Profitability Reflects Well on The Big Three

Automotive OEMs are eager to reschool when their productivity is at stake. Automakers' investments in both education and research & development are paying back healthy dividends and lasting lessons.

Profitability Reflects Well on The Big Three

by Tom Andel, chief editor

• Keith Martin came up with a new method for bulk material delivery using radio frequency signals and computers mounted on lift trucks. Resulting cost reduction for General Motors: $32 million.

• Martin also optimized the material flow processes in his plant. Extra savings: $10 million.

• Pat Dessert modeled an automated order to deliver process. After implementation, the resulting inventory cost reduction on one DaimlerChrysler line was $600,000.

Who said there was no profit in academia?

That’s right, these automotive innovations were a direct result of partnerships between the Big Three automakers and academic institutions. By combining their human resources with the research and development (R&D) capabilities of colleges and universities, car manufacturers are teaching industries outside Detroit that continuing education pays.

“Supply chain management is very important if you’re going to look at the total cost of an enterprise and the cost to society,” says Joe Joseph, director of the GM Knowledge Center and director of GMU Distance Learning. “Good supply management techniques are taught in high schools and at the graduate and undergraduate levels through engineering and business courses. It’s a blend of analysis capability and computer-aided design capability. Those disciplines go all the way through the value chain.

“The most important aspect of the Tech Ed programs is we have imbedded GM projects into them. At our graduation in March we celebrated about $42 million in savings.”

GM and Delphi have approximately 1,500 employees enrolled each semester in the GM Technical Education Program. Students select courses from more than 60 degree-granting universities including the University of Michigan-Ann Arbor, Massachusetts Institute of Technology, Stanford University, Purdue University and Rensselaer Polytechnic Institute. Courses are taught to students through the use of CD-ROM, videotape delay, video conferencing, live lectures and the Internet.

Pat Dessert is a professor in the school of electrical and systems engineering and director of the product development and manufacturing center at Oakland University. He got involved in a project with DaimlerChrysler to help them achieve hundreds of thousands of dollars in inventory cost savings. He helped them design an automated order to delivery process that handles inventory counts, quality statistics and lot traceability. It incorporates the Synapse MES (manufacturing execution system) from IBSS.

“We’re taking the theory we’ve been doing here at Oakland and going out in industry,” he says. “We went into a company a year ago when we started developing the theory and we came up with a way of saving them 40 percent on their manufacturing costs. We’re now in a company called LDM Technologies. They threw us a curve ball. They gave us one of their healthier plants that was making money. We applied our shop-floor technologies and theory, and we’ll almost double their return on net assets [RONA].”

What are academic R&D initiatives like this adding to automotive know-how that efficiency pioneers like Toyota didn’t do decades ago with kaizen and kanban?

“Toyota’s production system was great and they have nice principles, but it’s 50 years old,” Dessert answers. “It didn’t take into account the technologies we have today. To optimize these processes and techniques you need to implement technology. There’s a handshake between the mix of technology, the mix of people improvement and the mix of process improvement to implement these world-class manufacturing principles quickly and reliably.”

Keeping score

The Big Three are using their own scorecards to grade supplier performance. Jean Czopek, director of volunteer services for the Automotive Industry Action Group (AIAG), says that through these scorecards the automakers identify areas where a supplier may be weak or in need of help. In some instances they use university partners to help bring them up to speed.

“Each of the Big Three has implemented a supplier education plan, offering online access to different types of education,” she says. “In many instances the OEMs provide their own education, but in some instances they work with universities and other training organizations to provide what they need.”

Of course, education is a two-way street, and some of these universities don’t offer much practical plant floor experience. That’s why these partnerships between the Big Three and academia are mutually beneficial. The students get practical industry experience, and the OEMs get better educated job candidates.

“The Modeling Group at AIAG has a professor from Michigan State University as one of its members,” says Ron Tillinger, program director of AIAG’s Occupational Health and Safety Steering Committee. “This professor has modeling expertise and has aided the AIAG industry-based work group in grasping some of the modeling theory needed. However, at the same time, the professor is learning more from the practical end of real supply chain issues on the plant floor. The professor goes back to the class teaching his students from more of a “real world” background. GM, Ford and Chrysler benefit because the people coming out of the professor’s classes will have some practicality built into their curriculum and they’ll be able to hit the plant floor running.”

These relationships foster continuing education for employees, as well. For example, the goal of the Ford Supplier Learning Institute is to help Ford Motor Company suppliers improve performance.

“It helps them understand specific tools, processes and methodologies we use at Ford,” says Judith Theobald, manager of the Institute. “One learning opportunity and resource is Material Planning and Logistics in a Box.”

Another tool available through the Institute is a Virtual Supplier Support Center. The center provides a bridge between basic knowledge and understanding the functional roles of the Ford Motor Company, say Dave Schultz, Operations, Ford Supplier Learning Institute.

“If they sell axles and they need to talk to the right person in purchasing, it will provide them with the right name, he says. “We brought together all the learning solutions a supplier would be interested in under one roof.”

Supply chain 101

Supply chain appreciation must start at home. GM Service Parts Operations came to realize that as its network of distribution centers grew out of control by the late 1970s and early 1980s. The thinking became bigger is better, and centralized is better than decentralized. That’s when GM started closing many of its DCs and building large automated facilities in certain key cities. But Debbie Harrington, IS application portfolio manager for General Motors Service Parts Operations, learned something important from these projects. Bigger isn’t always better.

“We have facilities that ship anywhere from 18,000 lines to 35,000 lines a day in our highest tech automated facilities,” she says. “If the warehouse management system [WMS] breaks, you’re dead in the water. In an automated facility, one hour of overtime upstream can be magnified to eight hours downstream. We also had no common process from facility to facility. You could see a homegrown Tandem-based WMS system in one facility, and the process could be totally different in another, along with a different culture and building layout. Several facility layouts had excessive travel times.”

Finally, in 1995, GM’s service parts network started adopting EXE’s WMS, which came with a 24/7 support center. Eventually all of GM’s parts distribution centers will be using the same WMS as well as the same lean concepts to get better value throughout the entire service parts supply chain.

Two of the 10 sites ship 24 hours a day; the rest work two shifts. The smallest site ships 23,000 lines a day while the largest ships 33,000 a day.

“We’re always challenging our workforce and systems people to provide continuous improvement,” Harrington adds. “We learned a lot by benchmarking. As for manpower planning, we know the average number of work assignments coming out of each area. Everything is as cookie cutter as possible. Because we were able to reduce the total time involved, from processing an order until it shows up at the customer’s door, we took hours out of the process — days in some cases.”

Not bad, considering GM’s service parts operations were peopled by managers who were schooled the old-fashioned way. Then ...

“Our leadership had the foresight to hire someone away from one of our competitors and his strength was to kick us every single day and say ‘You need to think differently’,” Harrington concludes. “He brought to us the kaizan concept. Since then, the quality initiatives in our division have taken place aggressively, addressing all key areas of distribution. Every picker gets his/her own personal report card every week about errors that dealers have claimed against their personal picker ID. This enables them to personally investigate their own errors. That feedback loop is so important. I can track on a graph exactly where we started giving people feedback, because their errors dropped significantly.”

A partner in technology

With the help of technology, management and labor can help each other find problems before they infect the supply chain. Automotive OEMs are using the recent tire quality situation (see Editorial, page 11) as the starting point for a new application of radio frequency identification (RFID) technology. The OEMs worked with AIAG’s RFID Tire and Wheel Identification group, whose membership includes bar code technology OEMs, automotive OEMs, tire OEMs, and other interested automotive companies, to generate a tire identification standard.

“The subcommittee developed a label version using Datamatrix, a high-density bar code symbology,” explains Bill Hoffman, manager of automotive business development for Intermec and AIAG subcommittee chair.

“There wasn’t a way to track a unique tire to a unique vehicle. This standard will allow a tire to be uniquely identified either by a label or an RFID tag molded into the tire, and link that tire to a vehicle.”

Once that tire/wheel combination is made, the OEM will know where it is in its manufacturing facility. It can then be checked into the yard, on the truck, at the dealer and linked to a customer. This isn’t new technology, but its affordability is. Hoffman says a combination of unique pressures will make the costs come down.

“Had this tire problem never happened, this identification effort would have happened anyway,” Hoffman professes. “It just would have taken longer because the price point would have had to get lower. Now, the proliferation through the supply chain will be exponentially faster than it was in going from handwriting to bar coding.”

Another example of the law of supply and demand at work in the automotive supply chain — and another valuable lesson for supply chain managers of today and tomorrow. MHM

Promoting Just In Time

To facilitate the practice of Just In Time (JIT) delivery throughout the automotive supply chain, the Automotive Industry Action Group’s (AIAG) EDIFACT Alignment/Migration Work Group, recently published its Implementation Guidelines For UN/EDIFACT — DELJIT (Delivery Just In Time) document. The completion of this document brings the automotive industry one step closer to a global standard for material management via electronic data interchange (EDI).

“The DELJIT message is currently being used by several automakers and major tier one suppliers, allowing suppliers to carry out exact shipment requirements and save time by preparing material prior to shipping,” says Ron Tillinger, AIAG program manager. “This standard has paved the way in North America for joint EDI communications with current and future product launches between automakers and suppliers worldwide.”

Initiated by the automaker and sent to a supplier, the DELJIT message provides information regarding shipping details for manufacturing environments that are requirements-based, consumption-based or sequenced. The message informs the supplier of what material to ship and where and when to ship it.

In addition, DELJIT allows automakers to inform suppliers of:

• Previously received quantities; packaging-related requirements;

• The relationship of the material to a specific production or delivery sequence;

• Shipment authorization;

• Mode of transport.

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