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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

[email protected]


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


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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



The modular concept: body panels



70% part commonality with Renault Twingo III Renault gasoline engines Smart Hambach plant

ForTwo 3rd generation


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)



Smartville layout, Hambach



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)



Assembly line performance

Assembly time/car 4.5 hours Assembly stations 140 Cycle time 102 s Employees in assembly 150


Body shop


137 robots 108 body components 2,300 welding spots


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


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


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, …



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


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


Electrical smart


Source: www.usinenouvelle.com


Capacity utilization

Standard capacity 250-300,000 cars/yr Hambach volume 98,239 cars (2013)


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


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.



Smart logistics partners

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Rhenus Parts to assembly TNT Spares & accessories Mosolf Delivery of cars Panopa Internal logistics

Consolidated shipments

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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


Hindsight analysis

26 Louvain School of Management UCL/LSM/CESCM/AGRELL


Sales start slow …



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)


Which were the growth segments in automotive 1993-2004 ….

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Source: National Stats, BE, Belgian immatriculations


Demand changes …

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Source: EAAuto, 2012.


Conclusions


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



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.



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?


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


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.



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?



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?


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