspension modules with brakes); Dow (injection molding and painting of large plastic parts, bumpers, panels and door side panels); Lear (seats); Valeo (front-end modules and radiators); and Visteon (instrument panels).
The plant boasts a lean production system capable of assembling up to six different cars on the same line. Unlike traditional plants, the Brazilian complex operates under a unique wage structure applicable to all the employees. There is no separation between hourly workers and salaried personnel.
Greater Burden Ahead?According to CAR’s Cole, the success of the Chicago manufacturing campus will help Ford decide whether or not to create similar supplier parks at plants in other cities, such as Atlanta, Cleveland and Detroit. In an effort to control costs even further, he believes Ford may also implement other nontraditional concepts that place greater burden on suppliers.
For instance, Ford has been tinkering with a "pay on production" model that would shift the cost of tooling to suppliers. This concept is designed to free up the automaker’s finances by requiring suppliers to take on more upfront costs.
Under this type of system, which was developed at the Ford plant in Cologne, suppliers would pay for and own tooling and other production equipment that the automaker normally would have purchased. The automaker repays the cost through production, with payments credited as each car rolls off the assembly line.