We identified a total of 12 vehicle launches by Ford during the period investigated. Ten of those launches meet the single product-single plant requirement for this investigation. Our discussion will focus on these 10 launches.
The data for this article was gathered fromWard's Automotive Reports. For each launch, a production start date was determined. Monthly production data was collected for the 12-month period prior to the start date, and the 12 months subsequent to the start. We compared this date to Harbour & Associates capacity estimates to facilitate direct comparison between plants of differing capacities. Annual capacities for each plant were gathered from The Harbour Report (Harbour & Associates; Troy, MI) and similar tables published in Automotive News. These estimates were divided by 12 to give a monthly capacity estimate for each plant. They were then divided by actual production to give a monthly performance to capacity measure. Figure 1 compares Ford's performance to the North American industry average and to World Class, the company with the quickest vehicle launch. The chart shows that, on average, Ford facilities demonstrate a decline in production at changeover similar to the industry average, yet they take somewhat less time to return to a normal operating range. Ford facilities return to a higher capacity utilization rate post launch than the industry average—in fact Ford's post launch capacity utilization rates are even higher than the company with the quickest changeover performance.
Table 1 shows the 10 Ford plants and launch events that met the single plant-single product criteria. Of all North American participants, Ford had the most single plant-single product launches over the time period analyzed. This is indicative of a strategy by Ford to concentrate manufacturing and marketing resources on fewer nameplates and gain higher volumes per nameplate. It is interesting to note the Ford Wixom plant, which produces the Lincoln Town Car, Continental and soon will produce the DEW98-based LS6 and LS8, is the only facility producing more than one platform.
|Selected Ford Plants and Launch Events|
|Twin Cities||July 1992||Ranger|
|Kansas City||June 1994||Tempo-Contour|
|Kansas City||December 1995||F-150|
An interesting exercise is to separate the launches into two time periods; 1992-1994 and 1995-1996. Figure 2 graphically presents the company's average launch performance during these two time periods. It is apparent that during the 90s, Ford has improved its ability to launch vehicles. Although Ford still experiences severe downward spikes during changeover, they quickly return to capacity. The data suggests that Ford plants run the facilities at a much higher pace than before the change-over. Even more impressive is that these improvements were accomplished during the launch of the Taurus and F-150—the company's most critical products.
As with previous articles, we find it helpful to investigate the economic ramifications of our analysis. We assume that the average assembly plant has an annual capacity of 240,000. Table 2 shows a numerical comparison of Ford's 1992-1994 launches compared to its 1995-1996 launches. Although the numbers are averages used for illustrative purposes, and are obviously stylizations, it is a revealing exercise.
Further, we assume that the average profit for a new vehicle is $2,000 since a new vehicle will garner a relatively higher profit margin than an older model—especially with the higher profit margins from light trucks. Using the data presented, it is possible that the improvements Ford has made in vehicle launch may have added as much as $83 million in profits per launch when compared to their 1992-1994 performance. To further illustrate the importance of Ford's recent performance, it must be remembered that two of the recent launches involved the company's highly profitable F-150.
Under Ford 2000, the lead responsibility for vehicle launches belongs to the Vehicle Operations New Model Programs Department. This group is responsible for coordination of the product development team and the assembly plant. They interact with suppliers through Ford's purchasing department.
According to Bob Damron, Launch Manager, Ford Vehicle Operations, the most critical elements to a successful launch are assuring that the engineering is complete at engineering sign-off and getting suppliers to provide quality parts in a timely manner. Not surprisingly, Mr. Damron says the greatest barriers to a successful launch are late engineering changes and poor quality parts.
Mr. Damron says that "attention to the details that affect the customer, whether it be engineering or manufacturing/assembly process" have been responsible for the drastic" improvement in launch performance.
As for the idea that maintaining assembly `hardpoints' limits the styling potential, Mr. Damron disagrees. According to Mr. Damron, "Hard points can be held (and) styling changed without compromise. It [the maintaining of hardpoints] is the right approach to reduce investment and improve launch speed and quality".
|Comparison of Selected Ford New Vehicle Launches, 1992-1994 and 1995-1996|
|(A) Average capacity for 4 months following launch (percent)||(B) Average units produced per month based on annual capacity of 240,000||(C) Average total units produced during 4 months following launch (4x(B))||(D) Average difference in units (C) between 1992-1994 period and 1995-1996 period|
According to Mr. Damron, in attempt to further reduce investment and improve launch speed, "Ford has progressively moved away from hard automation, and increased flexibility in its body shops".
The first article in this series described an economic model in which we framed product launches. Our model assumed that each vehicle firm had explicitly or implicitly defined its manufacturing cost schedule for vehicle launch times. Our model also assumed that the companies must make strategic decisions with regard to capital allocations. These decisions would cause a company to move along their launch cost curve, but only through a change in technology or process could a company shift their cost curve. Ford's recent performance suggests an interesting test of our economic model. Has Ford actually improved the position of their launch curve? Or have they merely moved along the curve by increasing the amount of money spent on each individual launch?
Although he was not willing to give a definitive answer to whether there was a shift in Ford's manufacturing cost curve or a movement along it, Mr. Damron does believe that if it has shifted, an important element for that change is that there has been a change in the mindset at Ford. And finally, as to whether or not the curve will continue to shift, Mr. Damron states "If the customer does not benefit, it is not of value to make the change."