Recently, I had the opportunity to talk to a group of manufacturing executives about flexibility. As I was preparing the presentation I began to put together the major items that many are familiar with in terms of flexibility drivers: common vehicle architecture, consistent PLP points, common components, a common sequence of build in the assembly plant, and common equipment, particularly in the body shop. These elements are some of the most critical things required from manufacturing engineering and product development in order to become a flexible manufacturer.
As I did my research, I quickly realized that each of the major OEMs around the globe have done fairly well at accomplishing these items. All of them understand the enablers and have implemented many of them to varying degrees. And if companies have not figured out this part of flexibility, then they are significantly behind and will struggle for survival in this ever-changing global market.
Then I began to really focus on the bigger picture of flexibility in the market. In the past, flexibility has been a tool at companies; today it is a necessity. As companies are being forced to right-size their business while also being pulled in many directions by consumers, flexibility is an enabler. Many have viewed flexibility as a manufacturing issue, but even if the manufacturing staff masters the elements of flexibility, they cannot be successful without the entire business working together to provide a more-balanced approach to matching supply to demand.
So what is flexibility? There are three primary elements to this definition. First, it is an organization's ability to adapt to changes in the marketplace without: (1) creating unintended consequences in demand; (2) overexposure of a company, its assets, resources, and supply chain; and (3) placing increased pressure on the supply chain. This is an important element because it stresses the focus on balance. Companies that have limited financial resources will not be able to invest in infinite flexibility and they must balance this overexposure to be profitable in the future.
Secondly, flexibility is leveraging knowledge of demand changes at the earliest possible time, taking into account demand changes created by changes in offerings. The market is changing rapidly and consumer wants and needs are very different. Companies must work to gain visibility to that consumer through stronger communication with the customer and dealers.
Third, flexibility is really about matching supply to demand exactly, while gaining consumer and supply chain loyalty through a higher level of involvement and transparency. Critical information to share with consumers and suppliers are the company's business intentions, demand information, and product and process investment strategies. One of the most critical missing links for North American domestic manufacturers is the lack of open, honest communication between suppliers, OEMs and consumers. Without this transparency, flexibility cannot be achieved because loyalty does not exist. This is something that best-in-class companies do well. They have engaged the entire value chain as partners, developed a communication loop, and loyalty throughout the system. This enables them to better match supply and demand and ultimately achieve flexibility.
There are things that must be considered while working to match supply to demand, and the most important is the issue of today's current situation with global automotive manufacturers. All companies are struggling with a shaky economic environment and many unknowns. Many OEMs have restructured their businesses by removing plants, processes, people, and products. As companies step back to evaluate the current environment and plan for an uptick, they must face the issue of becoming flexible. Yet flexibility requires financial resources in addition to new product investment that all the companies are facing to reinvent their product lineups and gain share as the market rebounds.
Many of the lending organizations in North America are concerned with lending money to the OEMs for efforts of flexibility and product renewals, particularly with the recent bankruptcies of GM and Chrysler. As we look to the future, there will only be so much money to be spread out for the OEM's new products and processes. Companies will have to evaluate their current situation and determine what the right "balance" is for flexibility, current legacy operations and new products in the future.
In order to achieve an integrated flexible environment, a delicate balance of product loyalty/planning, product development, manufacturing engineering, and suppliers must be achieved with OEMs. While developing this integrated model, companies must balance future investment to be successful. Flexibility will be one of the most critical factors going into the future but the key will be balance to avoid overexposure. It will require all companies to operate in a keiretsu-like environment with full collaboration.