A Random Walk Through the U-M Management Briefing Seminar...& Yet Common Themes

Each August, hundreds of managers and engineers travel to Traverse City, Michigan, where they not only have the opportunity to knock around some golf balls, but get to hear a vast array of speakers representing the leading OEM and supplier companies. The Office for the Study of Automotive Transportation-organized event is chock full of the latest thinking...and it seems that some of the thinking is shared by a whole lot of people.

Learning that the Lines May Be Blurred

One of the key things that Ford personnel learned while working with engineers from Mazda on the Escape/Tribute unibody sport utility vehicle program: "There are no right or wrong answers, sometimes." So noted Shamel Rushwin, vice president, Vehicle Operations, Ford Motor. Instead, he explained, there are distinctions, which aren't so black-and-white, not so binary. The differences are based on culture.

As people work on a more global basis, driven not only by company consolidations and ventures (e.g., Daimler andChrysler; GM and Fiat; Ford and a long list) but also by the Internet (and let's face it, although the Internet blurs geography, there are still people on the ends of the keyboards), there must be a clear understanding that sometimes things aren't clear. Culture counts.

Speaking of SUVs and culture, Martin Inglis, vice president, North America, Ford Motor, pointed out that Ford has sold more than five million SUVs since the introduction of the Explorer in model year 1991, and claimed that "SUVs are not a fad; they are a deep-rooted trend. Hula hoops and pet rocks were fads; personal computers and cellular telephones are trends that are changing the way people live. Likewise, SUVs. In 10 short years they have become part of our American culture and changed consumer expectations of personal transportation." Other cultures may not be so enchanted.

Dealing With Technology— and Dealing Through It

According to Gary Baker, practice leader, Advanced Technology Group, Arthur Andersen, this relates to the required assurance that when someone buys something over the ‘Net—and we're not talking about an Amazon.com purchase, but something via one of the B2B exchanges—that the supplier will be paid without undue difficulty (or at least without more undue difficulty).

Given that there is terminology created to describe this state of financial affairs, it must be that the "Enter" key is a whole lot easier to hit than people would like it to be in some cases ("Oops: I ordered what!?!").

And you might want to be careful with regard to what you do order over the ‘Net, EDI, fax, U.S. Mail, at least according to one Wall Street observer who has discovered (1) the auto industry, (2) the Internet and (3) collaborative engineering tools, though not necessarily in that order. Scott F. Merlis, managing director,Wasserstein Perella Securities stated, "Vehicle sales in Europe and the U.S. may be down 3 to 7% next year: be on your toes. The boom will subside." Maybe you won't need all of those MRO items next year, after all.

Merlis and his colleagues have developed a report titled "E2E, Product Development Drives Value Creation: The Untold Breakthroughs in E-Engineering." "E2E"? That's "engineering-to-engineering, web-centric product development" (and a whole lot simpler than "E2EWCPD"). Merlis pointed out that through the use of such things as product data management (PDM), computer-aided design, engineering and manufacturing (CAD/CAE/CAM) and other such software development tools (as are commonly covered in this magazine on a monthly basis), automakers will be able to save big money not only in reducing time to market, but, by cleverly designing common platforms, they can achieve billions of dollars of savings in capital expenditures. And Merlis noted that even sub-tier suppliers can be hooked into their customers' systems, such that earlier, collaborative design and engineering can be performed, which is certainly beneficial to all involved. (Which is something that as an AM&P reader you probably already know, right?)

Quickness & Collaboration: How the Leaders Operate

Do what needs to be done and have others do the rest.

Gary Baker says that Cisco concentrates on engineering and its customer base. It has its supply chain add the physical value. It does what it does best and offloads the rest.

Given the market valuation of Cisco (which, unlike many of the Internet companies, actually provides tangible products and is therefore like one of the so-called "Old Economy" companies) is as about as stratospheric as it can get, perhaps companies in this industry ought to take a page from Cisco's book and really work with suppliers for mutual benefit and advantage.

Think Cisco might be an outlandish reference? Think again. Toskiaki Taguchi, president and CEO of Toyota Motor North America, stated, "We need to be more like Cisco." He pointed out that when it comes to warranty issues—which is certainly an issue relating to dealing with its customer base—Cisco, as senior manufacturing people from Toyota discovered while visiting the firm, responds well: "They use new technology to get the information quickly, identify the countermeasure quickly, and then fix it quickly." Taguchi admitted, "Typically, we wait too long before we take action. And then we spend too much time fixing the problem." And this from a company that pioneered andon lines.

Taguchi said that they used the Cisco approach to dealing with a problem with the weather stripping on the doors of the current Avalon model, and that Toyota has instituted a "web-based system to streamline our communication with our North American parts and materials suppliers." And saving time is saving money.

When Two Become 1.5 to Save $3.3-billion
As is well known, Nissan, of which Renault owns a controlling interest (having bought 36.8% of the company), is undertaking massive efforts to cut costs, well, massively. The initiative is called the "Nissan Revival Plan" (and realize that the primary definition of revive is "To bring back to life," which means that Nissan is in a severe state unless, vide the Rushwin comment noted above, there is a problem vis-à-vis cultural translation—although English is the "official" language of the Renault-Nissan combine).

One of the keys to savings is the Nissan Production Way (NPW), which Tadao Takahashi, senior vice president of Nissan, whose responsibilities are in the areas of manufacturing, says was launched on a global basis in 1997 and which is now being coordinated with Renault's production system.

Apparently, the strengths of Nissan in the production arena include abilities in benchmarking, production methods and maintenance; Renault has strengths in logistics and vehicle engineering (as it relates, in this context, to ergonomics: ease of putting together the vehicles in the factories). They are looking to save $200 million through improvements in manufacturing and logistics during the next three years (which is a part of the $3.3-billion that Carlos Ghosn, chief operating officer, is aiming to save overall).

From a tactical point of view, one of the things that the NPW is doing to attain operational improvement is to better coordinate schedules between the engine plant and the assembly plant: the engine plant will receive a specific order two days before the vehicle is scheduled for build. This will help minimize inventory requirements.

A Nissan goal for its Japanese market is to be able to provide customers with a car in 14 days, order to delivery, by 2003. The actual manufacturing time is not more than three days. Takahashi points out, however, that the entire supply chain must be synchronized in order for this to be realized.

And about that supply chain: The Nissan Revival Plan calls for it to be cut in half by 2002. There are approximately 1,145 parts and materials suppliers now. The number they are going to is 600.

Working the numbers, there is actually a program called "3,3,3" that's being administered by Nissan engineering and purchasing. The threes represent: three partners—suppliers, purchasing and engineering; three years' time (the Revival Plan was announced October 18, 1999); and three regions—Asia, Americas, and Europe/Middle East/Africa. Suppliers, under the Revival Plan will be called on to help reduce both development time and costs. Fewer will do more.

(It should be noted that it isn't just the number of suppliers that will be going down: by March 2001 three Nissan assembly plants will be closed in Japan, and by the following March, two powertrain plants will be shuttered. The objective is to increase capacity utilization from a current 53% to 82%.)

Takahashi emphasizes that although there is a give-and-take between the Nissan and Renault production systems, this will not result in a situation where the two will end up as one. He suggests that they will achieve synergies where they can, but still maintain distinctiveness in practice.

One area where Takahashi says he is looking to learn from Renault is in the production of small cars, which he says the French company can actually produce at a profit: "We hope we'll gain some expertise."

Takahashi also noted that by 2010 plans call for 10 common platforms between Renault and Nissan; presumably, this means there will be some serious synergies. (Presently, Nissan alone has 24 platforms.)

Niche Thinking In A Mass Production World
D. Craig Winn is an ex-DCX guy (last position: vice president of Jeep platform engineering). He's now president, SteyrSymatec, North America, a subsidiary of Magna International. In speaking of niche vehicle programs—"small, fast programs," in which cars are developed to build a brand (e.g., Dodge and the Viper), to expand model choice (think of all of the compact pickups with the fascia-and-fender packages), to grow market share (ditto), to respond to market trends (ditto), or to utilize excess production capacity (?), programs in which the volumes are typically on the order of something less than 20K per annum—he noted how people can become "frustrated in big companies trying to do small programs." (Small programs are, not surprisingly, the raison d'etre of SteyrSymatec, which has capabilities ranging from engineering to program management to performing complete vehicle assembly [it is responsible for the Grand Cherokee in Europe].)

According to Winn, the keys to successful execution of a niche program are: • Agile manufacturing
• Vehicle integration skills
• Fast-to-market methodologies
• .Cost-effective balance of design, materials, tooling, and labor
• Informed and connected supply base
• Higher level of risk. And he pointed out that when it comes to people who are used to conventional large-volume programs—which may seem to be bet-the-company programs and probably are bet-the-career programs—these keys are not necessarily at hand (e.g., he points out that in the mass production environment, people are "engrained" to be risk averse, so there is a tendency to do plenty of testing so as to minimize the amount of shutdown time and to avoid any glitches at launch). "A large organization has a rhythm"—think waltz, perhaps—"and it is difficult to get people to break out of that pattern"—meaning they need to do the jitterbug or some similarly frenetic dance if they're to produce niche vehicles.

Whereas he says that traditional programs have a four-year timing (including invention, styling, engineering and design evaluation, prototype and vehicle testing, tooling and PPAP, and launch), a niche program can be done in 1-1/2 years (although it should be noted that the invention and styling steps are eliminated from the sequence).

Although Winn suggested that computer-aided tools that facilitate overlapping the product and process development steps are certainly important to fast product development for niche vehicles, the most critical resource is people: "People with a new mindset." People who think fast, not big.

Electronics Example, Again
Jim Geschke, vice president and general manager, Product and Business Development-Electronics Integration, Johnson Controls, points out that the life cycle of a vehicle is about 15 years: three to five years in development, five years in production, and five years on the road. Geschke's area of interest is not the interior as a whole, which is Johnson Controls' area of expertise, but specifically the electronic products within the vehicle. Given the lifecycle of electronic products (think of the stuff available, say, at Circuit City), he said that by the time a car goes into production, the electronics technology within that vehicle can be as much as two to five years old. That's several life times, in effect.

Their solution? What they're calling "flex-build" architecture. Essentially, they have developed a plug-and-play approach that facilitates swapping out modules, thereby not only making the electronic unit going into a new production model up to date, but also providing the means to provide enhancements when a vehicle is midway through its production cycle.

Another thing that Johnson Controls is doing, Geschke noted, is admitting that their people don't know everything about everything that goes into the real estate that the corporation is often responsible for. So it has created relationships—it has a formalized program called "Peer Partnering"—that acknowledges that some companies do things better than it does (see the comments about Cisco, above), like Philips Electronics, which knows lots about video systems, even though most of them may be found in houses rather than vehicles. Although many companies may indicate that they, too, depend on other companies within a supply chain, Geschke noted that in the Johnson Controls approach, things like shadow engineering and other non-value activities that are based on fear, not trust, just aren't done.

Let the Games Begin
"Going forward, competition will be supply chain versus supply chain. But in the new competitive landscape, your competitor one day could be your supply chain partner the next. What we used to call ‘lines of battle' will now look more like a game of Twister."—Bill Carroll, president, Automotive Systems Group, Dana Corp.

Costs, Barriers & Bumps
"It is just the cost of doing business," commented John E. Cunningham, partner, Andersen Consulting(Detroit). While not all that long ago the "cost of doing business" tag was attached to quality, what Cunningham was talking about is actually collaborative product development over the Internet. Whereas as few as five years ago the nature of the network between organizations was hard-wired—and, consequently, costly—the state of affairs today is such that the barriers to entry are barely a bump in the road.

Randolph C. Barba, another Andersen Consulting partner who also concentrates on the auto industry, but in his case from Chicago, amplified Cunningham. Speaking from the standpoint of a fictitious supplier, he said, "We think the issue is getting our knowledge placed in our customers' hands"—or heads—"in a way that is faster, cheaper, and more efficiently than our competitors. That's where the edge will be created." And using the ‘Net as the means by which to accelerate this knowledge transfer can be key—although Barba and Cunningham are both quick to point out that the advantage may be fleeting.

Barba uses as an example a company supplying a simple assembly that consists of a nut and a bolt. In the conventional approach, a drawing of the nut-and-bolt assembly would be sent to a customer, which will use it in putting together a component. The customer will likely send a drawing back, incorporating the nut and bolt . . . and some modifications. "We need to get to the point where a company's engineers move their knowledge of the applications that the customer will be trying to put the assembly into. We need to get to the point where groups work more effectively."

Which means collaborating over the ‘Net. But the major sticking point—which could be considered a replacement to the barrier to entry that the ‘Net brings down by its economical nature (comparatively speaking)—is one of security: Barba believes that more secure channels need to be established in order for the engineering community to feel more comfortable exchanging information. Another issue is that of bandwidth, of having a sufficiently broad channel that would permit the flow of parametric data (e.g., permitting the nut and bolt to be dynamically resized, say, to accommodate an engineering change).

What will be potentially even more troubling is a lack of people. On the one hand, there are people retiring out of automotive companies, and on the other, it is hard to grab young new talent into the business. Barba commented about the second hand: "The automotive companies need to provide the absolutely highest learning environment in order to attract engineers. If I am an engineer and I have the choice to train for Silicon Valley or for Detroit, Detroit is going to have to persuade me that it has the vibrant engineering environment that will get me excited.

"Leveraging the latest tools in an aggressive manner is important. Second, they're going to have to train the hell out of those young engineers."