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UCL Université catholique de Louvain Louvain School of Management / CESCM
Louvain School of Management
JCAL 15 – FELUY, BELGIUM Advanced Supplier Parks: smart Hambach
Per AGRELL
Louvain School of Management
Outline
Supplier parks Smart
– Product concept – System partners – Assembly – Investment policy – Incentive alignment – Support functions – Logistics
Some hindsight analysis Summary
2 UCL/LSM/CESCM/AGRELL
Supplier parks
Cluster of suppliers located adjacent to or close to the final assembly
Single logistical node in the OEM supply chain Common facilities management Coordination options for
– Parts inventories – Information systems – Support functions: Catering, human resources, …
UCL/LSM/CESCM/AGRELL 3
Why supplier parks?
Cost reduction in logistics Labor cost reductions Productivity increases
UCL/LSM/CESCM/AGRELL 4
Louvain School of Management 5 UCL/LSM/CESCM/AGRELL
Louvain School of Management
Structure and Supply Chain
1. Maximum simplification of MCC�s management: – One headquarter in Bienne – One production site, Hambach – One technical center – Few representatives
2. Simplified manufacturing process – Five sub-assembly modules
3. Easiest adaptation to customer choices – Cost-Volume-Profit CVP Analysis – Dealer network – Internet sales
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Louvain School of Management
The modular concept: body panels
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70% part commonality with Renault Twingo III Renault gasoline engines Smart Hambach plant
ForTwo 3rd generation
Louvain School of Management
Supplier integration
– Onsite suppliers Magna System Chassis (the spaceframe) Magna Unipart (doors) Surtema Eisenmann (the paint shop) Plastal (plastic body panels) Mannesmann VDO (cockpit) ThyssenKrupp Automotive (powertrain and rear axle) Cubic Europe (surface decoration)
– Offsite suppliers (close to plant) Faurecia (seats) Continental (tires)
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Louvain School of Management
Smartville layout, Hambach
10 UCL/LSM/CESCM/AGRELL
Louvain School of Management
Inbound supply
Delivery of modules by a system partner for assembly – E.g the whole back part of the car with the engine
Delivery of parts by a system partner for assembly – E.g., the body panels intended to be fitted onto the car body
Delivery of parts by an external supplier for assembly – E.g., AC units
Delivery of small parts to partners for assembling their modules – E.g. bolts, (average rotation speed: 3 days)
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Louvain School of Management
Assembly line performance
Assembly time/car 4.5 hours Assembly stations 140 Cycle time 102 s Employees in assembly 150
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Body shop
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137 robots 108 body components 2,300 welding spots
Louvain School of Management
Production planning
Three week frozen, rolling horizon Quoted delivery time: 3-4 weeks WIP 8h of prod: 500-600 cars Finished cars 4-5 days of prod 2,500 cars Order regime: ATO + dealer replenishment Demand season: April-June ERP system Baan
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Just in time
Just in time – No incoming inspection, no part registration by smart – 70% of components enter assembly buffer without stockage – Modules are made on-site, conveyer to assembly line
Just in sequence – Exact sequence set one day ahead – Module production time: up to 10 days … – Assembly flow time : 4,5 h
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Infrastructure
Plant area 695,000 m2 (2013) Buildings 150,749 m2 (2013) All owned by common holding company Leasing to all users – including smart! Strict centralized environmental design criteria Construction materials, water, energy, noise, …
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Louvain School of Management
Principles for incentives
Onsite suppliers cannot supply offsite Pay on sell-through
– ATO, payment after final test – Supplier owns all process inventory – Supplier owns all specific equipment
– MCC reimburses annual depreciation – Holding company owns all land and buildings: leasing
Dealer take ownership after 24h
17 UCL/LSM/CESCM/AGRELL
Customized supplier deals
Each supplier is different The details of their agreements are customized ThyssenKrupp
– Smart owns parts, subcontractor for module assembly
Plastal – Smart holding owns machines and buildings
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Electrical smart
19 UCL/LSM/CESCM/AGRELL
Source: www.usinenouvelle.com
Louvain School of Management
Capacity utilization
Standard capacity 250-300,000 cars/yr Hambach volume 98,239 cars (2013)
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Investments for ForTwo Electrical
Total budget: 200 MEUR Daimler
– 100,000 h of training – New paintshop 50 MEUR (2013)
Suppliers:
– Panopa: + 2,770 m2 warehouse – Magna Chassis 1 new assembly line – ThyssenKrupp 2 new buildings – Plastal stock 17,000 to 26,000 m3
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Human resources
Smartville staff 1,500 (2,200) (750 Daimler) Common access to ‘market place’ and cantina No smart access to suppliers’ premises Each supplier responsible for social policy and contracts HR conditions ‘similar’ or identical, in particular holidays smart HRM leads HRM meetings for 11 suppliers.
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Louvain School of Management
Smart logistics partners
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Rhenus Parts to assembly TNT Spares & accessories Mosolf Delivery of cars Panopa Internal logistics
Consolidated shipments
UCL/LSM/CESCM/AGRELL
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Partnership Renault-Daimler Platform Renault Twingo III Renault plant Novo Mesto (Slovenia)
ForFour 2nd generation
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smart models
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City-Coupé 1998-2000
Roadster2003-2005
Fortwo2008-
Fortwo ED2012-
Crossblade2002
City-Coupé 2001-2007
Smart K (JP) 2001-2004
Forfour2004-2006
NedCar
smartville
smartvillenew lines
UCL/LSM/CESCM/AGRELL
Hindsight analysis
26 Louvain School of Management UCL/LSM/CESCM/AGRELL
Louvain School of Management
Sales start slow …
27 UCL/LSM/CESCM/AGRELL
Louvain School of Management
Financial problems
Distribution – Too expensive (location) for the volume
Demand – Stagnant in Europe (mobility problems not solved)
Production – Too high fixed costs (low volume utilization)
28 UCL/LSM/CESCM/AGRELL
Which were the growth segments in automotive 1993-2004 ….
29
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Source: National Stats, BE, Belgian immatriculations
UCL/LSM/CESCM/AGRELL
Demand changes …
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Source: EAAuto, 2012.
UCL/LSM/CESCM/AGRELL
Conclusions
31 Louvain School of Management UCL/LSM/CESCM/AGRELL
UCL/LSM/CESCM/AGRELL Louvain School of Management
Summary
The smartville plant shows a unique combination of: • Postponement delays value-added operations to permit pull
operations • Modularity combines customization values with economies of
scale in mass markets • Spatial integration with dedicated infrastructure replacing
inventory with information, strong internal coordination • Value chain configuration aligning the interests of the suppliers
with the OEM • Organizational integration creating direct multi-level links and
information flow, creating trust and informal collaboration, increasing speed
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Louvain School of Management 33
Prof. Per J. AGRELL Center for Supply Chain Management Louvain School of Management Université catholique de Louvain POB L1.03.01 B-1348 Louvain-la-Neuve www.uclouvain.be/cescm [email protected]
Discussion questions
34 Louvain School of Management UCL/LSM/CESCM/AGRELL
Louvain School of Management
Case question 1
Why should MCC assemble cars itself when suppliers are integrated in the site? VW for example, at its truck plant in Latin America, involves suppliers in
assembly, thus further lowering the financial commitment of the OEM. In line with the question whether carmakers should assemble cars at all, or should leave this to suppliers, an interesting topic is how to assure a lead over suppliers when these perform most of the value-adding activities and how to maintain an integrated environment. One might reason that suppliers are becoming too �smart� and might (in a consortium or stand-alone) by-pass MCC and gain the lead over the supply chain.
The LEAR Corporation, for example, is a consortium of suppliers that used to supply car-interior parts to manufacturers and is now beginning to supply entire car interiors and becoming increasingly dominant in the relation with manufacturers.
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Louvain School of Management
Case questions 2
How can MCC control and assure performance in the supply chain, not on the basis of ownership but through co-operation with suppliers?
36 UCL/LSM/CESCM/AGRELL
Case question 3
MCC is heavily focused on integrating the flow of information between players and levels in the chain, but how to measure and assure the performance of partners? so, how? As another example of problem solving in a partnership, the relation with the supplier of doors was terminated after lasting quality problems.
Should MCC, in case of disturbances, take over the operation and regain control, or should it stick to its policy of supplier involvement? If so, how to select a supplier shortly before the product launch?
37 Louvain School of Management 37 UCL/LSM/CESCM/AGRELL
Louvain School of Management
Case question 4
On the principle that at MCC cars are produced to customer order, the order-delivery lead-time can be seen as world-class and ahead of other manufacturers. However taking into account that – a) it is by now possible to have order specific modules, for
example dashboards, produced at two-hour notice; and – b) the final assembly time of a Smart is less than 5 hours,
one could question why a client order-delivery lead time of two to three weeks is a challenge for MCC, and why the company does not strive for shorter lead times.
38 UCL/LSM/CESCM/AGRELL
Louvain School of Management
Case question 5
The modular product concept of MCC permits customisation of the product in the dealer-channel through production postponement. However, at present the final assembly is done at the plant in Hambach. What is the rationale behind that decision?
39 UCL/LSM/CESCM/AGRELL
Louvain School of Management
Case question 6
An important consideration is how to cope with possible extensions of the Smart product concept in the future; how can short cycle and lead times be maintained as product variety and complexity increase?
40 UCL/LSM/CESCM/AGRELL