Annex 1
Observations by Professor Denis R Towill,
FREng
SUMMARY
These notes are based on extensive site research
conducted by the Cardiff Logistics Systems Dynamics Group on the
performance of European automotive values streams based on the
problems experienced by first tier suppliers. We reach the conclusion
that there is much good practice within the UK. As reported by
Richard Schonberger, some first tier suppliers already outperform
the OEM's on such important performance metrics as annual stockturns.
The spread of excellence is hampered by the continuing existence
of an "us-and-them" culture, especially across the OEM
first tiers supplier interface. This is extremely wasteful of
resources, particularly capacity. As well as an attitudinal barrier
to the transfer of best practice throughout the industry, there
is a critical shortage of high quality business systems engineers.
These professionals are required to design, implement and update
automotive value streams to match best international practice.
They need to ensure the proper engineering of the "how"
of supply chain operations: the "what" is already well
documented.
1.1 Cardiff LSDG Audit of Automotive Value
Streams
We have recently completed our audit of 20 automotive
value streams centred on UK first tier suppliers operating within
European supply chains. The value streams supply a representative
range of mechanical, electronic and electrical systems to UK,
European and Japanese transplant OEMs. There are obvious dangers
in extrapolating audit results from such a sample in order to
generalise across a whole market sector. However, the comprehensiveness
of the audit in terms of site visits, data analysis and process
mapping does suggest the conclusions should be of considerable
value to the automotive sector. In particular the audit establishes
current performance as measured by the level of uncertainty induced
within the business due to supply chain interactions.
1.2 An Established Route for performance Improvement
The audit has also established the best route
for performance enhancement as demonstrated by the exemplar value
streams. As first tier supply level this must start with the engineering
of internal production processes to a high and consistent level
of productivity. This experience and knowledge can then be exploited
in the better management of materials and sub-assembly vendors
so that a uniformly high performance is achieved in both upstream
and internal pipelines. The final step in reducing uncertainty
is then to work with the OEM to enable streamlined information,
material, capacity and cash-flow. In parallel with the better
engineering of the internal, upstream and downstream processes
is the need to develop simple, robust, Decision Support Systems.
This in turn requires the immediate availability of operating
information throughout the value stream. EDI is therefore essential,
with all operating systems compatible and able to share this information.
I.3 The OEM-First Tier Supplier Interface
The audit sample established that two "exemplar"
value streams had exceptional performance along all four dimensions
(internal processes; supply side; demand side; and system controls).
These exemplars can be confidently recommended as demonstrating
best practice. However, six other value streams provide considerable
evidence of good practice. Indeed they have achieved all the engineering
benefits available within both the internal production and upstream
supply processes. What is holding them back is the nature of their
relationship with the particular OEM. This results in information
being late; sometimes being withheld and all too often changed
at the last moment. What the OEM causes herein is the inevitable
added cost to the supplier of heeding responsive manufacture when
the marketplace needs are met via level scheduling.
There is a cultural problem still to be overcome
at the first tier supplier-OEM interface. It is wasteful to expect
delivery of the right product, just-in-time, at lowest cost, when
the masking of downstream demand makes capacity planning for the
first tier supplier unnecessarily complex and highly variable.
True partnerships across this interface would help solve this
problem. There would also be a better chance of the associated
cultural change working its way upstream so that a genuine extended
enterprise would be in place. Since in the year 2000 it is value
streams, not individual business which compete, this can only
help UK plc.
I.4 Individual Businesses within the Value
Stream
There is a downside to the Cardiff LSDG audit
results. Four businesses were found to have minimal control of
their internal production processes this means it is very difficult
for such companies to adhere to delivery schedules, a performance
metric which lies at the heart of best practice. Amongst the reasons
for poor process control are the low (or inappropriate) investment
in equipment, and the low investment in production engineering
personnel. Hence instead of the desired continuing increase in
performance, resources are wasted in fire-fighting to fulfil an
overdue order.
Thus despite the wide publicity advocating lean
production ("lean" means "without fat" and
hence the elimination of all waste), our automotive sector audit
shows that it is still far from a universally applied paradigm.
This is strange considering that Spitfire production in the UK
during the Second World War was essentially enabled via lean production.
So the "comfort factor" or just-in-case inventories,
back-orders and visible queues still inhibits progress in some
parts of the automotive sector. There is thus a need for a sustained
cultural change which must not be reversed at the first hurdle.
I.5 Need for a "Total Systems" Approach
to Value Stream Design
It is evident from the audit that the successful
value streams have been holistically designed. In contrast many
of the less successful value streams have "grown like Topsy"
without adequate thought being given either to their architecture
or their infrastructure support. A suitable design methodology
exists known as Business Systems Engineering (BSE), which specifies
and integrates all the business processes linking customer need
to customer need being satisfied. The methodology is an extension
of traditional industrial engineering to consider end-to-end material,
information, capacity and cash flow together with the use of appropriate
technologies (especially IT) as an integral part of each process.
The UK automotive sector helped pioneer the
methodology in the early 1980s with considerable success at the
first tier supplier level as readily identified via annual stock
turn improvements. Since then the movement has lost its impetus,
to the detriment of value stream performance. The mistake has
been made in thinking that Value Stream Design is a one-off exercise.
It is not: periodic review is required as frequently as industrial
engineering checks were historically conducted on individual operatives.
In turn this much needed industrial engineering resurgence will
necessitate recruiting and professionally encouraging high quality
business systems engineers to design and implement the next generation
of value streams.
I.6 Conclusions
It may well be that at the UK OEM level some
contraction is inevitable due to global over-capacity. This global
situation is partially the result of increased efficiency in the
industry. At the same time the performance improvement has been
very patchy. Hence the problems encountered at BMW-Rover. However,
there is no reason why UK automotive suppliers cannot respond
to the global challenge. Our research shows that many companies
are starting to compete. What is needed is to rapidly bring the
industry up to the standard of the present best practice. To achieve
this goal requires attitudinal change allied to recruitment of
high quality business systems engineers capable of designing,
implementing and updating the next generation of value streams
to deliver top value to both customers and to businesses throughout
the supply chain.
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