Automotive Industry

1. Overview
At the end of this course you will be able to:
Explain key business processes for the automotive industry
Identify leading automotive companies and their respective overall strategies and
capabilities
Describe Accenture's Automotive practice key points of view and market offerings
Understand the major issues and trends driving change in the industry
Recognize how to leverage key knowledge capital resources
Understand industry terms

1.1 Product Development Process

This case, plays two major roles:
Developing New Products - including concept cars, new model years and totally new
vehicles.
Maintaining Existing Products - often referred to as Engineering Change.
"Vehicle Development Process" (VDP)
Stage 1 - Concept Development
Stage 2 - Product and Process Development
Stage 3 - Product and Process Validation
Stage 4 - Production
Technology Development Process (including Application Development and Technology
Research)

1.2 Manufacturing Process

OEMs (Original Equipment Manufacturers) are responsible for these processes:
Inbound logistics: delivery of raw materials, components
Transformation: manufacturing, assembly and testing
Maintenance and work safety: plant availability, quality and safety standards
Quality assurance: high quality standards, control costs and cycle lead times
Scheduling and shop floor control: optimize production plan, analyze skill, labor,
machine and material constraints

To provide you with the car you want in the fastest way possible, automotive manufacturers
apply Lean Production principles:
Define Value from the customer perspective
Identify Value Streams to eliminate waste
Make the value-add steps Flow continuously
Use a "Pull" approach: Design and provide what the customer wants, only when he
wants it
Strive for Perfection through continuous improvement

1.3 Supply Chain Process

Forecasting & Planning

 Supplier Collaboration
Manufacturing
Distribution/Warehousing/Transportation
Order Processing/Management

OEMs - Original Equipment Manufacturers - are the large automakers that conduct
final assembly and sale of a complete vehicle such as Ford, General Motors,
DaimlerChrysler, and Toyota.
Tier 1 Suppliers - are suppliers that manufacture and deliver parts directly to the
OEMs. Electronics (Visteon, Delphi), Emission Control (Tenneco), and Wheels & Tires
(Goodyear) are examples.
Tier "X" Suppliers - are normally smaller suppliers that make components for the Tier
1. However, many of the Tier 1 suppliers are considered to be multi-tiered since they
make components that do not feed directly into the final assembly. Raw material
manufacturers such as steel companies are considered to be the lowest Tier (Tier3
>X) of the automotive industry.

1.4 Marketing & Sales Process

A three-level OEM Marketing & Sales organization (a central level, a wholesale/regional

level, and a retail/local level) typically performs marketing and sales processes.

Marketing and Sales processes include:

Strategic Planning
Management of the Sales Organization
Generate Demand
Customer Relationship Management
Fulfill Customer Orders
Retail Services
Management of Product Quality
Support Processes
The key components of CRM are:
Customer Insight - identifying profitable customers and customer segments
Customer Offer - developing attractive product and service offerings
Customer Interaction - acquiring and keeping customers and interacting with them in
their preferred way
These processes are integrated with other industry Marketing and Sales processes to
increase the acquisition of customers, customer satisfaction, and the efficiency and
effectiveness of the Marketing & Sales organization.

1.5 Dealer Management Process

automotive dealers control 100% of the new vehicle retail sales market and more than 50%
of the after-sales service market? To help make dealers successful, unique processes exist
to aid them in Sales, After Sales, and the Management of their organization.

The Sales Process includes activities such as:

Prospecting and Appraising
Presenting and Arguing
 Negotiating and Closing
Delivering, Administering Sales, and Customer Follow-up
The After Sales Process includes functions such as:
Diagnosing and Vehicle Handover
Delivering, Administering Service, and Customer Follow-up
Vehicle Entry, Customer Identification, Analysis of Requirements, and Order Entry
There are two key processes that help Dealers Manage their Organization:
Administrative Process - including activities such as Financial Control, Administration,
Quality, Human Resources, and Image
Marketing Process - including activities such as Planning, Launching, and Measuring

1.6 Service Parts Process

service parts produced by the OEM are generally much more profitable than their original
equipment counterparts? It is also a very complex process to manage

Service Parts are any of the parts that replace the original parts of a product. Different
types of service parts include:
Maintenance
Mechanical
Collision
Accessories
Tire
The key processes that help to effectively manage service parts are:
Product Definition
Manage Relationships with Suppliers
Procure Material from Suppliers
Fulfill Orders
Manage Relationships with Service Providers
Manage Customer Requirements
Manage Relationships with Dealers and other Accounts
Generate Demand through Marketing Actions
Define Business Plan

1.7 uCommerce/Telematics Process

uCommerce, or ubiquitous commerce, is the continuous, seamless stream of

communications, content and services exchanged among consumers, business entities and
systems. Telematics is currently the most visible and rapidly growing mCommerce
application in the automotive industry.
uCommerce is made up of three things that, together, have significantly affected the
automotive world:
eCommerce (electronic commerce)
mCommerce (mobile commerce)
sCommerce (silent commerce)
Telematics and other emerging wireless technologies will affect the automotive industry in
two fundamental ways:
Vehicles will become seamlessly networked with the external environment
Mobile solutions will become prevalent throughout the automotive value chain
2 History and Background

The U.S. Industry

Frank and Charles Duryea, mass" produced Duryea motor wagons13 in all. Until then,
inventors had produced one-of-a-kind vehicles.

Great Exhibition in England in 1851the first world's fairand the Columbian Exposition in
Chicago in 1893.

Ransom E. Olds, whose Lansing, Michigan-based companies led to the formation of

Oldsmobile, developed mass production techniques that stimulated the development of the
automotive supplier base.

Henry Ford built the Model T, which put the world on wheels. The Model T was affordable for
the middle class,

William Durant, the automotive industry's greatest entrepreneur, formed GM in 1908

Charles Kettering, GM's technological genius, developed the electric self-starter, which
eliminated dangerous cranks, for Cadillac.

The European Industry

Europe's old cities, with their narrow, winding streets and the high cost of gasoline, were
less conducive to widespread use of automobiles than the expansiveness of the U.S. The
pioneering urge to explore new territories, and the lack of centuries-old social class
traditions, spurred the proliferation of cars in the U.S.

In 1883, Daimler created an engine considered to be the first truly suitable for an
automobile. Benz built the first workable automobile, a three-wheeler, in 1885. The next
year, Daimler perfected a four-wheeled car. Their achievements led to the official birth of the
automobile in 1886.

Early production in Europe was very labor-intensive, a carryover from the days of royal
coach building. To this day, European automobiles have much more handwork and re-work
per unit compared to a North American or Japanese vehicle.

Hitler, who personally favored large Mercedes-Benz touring cars, commissioned Dr.
Ferdinand Porsche through the Auto Union company to design a car for the people. The
result was the Volkswagenor "people's car''

August Horch, a former employee of Carl Benz, who produced his first car in 1900. The firm
became the Auto Union in 1932. Designer Dr. Porsche built race cars that broke world
records in the 1930s and designed the Volkswagen for Hitler. Porsche perfected the use of a
torsion bar suspension and rear mounted-air cooled engines.
In France, Armand Peugeot built his first steam tricycle in 1889 and founded a company that
still bears his name. In England, two mechanical engineers, Charles Rolls and Henry Royce,
met in 1904 and became partners in the manufacture of Rolls Royce
Swedish Economist, Assar Gabrielson and engineer Gustaf Larson formed Volvo in 1924 and
in 1927 began production of passenger cars.
The Japanese Industry

In Japan, design considerations were similar to those in Europe: the product had to be
smaller than American cars to accommodate congested traffic and had to get good gas
mileage.

Early attempts at mass production used methods developed by Ford early in the century
and accepted as industry standard.

The Japanese automakers got a boost from quality guru J. Edwards Deming. He served as
an adviser after World War II to the Allies that wanted to improve their ability to take a
census and make it easier to feed and house people. His work led him to develop ideas
about statistical process control and variations that were quickly adopted and perfected by
the Japanese, particularly Toyota.

The Toyoda's: Kiichiro founded the company and mass-produced the first cars in 1955
Taiishi Ohno, a self-educated industrial engineer, revolutionized the method of car
production with his just-in-time method of inventory control, quality control at the point of
assembly, and team management. He further developed a method for rapid tooling changes
to allow for economical short production runs.

Yoshisuke Aikawa founded Nissan in 1934,

Soichiro Honda, a bicycle mechanic who adapted a few war-surplus small gasoline engines
to bicycles and started a motorcycle industry with Takeo Fujisawa (1949). Honda became
the largest Japanese motorcycle manufacturer.

2.1 The Industry Today

In the U.S. alone, more than 5,000 different carmakers have existed in one form or another
most for only short periods of time. The total number of manufacturers, including
specialty builders, totals no more than 100.

Industry Structure
Raw Materials

Today, Henry Ford's strategy is outmoded in the highly competitive world market in which
the automakers and their raw material suppliers operate. The special needs, global reach,
and enormous purchasing power of automakers is forcing innovative and diverse global
strategies. Due to core competencies and innovation required, reduced financial capital
and risk, economies of scale producing more for different customers rather than one.

Like all suppliers, raw material and commodity suppliers to the motor vehicle industry are
under pressure to reduce costs so that manufacturers can hold down the final sale price of
the vehicle to consumers.

Raw material and commodity suppliers have the additional challenge of coming up with
ways to compete with alternative materials being considered for future automobiles. In the
mature markets of North America, Japan, and Western Europe, consumers are growing
resistant to year-after-year price increases. In developing markets, consumers have limited
incomes to buy vehicles.

Components

A vehicle comprises thousands of parts or components that fall into the general categories
of interior, drivetrain, chassis, and the body.

The interior includes the seats, the dashboard, the door panels, and the instrument panel.

Drivetrain components include the engine and the transmission.

Chassis components include the body structure, suspension, and brakes.

The body consists of the exterior panels, made of steel, plastic, or aluminum that hang on
the body structure. These include the hood, the fenders, and the trunk lid.

Virtually every major automaker considers the drivetrain and the chassis core competencies,

An exception to the rule of the engine being a core competency can be when a
manufacturer wants a specialty engine for a low-volume model. For example, Chrysler buys
diesel engines from Cummins for pickup trucks. Ford Motor Co. works with motorcycle
manufacturer, Yamaha, to produce its high-performance, low-volume Taurus SHO (super
high output) engines. In Japan, Toyota owns a stake in parts-maker Aisin Seiki Co. Ltd. and
buys some of its engines from Aisin. Chrysler and BMW have a joint venture in Brazil to
supply engines to each other. Chrysler and GM have a joint-venture company, New Process
Gear, which makes all-wheel-drive systems for both companies.

System Suppliers
 Reduced complexity throughout the system. The vehicle manufacturer's
purchasing department deals with fewer potential suppliers. The plant receives fewer
deliveries. The plant has fewer parts to put together.

Lower costs. Suppliers, many of which are not unionized and pay lower wages to
their workers, can produce and assemble systems more cheaply than can a vehicle
manufacturer, which typically has higher labor costs. Likewise, vehicle manufacturers
can lower their costs and capital requirements by shifting the cost of design,
engineering, and testing to the system supplier. Delivery of entire systems also
reduces the vehicle manufacturer's inventory, storage and space requirements,
packaging, and transportation.

Improved quality. Theoretically, quality is improved when a supplier is given

responsibility for designing and engineering as well as manufacturing the part or
system. Less handling of parts means less likelihood of damage for better quality and
lower cost. For example, interior components such as fabrics and plastics can be
matched better if one system supplier produces them.

Greater accountability. Vehicle manufacturers are shifting responsibility for

warranty costs, product liability costs, and problems to suppliers for the parts and
systems they produce. System suppliers give vehicle manufacturers one place to go
when a problem arises instead of tracking the problem through a number of suppliers.

Additional electronics. With the increased use of electronics throughout the

vehicle, systems increasingly are linked to other components and systems, making
systems integration more critical. For instance, the sensors used for the anti-lock
brakes also are used for traction control and stability enhancement systems.

Efficiency of space. Vehicles are becoming smaller but automakers are crowding
more content into them. A system supplier can develop an entire system to fit into a
smaller package than can several individual component suppliers.

Assemblers

The OEM's primary function is to conceive, design, engineer, and ultimately assemble
various components and systems into cars and trucks.
The OEM comes up with ideas for vehicles based on input from its marketing, product
planning, and engineering people. Once an idea for a vehicle is conceived, designers sketch
what the vehicle might look like. Engineers and designers set parameters for how the
vehicle will be configured. Engineers also specify what parts will be needed to build the car
and how they will fit together. Purchasing staffs generally put the specifications out to
suppliers for bid. The OEM also may have divisions that build components and systems or
even provide raw material, like glass.

Engineers test components and entire vehicles to ensure their reliability; manufacturing
engineers work at the assembly plants to make sure the vehicles go together as planned.

Distributors
Vehicle manufacturers sell their products to a distributor, agent or franchised dealer, who, in
turn, sells the vehicle to the consumer.
In some systems, a distributor may serve as the middleman between the manufacturer and
the franchised dealer.

Vehicle distribution systems around the globe are undergoing massive change, with plenty
of experimentation taking place in new ways of distributing cars and trucks.

The reasons for change and experimentation are many:

The current system is highly inefficient in time and cost. Too much lag time exists
between when a customer orders a vehicle and when it is delivered to the customer. Or,
dealers find themselves ordering and maintaining inventory that may or may not be
what the customer wants to buy. The process contains entirely too much wasted cost.

Consumers are extremely dissatisfied with the current system, rating car buying as
one of their least favorite activities. Many are searching for ways to circumvent
traditional buying methods. As a result, new businesses have emerged to accommodate
them, and manufacturers and their distribution networks are trying to respond to
maintain their business base.

The information age has made new and potentially more efficient ways of distributing
cars and trucks possible.

Intense competition exists for sales, market share and brand loyalty. Profits on new
cars for manufacturers and dealers have dwindled. Manufacturers have to make money
on hot, high-profit vehicles and non-auto-making businesses, such as financial services.
Dealers rely more on profits from used-car sales, service and parts than on new-car
sales.

Consumers

The general public.

Corporate fleets. Commercial businesses buy vehicles for their employees to use.
The business may be a giant such as Hewlett-Packard, which provides cars to its service
people to call on customers, or may have a sole proprietor who uses dump trucks for a
landscape business.

Commercial leasing companies. Some companies are in the specific business of

purchasing vehicles and operating fleets for their corporate clients.

Rental car companies. Rental car companies worldwide purchase large fleets of
vehicles.

Governments. Cars and trucks are sold to national and local government agencies
throughout the world for civilian and military use.
 Conversion companies. Some trucks and vans are sold to conversion companies
that customize vehicles for specific markets. For example, truck cabs are sold to the
makers of recreational vehicles and vans are sold to conversion companies.

Support Services

Advertising. Automobile companies and their dealers spend more on advertising

their products than virtually any other industry does.

Financing. Lending institutions rely on the automobile business as a major source of

income, providing retail financing to the ultimate buyer and financing to dealers to
acquire the cars to sell. The automobile manufacturers, their suppliers, and all of the
industry' supporting cast tap lending institutions and the stock markets to fund their
operations.

Insurance. Insurance of all kinds is required from making cars to selling them.
Automobile insurance has grown into a major industry.

Parts and service. Companies that make replacement parts and vehicle
accessories, wholesalers and retailers that replace parts, and repair shops and
dealerships that install these parts represent a huge part of the automobile business

2.2 Market Statistics

Vehicle Production

Asia-Pacific dominated by Japan, represents the world's largest vehicle-producing

region,accounting for 30 percent of all vehicles produced worldwide. Asia-Pacific produced
more than 17.9 million cars and trucks in 2000

North America represents the world's second largest vehicle-producing region, accounting
for nearly 30 percent of worldwide production. North America, which produced 17.7 million
cars and trucks in 2000, is currently in an overcapacity state

Western Europe represents the world's third largest vehicle-producing region. Western
Europe produced nearly as many cars and trucks in 2000 as did North America, also
accounting for about 30 percent of the world's vehicle production.

Mature Sales Markets

North America represents the world's largest vehicle market for sales, accounting for more
than 34 percent of all sales worldwide. Annual North American vehicle sales have been
running at a rate just shy of 15 million since 1992 to a high of almost 20 million in 2000.

Western Europe represents the world's second largest market with nearly 30 percent of
the world's sales had been running between 11.4 million and 13.5 million units annually.
increase until they peaked at 17 million units in 2000.
Asia-Pacific represents the world's third largest market with about 23 percent of sales
worldwide. had been hovering between 6.5 million and 7.0 million. peaked in 2000 at just
under 13 million units.

2.3 Market Trends

Globalization
Two forces are driving globalization of the automotive industry.

Because North America, Western Europe and Japan are mature markets,
the world's major automobile manufacturers and their automotive suppliers
are exploring new sales opportunities both in mature foreign markets and
in promising emerging markets.

In addition, foreign markets, particularly emerging markets, offer a low-

cost production base because of low labor costs. Vehicles can be produced
in emerging markets for local sale and export.

The emerging markets of Asia-Pacific, Eastern Europe, and South America

represent the biggest potential. As a result, a major shift will occur as non-
traditional regions replace the traditional powerhouse markets for both
sales and production.

Meanwhile, vehicle manufacturers are scrambling to establish beachheads

in emerging markets, forming partnerships with local companies and
building new production facilities. Manufacturers also are restructuring
their companies to be global organizations.

Vehicle manufacturers require that their suppliers go with them into foreign
markets where they, too, are establishing operations, forming partnerships
and building new plants.

Over capacity
The massive construction of assembly plants planned or under way in
emerging markets where booming sales may not materialize, as well as in
established markets, will lead to extreme over capacity worldwide.
Industry experts calculate that supply will exceed demand by 20 million
cars and trucks annually by the turn of the century.

The result will be a shakeout among the vehicle manufacturers and their
parts manufacturers, some of which will be forced to close plants.

Shifting role of suppliers

Global vehicle manufacturers want to deal with fewer suppliers and have
these remaining suppliers bear more responsibility and cost for design,
engineering, and testing.

To reduce costs, manufacturers are moving toward single-sourcing, that is,

having a single supplier produce a specific part instead of having a number
of suppliers providing the same part as has been the common practice for
decades.

The manufacturers also are gravitating toward hiring system suppliers, or

system integrators. These suppliers can design, engineer, manufacture or
purchase, and assemble numerous components into a single system. These
systems can then be delivered to an assembly plant when required.

Consolidation
Globalization of parts manufacturers and the changing role of suppliers and
vehicle manufacturers have resulted in a worldwide merger mania unlike
any in recent history.

Parts manufacturers are establishing overseas operations through

acquisition, partnerships and joint ventures.

In addition, they are acquiring other companies and forming partnerships

to acquire the capabilities they need to become system suppliers.

The worldwide merger mania will continue into the next century and will
surely see some casualties. The ranks of parts suppliers will decline
dramatically, although the survivors will be bigger, stronger and have more
global influence.

Changes in distribution
Vehicle distribution is the next frontier for revolution in the auto industry.

The revolution is prompted by the fact that the current system is costly
and extremely inefficientand consumers generally are dissatisfied with
the buying experience.

A consolidation of the distribution base in mature, established markets is

taking place, while concurrently an expansion of the distribution base is
occurring in emerging markets.

As a result, virtually every vehicle manufacturer is exploring ways to

reduce the gross inefficiencies in its current distribution systems used in all
markets. They are experimenting with new ways to sell vehicles, to cut
costs, and to create a more pleasing experience for consumers. Likewise,
dealers are trying out new methods to save their businesses.

Meantime, new players, including superstores that are patterned after Wal-
Mart stores are cropping up. These superstores carry numerous automotive
brands and provide a satisfying buying experience. In addition, technology,
such as the Internet and interactive point-of-purchase kiosks, are offering
consumers new ways to shop for cars.

Environmental issues
Vehicle manufacturers, parts suppliers, and dealers are confronted with
numerous environmental issues.

Government regulations and environmentally conscious consumers are

pressuring them to:

1. Selling vehicles that emit fewer pollutants.

2. Producing vehicles at factories that produce fewer emissions.

3. Servicing vehicles to create less pollution.

4. Disposing of vehicles by recycling more components.

Regulations and consumer preferences in some markets are forcing

manufacturers to produce vehicles that obtain higher fuel economy, which
is prompting development of vehicles powered by alternative fuels and
made of nontraditional lightweight materials. Now in development are
vehicles powered by more efficient internal combustion engines and
vehicles powered by alternative fuel sources such as compressed natural
gas, electricity, hybrid battery power, and fuel cells.

Safety concerns
Safety is a key concern of consumers and regulators.

Airbags have raised the latest controversy. After studies found airbags
were apt to seriously hurt or kill children, infants in car seats and small
women who sit close to the steering wheel, manufacturers began "de-
powering" airbags; and the U.S. government allowed cut-off switches for
airbags, which the industry and dealers fought because of potential legal
liability.

Europe has instituted a new front-impact test for 1998 models, with
standards 30 percent higher than the previous test. The tests have been
hailed by safety and consumer groups as well as some government
agencies, but challenged by auto makers as too stringent.

In addition to occupant safety, Europe is concerned about pedestrians. The

European Union is expected to adopt rules requiring significant and costly
changes to vehicle designs in order to protect pedestrians. The auto
makers are fighting the rules, arguing there will be a poor cost/benefit
ratio: the rules would be too costly for the few lives they will save.

Pedestrian Deaths

1970: about 70/million

1996: about 20/million

Costs
Cutting costs throughout the entire value chainfrom raw material to
distributionremains a priority for every vehicle manufacturer in the world
because of affordability challenges facing consumers in established and
emerging markets.

Vehicle manufacturers are cutting costs by: speeding up the product

development time, shifting costs and responsibilities to suppliers, moving
toward lean production systems in procurement and assembly operations,
and streamlining the distribution system.

Vehicle manufacturers are consolidating their vehicle platforms. A platform,

the basic architecture for the vehicle, is being used as the basis for several
models, including global variants, to maximize worldwide parts purchasing
and reduce vehicle complexity. At the same time, manufacturers are
generating and widening consumer demand for their products by creating
more models, including low-volume niche vehicles, from fewer platforms.

Quality
Consumers are forcing vehicle manufacturers to make more dependable,
higher-quality products. In turn, the manufacturers demand that their
suppliers make improvements in quality, reliability, and durability.

As a result, vehicle manufacturers are requiring their suppliers to attain QS

9000 and ISO 9000 certification or risk losing all automotive business.
QS9000 standards are quality standards agreed upon by the Big 3 and are
based on the international quality standards, ISO 9000.

Increasingly, vehicle manufacturers are holding suppliers responsible for

warranty costs and product liability when components prove defective and
require a service campaign or recall.

Product

The trend toward smaller, more fuel-efficient vehicles will accelerate in the future.
In fact, the largest segment for growth in the future will be small cars and variants,
like a small sport-utility or recreational vehicle, that spring from small cars, mainly
because small cars will be most popular in emerging markets.

There also will be less difference in product availability from market to market as
vehicle manufacturers use fewer platforms for derivative vehicles sold around the
world.

Vehicles will be equipped with more safety featuresnotably, more airbags to

protect occupants in a crash and more electronics to help the driver prevent and
avoid crashes. The use of electronics in vehicles will nearly double in the next
 decade.

Electronics also will make possible the development of an all-encompassing "smart"

highway system that allows communication between the vehicle and the road to
help with traffic congestion.

Striking the Balance

3 Product Development
Introduction
"fuzzy front-end" of vehicle styling, with "hard core" engineering and manufacturing
disciplines. The basic goal is to take into account a large, sometimes-conflicting set of
requirements, and design a product that meets the needs of the target customer segment in
terms of cost, quality, features, and safety. While at the same time, the OEM must be able
to return value to its stakeholders.

Automotive Product Development plays two major roles:

Develop New Products - Including concept cars, major and minor enhancements to
existing model years and totally new vehicles.

Maintain Existing Products - This is often referred to as Engineering Change, with

each company having clearly defined processes for evaluating, designing and
implementing change to an existing product currently in production

Automotive Product Development addresses both a company's product and process

developments. This product/process design process is typically referred to as the Vehicle
Development Process (VDP).

Project Length Example (BMW)

New Vehicle 4-6 years '96 Z3
Major Model Change 2-4 years '01 328
Minor Model Change 1-2 years '02 330
Concept Vehicle Varies Z9

Vehicle Development Process

Gate Review teams are comprised of cross-functional representatives from Sales &
Marketing, Engineering, Major Suppliers, Manufacturing, Quality, Finance and Service. There
is an increasing participation from Tier 1 suppliers with major vehicle content, such as
engines and interiors.

The technology development has historically been performed by the OEMs and the Tier 1
suppliers. The current trend is to push more of this responsibility from the OEMs to the
major Tier 1 suppliers.

3.1 Stage 1 - Concept Development

OEMs make portfolio management decisions to introduce totally new vehicles or
replace existing products with a newer model. The OEMs are basically evaluating a
large number of options against the primary drivers of product function, time to market,
product costs, and overall program costs to come up with the best balance to deliver the
highest economic value to the company.

OEMs are being required to look at global markets, product design re-use, collaboration
of engineering efforts, common part strategies across platforms, and flexibility of
manufacturing operations

Determinations are made on which vehicle makes and models will share a common
platform. Determinations are made on which vehicle makes and models will share a
common platform. The company may decide that they will launch two nameplates in four
countries from the same platform.

Strategic suppliers are increasingly involved in Stage I and are being asked to bring in
innovations and identify key logistical and financial issues that may impact the vehicle's
destiny. The appropriate design centers are determined at this phase. It is typical to also
leverage designers and engineers in the target markets so they can ensure the design is
meeting the needs of that particular market. As the VDP process stretches across the
globe, the need for multiple design centers to participate in the development of a particular
product increases.

The active design center(s) will also set broad vehicle performance targets, based on
competitive benchmarking, regulatory trends, and customer focus groups. This includes
standard measures like Safety, Noise Vibration and Harshness (NVH), Fuel Consumption,
Ride and Handling, and Cost. It also includes crucial product attributes identified by
customer interviews

Key VDP Gate 1 deliverables include:

To introduce totally new vehicles or replace existing products with a newer model.
Product design re-use, common part strategies, flexibility of manufacturing
operations.

Vehicle target cost

Target markets

Platform strategy

Strategic supplier/development partner selection

Vehicle specifications

Design team selection

Initial assembly location

Financial commitment

Program schedule

3.2 Stage 2 - Product and Process Development

Product Design

The vehicle is broken into major systems such as powertrain, interior, air conditioner
(HVAC), chassis and Body in White.

The vehicle is broken into zones, which allow for the design and development of the vehicle
within that particular area by those teams. Examples would include: Engine compartment,
chassis and suspension, passenger compartment, rear compartment, and doors. Whether
they are formal or informal teams, OEMs focus on the following three levels: vehicle design,
system design and component design.

The vehicle design team is responsible for the vehicle styling, defining and
managing the interfaces between major systems, testing, validation, and process design
for the salable vehicle. This team is sometimes referred to as the launch team. The bulk
of this team is comprised of members from the OEM. Increasingly, there is
representation from strategic Tier 1 suppliers that will supply the assembly plant.

System teams focus on the design, performance and testing, validation and
manufacturing of the major vehicle systems. These teams start to form a "gray area" of
transition between the OEM and Tier 1 suppliers. OEMs typically hold tight reigns on the
Body in White and powertrain, as they are deemed to be market-differentiating
components. Interiors tend to comprise a more even mix of OEM and supplier
responsibility, while there is an increasing trend in outsourcing for other major systems.
Recently, Tier 1 suppliers have been asked to be responsible for the entire interior
passenger compartment including the design, development, testing, and manufacturing
of the vehicle's entire interior systems.

Component teams will focus these same efforts on pieces and parts, often with the
responsibility of seeking opportunities to share parts within a platform and across
platforms. The result is fewer parts to manage, increased purchasing leverage and
higher quality through reuse and focused quality efforts

. In the early stages, system "real estate" is assigned. This effectively provides the
dimensions within which a vehicle subsystem must fit. By modeling the motion of the
suspension system, engineers can measure the "tire envelope," before any physical models
are built.

Rapid prototyping is also used at this stage to generate physical parts directly from the
digital design. Stereo Lithography Apparatus (SLA)
To ensure that all components, tools and machinery come together at the right time to
achieve target vehicle launch, die cutting is authorized for the parts with the longest lead-
times through a "design release." After this event, part design is also said to be "frozen."

A multitude of testing takes place during the product development cycle. Individual
components have durability test runs. In addition to laboratory testing, vehicles are sent to
proving grounds where skilled drivers put the cars through rigorous test cycles in real,
although sometimes extreme, driving conditions.

Process Design

The "Process Design" process is kicked off by selecting the final assembly facility, setting
targets for equipment and capital expenditures levels, and setting target manpower levels.
It is imperative that product and process engineers work together at this stage to achieve
lower overall costs and to develop a vehicle that can be built within the constraints at hand

Material movement through the supply chain and on the assembly floor are designed and
planned. Powerful simulations are run to assist with shipment sizes, material consumption
rates, labor costs and factory energy consumption. Similar to a digital buck, a digital factory
is created allowing OEMs to simulate different assembly sequences, work cell layouts, robot
movements, and material flow.

Key Gate 2 deliverables include:

System and component level specifications

Detail component and systems design

Supplier selection

Tool design

Long lead tooling release (piece cost, labor cost and capital investment)

Target cost maintained

Prototype and test

Component, system and vehicle performance validation

Process design

3.3 Stage 3 - Product and Process Validation

For some "Long-lead" parts of the vehicle, the process validation starts in Stage 2. The dies
that are needed to manufacture these parts are large, expensive and complex, resulting in a
longer lead-time from design release to mass production quality parts. The product and
process designs for these parts must therefore mature earlier than other parts of the
vehicle.
Each step of the process is carefully examined and the results analyzed. Did the parts fit
together as expected? Were there unexpected difficulties in the assembly sequence? Were
assembly times as expected? Longer? Shorter? Were part and bin labels in the appropriate
locations? This is the first dry run of actually assembling the new vehicle.

Prototype build vehicles are rigorously tested. Each system's performance is evaluated and
tolerances are checked. Form and fit of internal components are also evaluated. Some
vehicles are crash tested to ensure that the vehicles produced on the floor meet design
intent.

A measure of the efficiency of the product development and the OEM is how many design
changes are made this late in the "game."

Process validation continues in the form of pilot runs. Pilot runs benefit from lessons learned
during simulations and prototype builds. A pilot run will simulate as much of the full
production run environment as possible. MRP and ERP systems are loaded with the actual
data required to build the vehicles, or the corresponding interactions with the plant floor are
simulated. Suppliers receive requests for materials in the same manner they will when full
production is in effect. Laborers have been trained on the new assembly sequences. Robots
have been programmed for the new welding locations and painting sequence. With each
iteration, the process is de-bugged until a decision is made for final launch.

Key Gate 3 deliverables include:

Prototype builds

Production process validation

Finalize supply chain

Pilot runs

Production process de-bug

3.4 Stage 4 Production

Production ramp-up is often referred to as vehicle launch. All details come together in this
stage. The production line has been re-tooled, supply channels established, inventory
management practices established and information technology systems updated.

Ramp-up production volumes, lot sizes and product mix are scheduled to exercise or test
every aspect of the production facility. During ramp-up, the lines may be run at a slower
speed than full production and/or be stopped often to allow time for line workers to adjust
to the new build procedures and material movement to be coordinated.

As with the previous stage, many of the first vehicles produced during ramp-up are cycled
back to the design centers for rigorous validation and testing. As the ramp-up process
occurs, line speed and vehicle mix is increased until full production volume is achieved at
the required level of quality. The ramp-up speed and quality levels are critical because a
slower ramp-up means there are lost units and sales opportunities which typically are at a
point where full retail prices are being charged. Additionally, should there be quality
problems, the economic impact to the company can be very significant as the recalls and
warranty claims grow rather quickly.

Key Gate 4 deliverables include:

Production ramp-up

Full production

Continuous improvement

3.5 Technology Development Process

It is important to note that just as suppliers have increased their role during product
development, they have also increased their role in technology research. Their capabilities
have matured to the point, where they not only enjoy economies of scale in production, but
also in research into their relevant fields.

Technology Research
Technology research can be very broad or targeted. For example, Honda has been
developing a robot that can walk like a human being. This has no clear applications to the
automotive industry, but some insight into remote sensing or other useful technologies can
"spill-over" to the automotive side.

Technology research can also be more targeted, . Innovations like traction control, ABS, and
variable camshafts

Some examples of basic research that have led to more specific application research:

Sensing technologies - have led to Active Collision Avoidance, Steer-by-wire

Guidance

Light Refraction, Infrared Vision - Night vision, soon to be offered in some luxury
cars

Aluminum Extrusions - Allowed manufacturers to use this lighter material throughout

vehicle frame components, significantly reducing overall weight.

Application Development

As mentioned before, OEMs and suppliers also support very specific research into
applications of new or existing technologies. The automotive environment is very unique.
Throughout its life, a vehicle can be exposed to extreme conditions, and the consequences
of shortcuts are lost lives and class action lawsuits. The Application Development Process
therefore takes the uncertainty out of using new technologies.

OEMs can also undertake both types of research simultaneously. For example,
environmental concerns have driven OEMs and the tiered supplier base to heavily invest in
Fuel Cell technology as "alternate fuel" vehicles. Fuel Cell technology harnesses the
chemical energy of hydrogen and oxygen to generate electricity without combustion or
pollution. They have therefore been performing both the basic research to elevate the level
of technology, as well as adopting the current level to the automotive environment.

Functional Tasks and Responsibilities

Stage 1 - Concept Stage 2 - Product Stage 3 - Product Stage 4 -

Development and Process and Process Production
Development Validations
Marketing, Define Monitor Modify Color Press
Sales and Target Customer Identified Problems and Fabric Events: Test
Service Markets Selections Drives for
Magazines and
Advise on
Newspapers
Conduct Gray Areas in Start
Focus Groups Requirements preparations for
product Organize
introduction Auto Show
Set Vehicle Define Model
Appearance
Requirements Variations
based on historic
problems and Define
competitive product
landscape packaging
options and
associated
price points

Styling Concept 1/1 Clay After Clay Attend

Drawings Model model is "Frozen," Press Events
refine and issue
the final surface
Alternative Modify as
Small Scale needed for:
 Concept Models Manufacturing, CAD data Modify or
(1/10 Scale) Cost, Regulations Prepare
Approve Prototype(s)
Aid in Supply CAD for Auto
Plugs and Mock-
Shows
Setting Vehicle surface data to Ups of visible parts
Requirements development
engineers

Vehicle Purchase Evaluate Test Final

Test and evaluate component and Prototypes Tests
competitor part design's ability
vehicles to meet Test
Work with Update
Targets
design engineers to Knowledge
Tear Apart fix resulting Database
Key Competitor's Conduct problems
Vehicles Large-Scale
Simulations (High
Refine
Speed Crash)
Set Test Simulation Models
Performance
Targets based on
Marketing
Information

Process Choose Decide Assemble Conduct

Design Plant and assembly order prototype vehicles Production
Assembly Line and product Trials
scheduling
Modify
constraints
Set Targets assembly order as Make
for: Capital needed final changes
Investment (New Decide what
Equipment and should be built in-
Modify
fixtures), house or
assembly process
Manpower Levels, outsourced
as needed
Cycle Time, and
Yearly Production
Simulate
Recommend
assembly
changes to parts
processes based
based on ease of
on part designs
manufacturability

Give
feedback to design
on
manufacturability
and ease of
assembly
Product Set Create CAD Follow up Follow
Design Cost/Weight data for build problems up M/P and
targets at the components field problems
component level
Negotiate
Run timing and cost of Negotiat
Set common Simulations to design changes e timing and
parts with other evaluate Designs cost of
Vehicles changes
Authorize Die
(shared with
Evaluate Manufacture
Assembly
Identify feedback from
plant)
regulatory effects other areas and
on cost/weight incorporate

Supplier Increasingly Simulate Supply and Conduct

more active at assembly Support Prototype Production
this stage processes and part Builds Trials
performance
Work with Support Finalize
Design, and Test Negotiate Design changes to Detail of
departments, to mounting points or Nearby Parts Assembly
set component clashes Processes
performance
levels

3.6 Product Life Cycle

Some of the most important reasons for implementing a PLM system are listed below:

Products are late to market

Product development activities are not managed rigorously (from market

requirements identification through commercialization).

New product commercialization processes are bottlenecked.

Poor product quality.

Rising complexity of key supply chain operations

Increasing numbers of supply partners who provide customized solutions.

Higher reliance on supply chain partners for intellectual property in manufacturing

and in design to deliver products quickly.

Losing market share to competition

Product costs are too high.

Products do not have the right capabilities.

Increasing numbers of parts and supply chain partners without a corresponding increase in
business

Inability to reuse proven capabilities, parts, and designs.

Inability to share design/manufacturing across multiple products/geographies.

Increasing costs in managing product data

Data is distributed in functional/geographic silos.

Data formats are inconsistent preventing sharing.

Design and manufacturing processes vary across the enterprise blocking effective use of
resources

Cost vs. Customization

Some possible actions and rationales are listed below:

Solution Rationale for Rationale against

Provide a single, Insures that Product Creates a great drain on
repository to ensure that data is always up to date the IT infrastructure
 design data is fully for all of those working which will slow down the
synchronized on the new product ability to access designs
Organize the Product Provide a process for all Incorporating all of the
Development process functions within the functions creates too
around an Integrated organization including many requirements and
Product Development sales, engineering, slows down the entire
Team (IPDT) manufacturing, development process
procurement, and
service to provide input
into the entire process
Rationalize the current Less components and Fewer components will
design to reduce the subassemblies will result limit the products that
number of components in lower costs we can make and result
and sub assemblies used in lowering our ability to
throughout the products meet the customer's
needs

The goal of the solution that is chosen for any particular case
is to create processes to develop modular components that
can be reused in multiple designs (keeping the costs down)
but provide the flexibility to be mixed and matched (to provide
custom solutions).

Assemblies and Components

There are some very specific challenges associated with keeping costs down while being
able to provide custom solutions. In particular, you have very flexible, dynamic Bills of
Materials that describe the family of components and subassemblies associated with a
product. These need to be highly configurable, yet at the same time, the number of
components and subassemblies must be significantly rationalized to reduce their overall
number. The future development process will require engineers to be able to easily search
and find existing components and assemblies and assess them for applicability for new
products. This requires very well-designed attribute descriptions and a system that will help
them navigate easily.
3.7 Tools Used in the VDP

3.7.1 Computer Aided Styling (CAS)

The process starts out with sketches and/or small scale clay models sculpted by industrial
designers. Digitizing hardware and software translate these into digital representations. The
resulting digital surfaces are then refined using different mathematical models and
visualization techniques to eliminate imperfections. The process then moves to the physical
world for a short while. The data is fed to a computer-controlled mill (CNC), which cuts a
very precise representation of the model at true (1:1) scale. The "styling mockup" is then
used for a variety of tasks:

1. To evaluate the quality of the exterior and interior surfaces that will ultimately be
used to make parts.

2. To evaluate the vehicle's aerodynamics at a wind tunnel. It is extremely important to

evaluate the aerodynamics (drag and lift) of the model early on, due to the high
impact on performance, safety and fuel economy. A car's exterior shape can
generate too much lift, causing problems for high-speed stability in countries like
Germany, where cars can legally cruise at upwards of 100mph. In addition, the four
important factors that determine fuel consumption are engine performance, tire
stickiness, vehicle's weight and aerodynamic drag. Modifying the exterior shape of
the model early on can be a cost effective way to improve fuel consumption.

3. To evaluate engineering feasibility, and to try out changes recommended by other

departments.
 4. In some cases, to test marketability, by taking the styling mockup to auto shows, or
showing it to focus groups.

The final step is to generate the styling digital buck. As the arrows show, there is a lot of
iteration in the process, some of it due to creative process of the styling studio, but
primarily due to manufacturing feasibility.

Styling buck and mock up https://books.google.co.in/books?id=390DAAAAMBAJ&pg=RA1-

PA242&lpg=RA1-
PA242&dq=difference+between+styling+buck+and+mock+up&source=bl&ots=VTVQx3Bgsr
&sig=uY_VlUpEMd_5ucZ6TFpi1TDJ2hA&hl=en&sa=X&ved=0ahUKEwiS5bPwtsnKAhVFuBQKH
cW-BSUQ6AEIOjAH#v=onepage&q=mockup&f=false

https://books.google.co.in/books?
id=xkqxBgAAQBAJ&pg=PA83&lpg=PA83&dq=difference+between+styling+buck+and+mock
+up&source=bl&ots=CHG2qYyxFO&sig=eqKqQFLnznDQKvzGAvbXh2y7ll8&hl=en&sa=X&ved
=0ahUKEwiS5bPwtsnKAhVFuBQKHcW-BSUQ6AEINDAF#v=onepage&q=difference
%20between%20styling%20buck%20and%20mock%20up&f=false

http://speckyboy.com/2015/04/20/wireframing-prototyping-mockuping-whats-the-
difference/

http://www.ferrarichat.com/forum/vintage-thru-365-gtc4-sponsored-vintage-driving-
machines/263297-styling-bucks.html

http://www.merriam-webster.com/dictionary/mock%E2%80%93up

3.7.2 3D Modeling
At its essence, CAD/CAM systems are used to create accurate mathematical descriptions of
parts and components (part data), and their corresponding drawings including bill of
materials for sub-assemblies. This data is then used by a number of other tools, including
die design, process and product visualization, and cost estimation.

The different CAD packages used throughout the supply chain require translation software in
order for the different packages to be able to use the same original math data.

Paper drawings continue to be used to convey important tolerance indications to suppliers,

communicate with less technically savvy departments like procurement, and as
documentation for supplier contracts.

3.7.3 Collaboration
One name that has been accepted by the industry to describe the combination of these tools
is Product Lifecycle Management (PLM).

Project Portal - Central Web page that contains the project workflow. The workflow is
a detailed calendar containing each task's deadlines, as well as identifying task
responsibility. It provides a secure environment where each user is identified and only
given access to information relevant to their organization. The information on the Portal
can be any number of things, from the latest cost estimates for parts and components,
to Engineering Change Request Forms for each part with details of their progress.
 Product Data Management (PDM) - Having a separate CAD model for every single
part in the vehicle requires having a system that can organize these vast amounts of
data. PDM systems, therefore, organize the product data into a logical hierarchy where
any team member can easily locate the latest data for a part.

CAD or Visualization Collaboration - Internet-enabled tool that allows different

dispersed resources to see and manipulate (rotate, cut a section) the CAD data for a
part.

Knowledge Database - Searchable collection of lessons learned across all past and
current product developments. Each development team updates it at the end of each
project.

3.7.4 CRM Tools

Automotive dealers can be a valuable source of information on consumer tastes, as well as
major and minor field complaints. To avoid repetition of major and minor field problems, it is
imperative that data from warranty claims and non-standard service be available to the VDP
team. This is an area where the project portal, with its ability to interface legacy systems,
can save time and effort.

3.7.5 Simulation Tools

Today, there are many different methods for engineers to estimate, or "model," the
performance of a design in a real world scenario, within the digital realm.

1. Fluid Flow Analysis. Engineers can simulate the flow of air around a vehicle, saving
the time required to perform similar analyses with wind tunnels.

One popular manufacturing method for plastic parts, where the plastic is melted and
then injected into the cavity of a mold (plastic injection molding), can also be
modeled with Fluid Flow Analysis. Results from this type of analysis can improve the
quality of original designs and reduce the time and effort required to make
production quality parts.
2. Stress and Strain. Engineers can estimate the strength of a part or combination of
parts, thereby optimizing for reduced weight and cost. In addition, this tool can be
used to model the manufacturing process for steel stampings. One source of late
design changes in steel stampings is imperfections (tears and wrinkles in the final
parts) found during early production trials. The results from these simulations can be
used to optimize the design for quality and save costs. The example shown above is
a simulation of the fatigue levels of an engine's connecting rod.

3. Heat Flow. Data from heat flow analysis can be used in the design of heat shields
surrounding the exhaust system, as well as in the design of the packaging of the
different electrical components (Ex. Engine CPU, Antilock Braking System CPU).
 4. Non-Linear Crash Analysis. Crash analysis, along with aerodynamic analysis, are the
most challenging and computer time-intensive of the simulation tools.

5. Manufacturing and Assembly Simulations. Process engineers also use CAD and other
tools to simulate the manufacturing environment. Above, you can see a simulation of
a tool cutting the mold for a part. Process engineers can improve their cycle time for
producing molds for parts.

3.7.6 Digital Mockups

Digital Mockups, to some extent, have already been described under CAS and CAD/CAM.
Stylists use digital mockups to evaluate surface appearance before cutting physical models.
Product engineers use them to check how well each part fits with the mating and
neighboring parts. The example below shows an engine and transmission cross view along
with the valve and other engine components.

Process engineers use digital mockups of the assembly and production lines to better
analyze proposed process steps and equipment purchasing decisions. Process engineers can
use the digital buck shown to simulate the assembly steps for the front seat, modeling any
hoists or lift assist tools they plan to use.

3.7.7 DFM Costing

Design for Manufacture and Assembly Costing tools are tools that help engineers and
procurement professionals estimate the cost of parts.
In general, these tools help break down the different manufacturing steps required to
make anything from a steel hood stamping to a condenser for an HVAC unit. Each step is
then analyzed for material and labor costs, as well as any needed dies or fixtures for
manufacture or quality check (QA).
A number of DFx initiatives have taken place at OEMS with the basic attempt to lower costs,
reduce the number of parts, and ensure the product is easier to assemble. Examples
include: Design for Assembly (DFA), Design for Manufacturability (DFM), Design for
Serviceability (DFS), and Design for Machineability (DFM).

This is another area where collaboration and communication tools can make a large impact.
Having a centralized portal where engineers and procurement professionals can see the
latest information on part designs, supplier capabilities and cost, and raw material costs,
can greatly improve the accuracy and time of estimating vehicle cost throughout the VDP.

3.7.8 NC Machining
Numerically Controlled Machining (NC, or CNC) is a way of cutting a die or other tools
automatically. Since the early nineties, process engineers have been able to use CAD data
directly to generate the cutting paths, eliminating this source of error. Process engineers
have recently been able to further improve on this by modeling the entire manufacturing
process, and predicting trouble spots before there are physical prototypes.

3.7.9 Statistical Process Control (SPC)

The main reason this belongs in the product development is that the processes and parts
designed must be defined in a manner that allows both process and product control
measurement, so that if problems are encountered in mass production, they can be
detected and corrected in a timely manner. These same tools are also used during the
prototype and pilot runs to evaluate both part and process designs.

3.7.10 Portfolio Management Tools

A Vehicle OEM needs to have a balanced portfolio of technology and product developments.
For the OEM to give Go/No Go decisions to individual projects, it must have a way of
rationalizing the differences in risk and reward between the projects. The tools used in this
process can range from complex Monte Carlo simulations to regressions to determine
customer purchase indicators. The goal of these tools is to reduce the market or technology
uncertainties by improving the accuracy of forecasts into market size or technology
feasibility. The portfolio tools also help project managers describe to their superiors how
individual projects fit into the overall company portfolio. This in turn helps upper
management give constructive feedback to project proposals, and choose the adequate mix
of projects.

This is another category where knowledge management tools can prove invaluable. By
tracking and recording detail performance criteria of each VDP, they can later use the
aggregated data to predict the likelihood of success. Manufacturing

3.8 Trends and Challenges

3.9 Case Activity: Valeo

Select the best activities for Valeo to meet the mass customization needs of their customers as
while keeping costs down. Choose all that apply.

Check all
that apply
Increase the Engineering Budget to increase capacity
Organize the Product Development process around an Integrated Product
Development Team (IPDT)
Automate the Engineering Change process

Reduce the Requirements definition phase

Rationalize the current design to reduce the number of components and sub
assemblies used throughout the products
Increase the investment in CAD/CAM solutions

Provide a single, repository to ensure that design data is fully synchronized

Business processes need to be developed that can create modular components. These
components can be reused in multiple designs (keeping the costs down), but also provide
the flexibility to be mixed and matched (to provide custom solutions).

Scope
The two major thrusts of the project are around the Develop Product & Process business process
and around the Supply Chain/Purchasing business processes. The overall scope of the program is
provided below.

As always, one of the key requirements is to develop some integration of the new technology to
the existing IT infrastructure. The deployment of the PLM will need such integration to make it
effective and to be able to work with the existing systems. In particular, PLM solutions will need
to communicate with the ERP to provide a critical link between product development and
operations, with CAD systems which are the tools in which engineers and designers create and
change their designs, and CRM and SCP solutions.

This CAD-PLM integration insures that the PLM system is able to create the complete product
structure of each design. When the design of parts is completed the new part revision information
needs to be sent to the ERP to plan the production of the part. Likewise as the entire product
design is completed, BOMs representing the product are transferred to the ERP to manage the
planning around the manufacturing and assembly of the product.

Note that current interfaces between the PLM and other systems are focused around the CAD
data and ERP. Additional integration capabilities will be important as customers and suppliers
collaborate on designs as well as planning/forecasting processes. This will lead to more
widespread integration between these systems and enable customers to make change requests,
which will ripple down to a change in the product and therefore the need to order new
components from suppliers.
Based on experience from other automotive suppliers, these will include:

BOM Accuracy improvement of 30-70% in costs. This cost reduction is achieved

through the efficiency of maintaining the accurate BOM. It greatly decreases the time to
begin volume production bringing the product to market faster.
 Reduction in costs of Engineering Change Orders of 15-45%. Engineering Change
Orders are the process by which design alterations are approved and then communicated
to everyone effected by the change. The automation of this process through the use of a
Product Lifecycle Management (PLM) system improves the efficiency of everyone
involved in reviewing these changes. It also reduces the likelihood of problems
associated when the changes are not properly communicated with all of those affected.

Improved Collaboration with Suppliers - 25-30% in reduced time. The ability to

utilize the PLM system to manage and control design reviews and design interactions
with suppliers will greatly improve the efficiency of jointly designing a solution. All
members of the design team including suppliers will be able to collaborate, suggest
changes, and get immediate feedback on their ideas, resulting in a finalized design that is
acceptable to the entire extended design team.
3.10 Client Engagements
3.10.1 Ford
Business Challenge:
The primary business challenge centered around the lack of use of the Ford Technical Education
Program (FTEP) tools. Proper use of the tools would allow engineers to:

Anticipate, detect and correct product problems

Manage system interactions

Make system/component target decisions

Translate consumer requirements to specifications

Anticipate high mileage, usage, and durability issues

Ensure robustness in designs

Reduce late engineering changes

3.10.2 HARLEY-DAVIDSON

Key Projects

Re-engineer and Automate ECO Process

Assess current Engineering Change and authorization processes

Re-design EC processes to incorporate best practices, including concurrent engineering,

and cross-functional teaming

Automate change and authorization processes using Metaphase PDM solution

Impact:

Reduced post release changes to products

Reduced cycle time for change releases

Technical Infrastructure Implementation

Selected and performed proof of concept on PDM software as a common repository for
product and process information using Accenture's rapid methodology
 Implemented improved technical infrastructure incorporating new processes and software
capabilities

Impact:

Reduced design cycle time and post release change cycle time

Program and Change Management

Managed project, resource, and budget across Metaphase project, including Metaphase
resources

Conduct organization impact assessment and develop training curriculum, media, and
trainers

Deploy solution to multiple sites across the globe

Impact:

Increased likelihood of organization acceptance with "quick-wins" and early "buy-in"

3.10.3 Renault VI/MACK Trucks

Solution

Common, global design repository

Common, global engineering change process/organization

Common, global part management processes including definition, numbering, and reuse

Common, global dictionary of product design language (with local translations)

Common, global product specification system to manage design (Configurator)

Common, global cross-functional product structure modules

4 Manufacturing

Manufacturing helps the company do what the customers want, when they want it, and at
the lowest cost, Eliminate all the waste along the Supply Chain.
In automotive manufacturing, there are several important processes:

The inbound logistics process. The basic objective of inbound logistics is to

receive and store materials as close to the point of use as possible.

The transformation process. In the production flow, transformation is the process

for which raw materials are transformed into finished goods.

The maintenance and work safety process. The main objective of the
maintenance function is to maintain the value of the company's properties.

The quality assurance process. Quality means delivering products (and services)
that meet customer standards, meet and fulfill customer needs, meet (exceed)
customer expectations, and meet unanticipated future needs and aspirations.

The scheduling and shop floor control process. The main purpose of the scheduling
process is to determine with a certain frequency (from weekly to daily, depending on the
way the OEM works) the Manufacturing Plan for each department of the Shop Floor
(machining centers, treatments, painting, assembling, testing, etc).

Challenges to manufacturing are mostly based on the fact that OEMs are increasingly
outsourcing their manufacturing and assembly operations. Awkward handoffs, less-effective
communications, and misaligned processes, systems and cultures can all be consequences
of outsourced manufacturing operations. In addition, an outsourcing model increases the
amount of interfaces between the OEM and the manufacturing service provider, so
information becomes more diffuse and Supply Chain oversight becomes more complicated.

4.1 Introducion
Build-to-Stock
Assembly is pushed by production planning without any customer order present in the system.
This means that a product is built and shipped directly to fill stock levels, not because it has been
specifically ordered. In this case, the delivery time the customer accepts is smaller than the entire
production time plus the assembly time, and does not allow for any assembly to be performed
according to a specific order. Finished goods inventory is required for the manufacturer.
Build-to-Order
This is true for build-to-order as well as assembled- and configured-to-order
products. The customer accepts a delivery time that is greater than the production
time plus the assembly time, since they are ordering a specific part or product.
Finished goods inventory and partially assembled standard parts (as intermediate
stock) are not required for the manufacturer. Depending on the supplier's
responsiveness, only components inventory is required.

Production to Order - intended to satisfy non-standard product requests, typically special

vehicles and niche expensive vehicles (Firefighting, Military, Agricultural). These companies
may produce and assemble products they have not designed and therefore do not "own."
Repetitive Production - intended to satisfy customized standard product requests, typically cars
with features defined by customer orders and produced by lots (passenger vehicles, motorbikes).
The lot size is not absolutely definedit depends on production systems

A number of factors typically influence or determine production:

Personnel (entrepreneurs, directors, staff, indirect workers, direct workers)

Technology (machines, installations)

Materials (direct raw materials, auxiliary materials, components)

Energy/power (electrical, hydraulic, pneumatic, thermal)

Capital (debts, leasing, cash, bank loans, public borrowings)

Information systems

Environment (regulations, laws, constraints, policies)

Time

Market (customer's expectations, leader or follower approach, time to market, life cycle)
4.2 The Automotive Manufacturing Evolution

These uncertainties include:

Unpredictability in the day-to-day variation in demand

Capacity of suppliers to maintain a reliable service

Skills and cooperation of the workforce

Reliability and capability of plant machinery and equipment

In the past, the response to uncertainty was to build inventories to serve as buffers, or to
have an excess amount of production capacity. Now, the response must be to eliminate the
uncertainties. This achieves two benefits:

Reduced investments

Increased responsiveness

To achieve this response, automotive industries introduced a new manufacturing concept

called Lean Production.

4.2.1 Transition From Mass to Lean Production

After the 1st World War, Henry Ford and General Motors' Alfred Sloan moved the
manufacturing world from the centuries of craft production, led by European firms, into the
age of Mass Production. The mass-producer uses narrowly skilled professionals to design
products made by unskilled workers tending expensive, single-purpose machines. These
machines churn out standardized products in very high volume. Because the machinery is
expensive and intolerant to disruption, the mass-producer adds many buffersextra
supplies, extra workers and extra spaceto assure smooth production. Changing over to a
new product costs even more, so the mass-producer keeps a standard design in production
for as long as possible. This results in lower costs for the customer, however, it is at the
expense of variety and uses work methods that most employees find boring and dispiriting.
The lean-producer combines the advantages of craft and mass production, while avoiding
the high cost of the former and the rigidity of the latter. Lean-producers employ teams of
multi-skilled workers at all levels of the organization, and use highly flexible automated
machines to produce volumes of products in enormous variety. Lean production is "lean"
because it uses less of everything compared to mass production:

Half of the human effort in the factory

Half of the manufacturing space

Half of the investment in tools

Half of the engineering hours to develop a new product in half the time

Half of the needed inventory on site

As a result, the customer gets products with an ever-growing variety at affordable costs,
and workers find their jobs more challenging.

A lean producer is one that:

Manages with a just-in-time philosophy

Focuses on eliminating waste

Takes advantage of continuous improvement keys

Creates value for the customers

4.2.2 Lean Production Principles

There are 5 basic principles that animate a lean production style:

Value: defining the value from the perspective of the customer in terms of a specific
product with specific features offered at a specific price and time. The value is what the
customer is willing to pay for.

Value stream: identifying the whole value stream for each product or product family
and eliminating all the wastes.

Flow: making the remaining value-creating steps flow continuously.

Pull: designing and providing what the customer wants only when he wants it.

Perfection: striving for perfection through continuous improvement.

Lean principles can also be applied in areas other than manufacturing. A very impressive
case is what Fiat Auto obtained by using a lean principle approach to its product
development process. The lead time between the concept definition and the marketing
launch was decreased by half in just 10 years.

1990 - 48 months

1995 - 36 months

2000 - 24 months

4.2.3 Features of Lean Production

The main features of lean production include flexibly implementing resources and
workflows, stock production control, reducing set-up time, and automated quality
monitoring. Click the sections below for a detailed look at each feature.

Flexible Resources (machinery and people)

Machinery has to be able to produce a large variety of product families with

very short set-up times; it must be reliable and simple to use. This can be
achieved with basic technology.

Workers must be multifunctional and adaptable. The number of workers must

be easily changed to change capacity.

Cellular Layouts (U-cells)

The U-cells layout is made up by grouping dissimilar machines to produce a family of

products. These cells have a one-way workflow, each worker tends several machines,
and the cycle time is adjusted by changing the number of workers.

The Group Technology tools, based on similarities in the design or processing of

different products, helps identify the product families.
 Kanban Production Control
Kanban is the simplest way to control the stock level and to let the production system
work in pullthis means that products will be produced only if necessary.

The basic concept is giving/bringing the right production signal to the right workplace
using a simple card:

Production kanban authorizes production

Withdrawal kanban authorizes movements of goods

The kanban card indicates a standard quantity of production. The formula for
calculating the number of kanban required is:

D * LT + SS

K=
Nk

Where:

D= average demand

LT = total lead time

SS = safety stock

Nk = number of component per kanban/ container

The kanban card has to address the right information to the right place, so we need a
flow of kanban between one point (supplier) to another (customers). For this purpose,
the kanban card must contain the following information:

The supplier

The customer

The code of the part to produce

The container and the quantity contained

The total amount of kanban

Rules of Kanban Production

A kanban should always be attached to the physical product

Production greater than the number of kanban is not allowed

Defective products should never be conveyed to the subsequent process

The number of kanban should be minimized

Prerequisites for Kanban Production

Low variation demand ( 20% max)

No quality problems

No unreliable suppliers

No high set-up times

No wide mix of products

Set Up Reduction

Kanban production with small lots requires short set-up times. Set-up times can be
reduced from hours to minutes using SMED methodology (Single Minute Exchange of
Dies) and other specific techniques.
SMED methodology is based on the following steps:

Separate internal set-up from external set-up

Convert internal activities to external activities

Streamline all aspects of set-up

Perform set-up activities in parallel or eliminate them entirely

Other specific techniques:

Preset desired settings

Use quick fasteners

Use locator pins

Prevent misalignments

Eliminate tools

Make movement easier

Quality at the Source and Visual Management

When a defective part is detected, the machine/assembly line is automatically stopped and
a signal is emitted. In this way, defective parts cannot pass on. This technique of quality
management is called Jidoka. Another technique of quality management is to use a large
sign or visual indicator (Andon) to highlight in real time how the production is running. If
there is a quality problem the Andon lights up.

There is a methodology in place to help the manufacturer focus more on their quality
management. The 5S methodology is a simple approach that every worker can use to
simplify work processes, improve workplace safety, improve equipment maintenance,
reduce waste and ensure product quality.

Every workplace should be arranged according to the 5S methodology:

Organization (Seiri): Identifying and separating the useful and non-useful tools

Orderliness (Saiton): Keeping everything in its right place

Cleanliness (Seiso): Keeping the workplace, machines, tools, and instruments

 clean

Standardized clean up (Seiketsu): Identifying proper tools and timetables for

cleaning activities

Self-discipline (Shitshuke): Becoming an example for colleagues

Key Trends Affecting Manufacturing Processes

In the last few years, other drivers of changes have been impacting the automotive
industry, in particular, the manufacturing area.
Globalization. Many organizations have turned to offshore manufacturing facilities
to reduce costs and improve performance.

Outsourcing.

Modules Suppliers. There is a change in suppliers - from component suppliers to

systems/modules suppliers.

Shortening of product life cycle

4.3 Manufacturing Process Overview

The primary processes in automotive manufacturing are:
The Inbound Logistics process, which includes all the activities related to the
delivery of raw materials, components and modules from the supplier to the OEM's Shop
Floor.

The Transformation process, which consists of different activities (Manufacturing,

Assembly and Testing) that, starting from the raw materials/components, create and
transform the product itself - creating added value.

The Maintenance and Work Safety process, which maximizes the plant's
availability at the lowest cost with the highest quality and safety standards.

The Quality Assurance process, which assures high quality standards according to
the manufacturing costs and cycle lead times.

The Scheduling and Shop Floor Control process, which generates a feasible and
optimized production plan by analyzing skill, labor, tool and material constraints.
4.3.1 Inbound Logistics

The first step in the manufacturing flow is the inbound logistics process, which consists of:

Materials transport from the suppliers to the Plant

Materials receiving into the Plant

Materials storage

Materials flow and feeding up to the production lines

Empty containers return

The basic objectives of the inbound logistics are to receive and store materials as close to
the point of use as possible. The primary reasons for this are:

To provide better management authority and responsibility for stored inventory, with
the objectives of avoiding surprise shortages and minimizing inventory investment.

To reduce all costs of storage and transport associated with material receipt and
storage. Since these costs do not add value to the product, they should be eliminated,
or at least minimized.

In the past, these processes were managed by the Plant itself interacting with the Suppliers.
Now, the trend is moving toward the introduction of Third Party Logistics, which will be
responsible for:

Planning and managing the inbound transports

Handling and feeding the material up to the production lines

The Third Party Logistics approach allows a material stock concentration from two stock
holding points (supplier and Plant) to one Logistics Center. The Logistics Center could
manage standard containers and feed the materials to the production lines according to the
manufacturing plans and the supply policies (for instance Just in Sequence, just-in-time,
Kanban).

In the production flow, transformation is the process for which raw materials are
transformed into finished goods.

4.3.2 Transformation

The main steps involved in this process are:

Manufacturing

Assembly

Testing

5 Supply Chain
The typical goals of the supply chain center around addressing the following questions. How
do I fill the order in the least amount of time? How do I insure that I meet the exact
specifications of the order? How do I fill the order at the least cost?

At its most basic, the successful design and execution of a supply chain relies upon the
following eight guiding principles:

1. Segment based on customer need

2. Plan according to market signals

3. Design and differentiate products and services closer to the customer

 4. Utilize customer-driven manufacturing

5. Strategically source and procure

6. Customize the logistics network

7. Develop supply chain-wide technology strategy

Develop supply chain-wide performance measures

5.1 Forecasting & Planning

If the act of manufacturing products is defined as the lifeblood of the Automotive Supply
Chain, then Forecasting and Planning is the central nervous system. Forecasting and
Planning functions must sense and respond to the various stimuli (customer demand,
inventory, capacity) within the Automotive Supply Chain.

Forecasting and Planning, based on traditional thinking, is a multi-level, cascading exercise,

with the cascading effect being defined primarily by the size of the time bucket and the level
of product.

5.1.1 Forecasting

Forecasts are estimates of future demand and are normally determined mathematically
using historical data. Forecasts can be adjusted by using more subjective information such
as economic conditions, actual customer information, etc.

There are typically three dimensions to a forecast: time, product and customer. These
dimensions are cross-sectioned by meaningful product and regional combinations to support
the appropriate business unit. The product dimension can be broken down into elements
such as major product line (e.g. car, small truck, heavy truck), brand (Taurus, Mustang,
Explorer, F250) and feature (engine size, color, trim package, etc.). The customer dimension
may be broken down into various levels of geographic regions or customer demographics.

Forecasts are utilized to plan asset acquisition/disposition and utilization throughout the
supply chain. These forecasts are essential to negotiating contracts.