Organizational learning in automotive ... - Clemson University
J Intell Manuf DOI 10.1007/s10845-009-0330-6
Organizational learning in automotive manufacturing: a strategic choice M. Omar · L. Mears · T. Kurfess · R. Kiggans
Received: 8 May 2008 / Accepted: 12 December 2008 © Springer Science+Business Media, LLC 2009
Abstract This manuscript surveys the changes that affected the automotive industry in recent years with the evolution of industrial focus on globalization forces. Further, it proposes organizational learning as a viable strategy for the automotive industry, to effectively embrace and be agile to the continually changing environment. First, the manuscript characterizes and surveys the impact of globalization (global markets and competitors) on the current automotive industry in three categories: challenges in new markets, challenges in mature markets, and challenges in customer demands and hence sales trends. Second, the traditional strategies implemented in the automobile industry such as the “Company” and “Plant” specific production systems are presented. Lastly, the manuscript supports its proposal through case examples from Original Equipment Manufacturers the Rover group and Volvo AB. Keywords Globalization · Computer integrated manufacturing CIM · Customer demands · The automotive industry · Company specific production system · Plant specific production system
Introduction The automotive industry has gone through profound changes in the recent years forcing some Original Equipment M. Omar · L. Mears · T. Kurfess (B) Clemson University International Center for Automotive Research CU-ICAR, 4 Research Drive, Greenville, SC 29607, USA e-mail: [email protected] R. Kiggans South Carolina Research Authority, 91 Technology Drive, Suite 200 Clemson Research Park, Anderson, SC 29625, USA
Manufacturers (OEMs) to re-invent themselves and their managerial and production techniques. The triggers for these changes in the 70s were the lack of the product differentiation, and the oil crisis. While in the 1980s, and 1990s the triggering forces were: market maturity, over-capacity, and the increased penetration of the Asia-pacific producers (especially from Japan) into established markets. To provide a numeric example, in 2000 the automotive industry had the capacity to produce 25 million more vehicles than the world needed (The Economist 1997), and the south Korean OEMs produced five times their projected domestic market. Due to these changes, the automotive industry went through following phases: 1. The dominance of the Japanese production practices of lean production such as Just-In-Time JIT and cellular manufacturing since the 1980s (Kenney and Florida 1993). 2. The end of mass production and the beginning of the flexible specialization era (Atkinson 1984), and finally, 3. The increasing interest and analysis in the human resources management and its implications on any proposed manufacturing systems (Bratton 1992; Storey 1994, 1995). Today, globalization is triggering further and different challenges in the automotive industry, first by changing the operating environment in terms of production/product placement and markets, with implication on logistics and customers, respectively. Second, the global environment is increasing the number of competitors along with more diversity in their managerial and production techniques. These triggering forces are creating new set of challenges for the automotive producers. The following summarizes such challenges
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in emerging (new) markets, mature markets, in addition to challenges in forecasting and adjusting to customer demands.
The implication of globalization We can begin by using the production and buying trends in China from 2002 to 2004 to illustrate the impact of increased competition in emerging markets. The automotive market (sales) in China increased from 116.5 million vehicles in 2002 to 197 million vehicles in 2003, an increase of almost 70% in one year. This jump has motivated most of the OEMs to increase their investment in new plants and operations in China, however, the reported data from the China Automotive Information Conference CAIC showed that the OEMs’ profit ratios have dropped by 50% in 2004. This drop is due to the increase in the level of competition in China. This example presents the adverse, drastic effect of competition. This not only complicates the OEMs’ return on investment justification but also demands a higher level of flexibility in adjusting the production volumes, to avoid market saturation and lower profits. The repetition of this phenomenon in other emerging markets such as Russia, Eastern Europe and South America will further exaggerate the OEMs’ and suppliers’ challenges. Second, more challenges are emerging in mature markets in Western Europe and the US; because, (I) the automotive OEMs have had to respond to different, changing trends in governmental and the societal demands. Currently, the European governmental regulations are seeking higher levels of safety, which is apparent through the issuance of the new European regulations for pedestrian safety and the development of new safety technologies such as lane departure and blind spot sensory. On the other hand, the US regulations demand greener vehicles and an increase in the Corporate Average Fuel Economy CAFE standards to 35 mile per gallon. In addition new, scrap policies are being introduced and continually modified in California (Hahn 1995). (II) The mature markets have also developed several National Standards Setting Bodies (NSBs) to coordinate the automotive companies and the industry level standards and their reconciliation with the international standards; such as DIN (German Institute for Standardization) and JIS (Japanese Industrial Standards). However, these NSBs assume different roles between accreditation (such as the American National Standards Institute ANSI) or setting and disseminating of regulations (such as DIN, and CEN (The French Creative Environmental Network)). Additionally, some NSBs, mainly the European based, are considered to pursue a strategy of “aggressively and successfully promoting its technology practices to other nations around the world through its own standard processes and through its national representation” (American National Standards Institute, ANSI 2002). Fur-
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ther, even though the standardization between these NSBs was achieved through the International Standards Organization (ISO), certain applications for niche markets or legislative environment reasons are still to be developed within the European standards (as indicated in CEN regulations), which for example include vehicles with electric propulsion. Third, globalization has affected markets through increasing the customer base in quantity and quality; in other words customers now exist with more diverse expectations and demands. These different expectations have motivated a shift toward mass customization and shorter models life cycle. Mass customization challenges the current manufacturing infrastructure and the supply chain management styles, while the shorter model life cycles demands shorter development cycles. To illustrate with an example, the typical development cycle in the 1990s was between 3 and 5 years between design freeze and the Start of Production (SOP), while current development cycles at Toyota and Honda are between 13 and 23 months. Additional challenges are emerging due to the change in the most demanded customer features in the vehicles. For example, most of the customers in China are buying their first vehicles and so they lack the experience of owning a vehicle. The lack of this experience tends to focus their attention on the quality, convenience and reliability of the aftersales service. In addition, the China Association of Quality (CAQ) conducted a study in 2002 to reveal a strong correlation between the quality of the after sales service and the vehicles sales in China; currently the Honda accord ranked the first in sales in China and the first in the after-sales service quality. This means that the OEMs should shift their attention to the cost of the after-sale service, and possible outsourcing or competition of/in such services. The following section discusses the different strategies available for automobile manufacturers to respond to the above-noted global challenges.
Traditional strategic responses employed in the automotive industry Traditional manufacturing strategies reported in the literature (Hitomi 1996) are based on: strategies to achieve minimum cost with highest availability, and the highest quality with highest flexibility. To achieve these strategies, several techniques were also traditionally defined and sought: positioning of the production system, capacity/location decisions, product and process technology, workforce and job design, and finally the vertical integration of suppliers. In the automobile industry, typical strategies can be usefully categorized into technological strategies, managerial strategies, and the most recently proposed organizational learning strategies. All of
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these strategies aim at improving the product development process, time to market, and sales and marketing. The technological strategies are evident through wider implementations and developments of the computer and IT technologies. This can be usefully categorized through: (1) the computer aid to the production function and the automated flow of material Computer-Aided manufacturing (CAM); which enabled small lot production for a variety of products with minimum human (workforce) contribution. (2) The computer aid to the design function through the automated flow of technological information CAD; CAD enables quick design and product development, and (3) the computer aid to the management function through the automated flow of managerial information Computer-Aided Process Planning (CAPP), which facilitates the reduction of lead times and enables quick production planning and scheduling. Moreover, some OEMs have focused their efforts on developing new active styling tools and technologies for designing and developing new vehicles and product families (Fung and Chong 2007) in addition to dedicating some resources for research in the human-machine interaction HMI research (Lueth et al. 1994), to reduce the need for elaborate process setup efforts. However, most of the technological strategies mentioned above are not developed within the OEMs and are not part of their or their suppliers’ competence or part of their core business. Additionally, the reliance on external consulting groups to achieve above technologies might not provide the OEMs with any competitive advantages or knowledge base because; other competitors will be utilizing similar if not the same third party groups. The managerial strategies devoted more resources to solve the mass customization issues, through developing and utilizing new concepts of product family designs and the adoption of the platform-based product development (Jiao et al. 2007). Other OEMs have focused on outsourcing more vehicle components and sub-assemblies to their suppliers; following the observations of Dahmus et al. (2001) that the more product architectures enables late customization. Additionally, a study conducted by the MIT international motor vehicle program; and summarized by Taylor (1992a,b) indicated that “predictions for the future suggest that the role of the
manufacturer will increasingly move towards the coordination of highly involved and integrated suppliers; the role will be one of the integration of the vehicles in a “virtual factory”. It is also possible that suppliers themselves will assume a more dominant role in their relationships with production”. However, the increased level of outsourcing will add serious complications to the after-sales support and will also increase the warranty prices. Additionally, this will have adverse impacts on the quality assurance, the logistics and will further complicate the implementation of a JIT system. Furthermore, the increase in outsourcing levels will require further analysis of the data and the standards interoperability (Ray 2006) between OEMs and suppliers and between the different tier suppliers. Other managerial strategies include; the mergers between the different OEMs, and the introduction of a “Plant specific” production system and a “Company specific” production system. The “Plant specific” production system was pioneered and used by Volvo AB in each production plant. In the Kalmar and Uddevalla plants, Volvo abandoned the mechanically driven assembly line and introduced small groups to assemble a complete vehicle. While, other Volvo production plants in Torslanda employed the traditional assembly lines (Berggren 1997). “Plant specific” production was also evident in Mercedes Benz plant Rastatt I, which followed the model employed by Uddevalla (Juergen 1995). The “Plant specific” production systems did not find great success, which is evident through the closures of both Uddevalla and Kalmar in 90s, and the switch to the more traditional assembly lines in Rastatt I, in 1995. The “Company specific” production system strategy was triggered by the success of the Toyota Production System (TPS) in different countries and under different operating environments. Figure 1 shows a historical presentation of the different “Company specific” production systems, which were introduced starting by the TPS and ending by the Mercedes Production System (MPS). However, most if not all of the “Company specific” production systems were built based on the TPS practices. For example, the Chrysler Operating System (COS) introduced in 1994, was the result of several benchmark studies conducted at Toyota in Japan in 1992 and 1994 (Constanze 2005). This means that the
Fig. 1 The evolution of the “Company specific production systems”, adopted from West (2000)
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J Intell Manuf Table 1 The Mercedes Production System (MPS) standardized tools, adopted from Juergen (1995) Human infrastructure
Standardization
Quality focus and robust processes and products
Just-in-time
Continuous improvement
Leadership (12 tools)
Standardized methods (8 tools)
Production smoothing (2 tools)
Waste elimination (10 tools)
Role clarity (3 tools)
Visual techniques 5 S (2 tools)
Quick issue detection and coordination (8 tools) Robust processes/products and preventive quality assurance (12 tools) Customer focus (internal and external) (4 tools)
Employee involvement and development (6 tools) Work groups organizational structure (9 tools)
“Company specific” production strategy will not offer the OEMs a competitive advantage, merely meeting a benchmark that has since been outdistanced by the founder. To further illustrate this point, Table 1 shows the MPS substructure and operating principles, which in essence is very similar to the TPS. The following section proposes organizational learning as a strategic tool for the automobile industry. Organizational learning in the automotive manufacturing From the above discussion in section “Introduction” and “The implication of globalization”, it is clear that the automotive industry is embarking into new ventures, facing new challenges, and will be operating in a continually changing environment. This sentiment was also suggested by Kenney and Florida (1993); he stated that the future of the automobile industry appears characterized by uncertainty, continuous change and innovation in technology, work practices, and markets. These factors necessitate the learning of new skills and the development of sustainable source of new strategies. Legge (1995) has suggested that the employees might be such a source; he indicated that the human/employee input is a proactive rather than a passive input into the production process. Additionally, Zuboff (1988) and Nonaka (1988) indicated that the automobile production models will continue to evolve with the central focus shifting from the “abstract mass” of systems and structures, to the creative processes associated with the development of the individual and the group within the organization. To utilize human resources as a sustainable resource for the automotive sector, several OEMs have established educational units and systems for the development of their engineering force. In 1990 the Rover group recognized the concept of “learning organization” as a means of survival in the contemporary automotive sector. Rover defined the
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Pull production (4 tools)
Continuous flow processing (6 tools) Customer demand rate (2 tools)
learning organization to involve the development and the integration of a double loop learning system to scan the environment and to develop new strategic approaches that are emergent and participative Hawkins (1994); Morgan (1997). To achieve this, Rover introduced a new business group within the company named the Rover Learning Business (RLB). The double loop learning can be differentiated from a single loop scheme from Argyris and Schoen (1978), where Argyris and Schoen defined a single loop organization as one that modify its course of action based on difference between the planned and the actual outcome, while a double loop organization reviews its basic assumptions and policies that resulted in their strategic actions. In Rover, the RLB board and structure involved not only senior managers from the Rover but also, people from other industries and educational institutions. Additionally, the RLB established strong and clear connections with different academic universities such as Warwick University, London Business School, and Liverpool John Moores University, in addition to the European Council for Learning Organizations (ELCO) (West 2000). The RLB have also utilized the Group Learning Exchange Network (GLEN), to make the developed or acquired knowledge institutionally available. The RLB was dissolved in 1996, following the merger with BMW in the February of 1994. Even though the RLB was successful in providing Rover with highly skilled innovative engineering force, the RLB faced several challenges because the RLB was an internal educational entity within Rover. This resulted in the difficulty that sponsoring such a learning system is too expensive for a company to handle; especially in the case that this learning system does not add direct/immediate contribution to the business case (the RLB cost was estimated to be one million dollar per year (Winnes 2002)). Secondly, the RLB did not offer any external recognition to the participants and was confined to the Rover’s internal culture. Further, the RLB system focused on the technical knowledge without providing the engineers with the managerial and market analysis or “soft” skills.
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Volvo was another OEM that recognized the importance of organizational learning and the need for companies to reinvent their strategies in changing environment. Volvo’s approach to learning as a new strategy was apparent through the different partnerships and relationships established with other OEMs. In 1993 Volvo announced a partnership with Renault, to learn new production concepts at low product volumes. Further, In 1996 Volvo established a joint venture with Mitsubishi in Born, Belgium with the goal of having a collaborative and a creative approach to production and the development of mutually supporting work and learning structures. This manuscript proposes the concept of “learning organization” from a different perspective. That is, learning through a collaborative, integrated relationship with an academic institution. This is proposed to enable a multi-dimensional approach to change and to reduce the perceived instabilities in the contemporary automotive sector (market and competitors) using integrated tools from the technical and the business administrative disciplines. This enables a continuous review of the basic assumptions about markets, supply chain strategies, and even the business case models currently implemented as the norm in the industry. This requires the development of an integrated managerial and engineering understanding of the different market forces and customer demands. The integrated managerial-engineering (technical) skills were further sought in recent National Science Foundation (NSF) surveys and the Journal of Engineering Education published studies (Todd 2001; Restructuring Engineering Education 1995). The concept of “learning organization” was originally coined and defined by Senge (1990) to include five basic pillars; personal mastery, mental models, shared vision, team learning and systems thinking. The proposed education based approach addresses some of these pillars. The proposal focuses on the student individual development through education to aid in his/her personal mastery, while it challenges the current representations of the auto. industry realities thus motivating new mental models that might steer the decision making process in new directions. Next paragraphs further match the proposed model to some of the “learning organization” pillars mainly; structured team work toward a unified vision with accountability, and systems-level thinking. The Clemson University recognized the need for a professional, integrated educational program for the automotive sector. Through the establishment of the Clemson University -International Center for Automotive Research (CU-ICAR), which serves as a integration platform for the different educational disciplines from the college of business, engineering, languages, and the center of entrepreneurship, to provide the combined managerial-technical analysis tools and skills, required in the contemporary automotive sector. Also, this helps in developing an enterprise or system-level perspective in more words; the enterprise horizontal (outside sup-
pliers and collaborators) and vertical branches (the company own departments), technical and non-technical failures and effects are investigated for each of the enterprise planned or current activities. The CU-ICAR established a multi-dimensional educational approach; through a four layered curriculum. The first layer covers the core automotive sector, defining its business and history through four “core courses”; while the second layer consists of different “system courses” that introduce the automotive OEMs activities; starting by vehicle conception through design and development, launch, and finally its marketing. The third layer consists of “technical courses” with specific focus on the manufacturing of vehicles or vehicles’ technologies and physics. The third layer is further supplemented through a certificate program that provides vocational skills in vehicle testing and quality; in addition to an internship program at an automotive enterprise. The fourth and final layer consists of the managerial, leadership, and entrepreneurship education. Furthermore, the context of cultural exposure and education is provided through a cultural and foreign language immersion courses. Figure 2 displays the CU-ICAR multi-layered curriculum structure. Even though the curriculum is multi-layered in nature, each course or component was developed with participation from all faculty members to ensure integration and coherency. Furthermore, the development was structured using Quality Function Deployment (QFD) matrices to match the University’s competence (i.e. colleges and programs) with the needed outcomes. The CU-ICAR curriculum combines the surveyed needs of several automotive OEMs and supplier groups. Additionally, it provides the integrated manufacturing education most needed, to operate effectively in a globally, changing environment, a need indicated in recent NSF workshops (Restructuring Engineering Education 1995). The CU-ICAR approach complements the advantages from some of the previous educational systems such as the RLB, while providing a multi-dimensional education. From the OEMs perspective, outsourcing such continuous learning program will eliminate the need to spend multi-million dollar budgets on internal entities on yearly basis. Moreover, the CU-ICAR educational program is a platform for idea-sharing and collaboration between the different OEMs in a less restrictive environment and with far less investment than found in joint industrial ventures. This collaboration between OEMs and suppliers can also be achieved through collaborative research projects and with scalable scopes. Furthermore, the CU-ICAR educational system focuses on team-based projects and assignments that might aid the students in forming a shared vision and developing a team learning attitude, while formalizing the cross-functional team creation and enforcing accountability.
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Fig. 2 The different layers of the Clemson University automotive engineering program
Summary conclusion Automobile production is the largest manufacturing activity in the world with turnover of trillion of dollars and employment of tens of millions of people. In recent years the automotive industry has undergone many mergers between existing OEMs, changes in consumer demands and the explosive entry of the Asia-pacific region manufacturer into established markets (particularly the US), and the rise of new markets in China, India, Eastern Europe and South America, with new customer demands and cultures. This manuscript presents the specific challenges that have emerged in the contemporary automotive sector due to the globalization of the industry. Furthermore, the text discusses and classifies the traditional strategies employed by the automobiles’ manufacturers to counter recent challenges. The authors indicate the need for new strategies because, traditional strategies are not compatible with the new challenges and are responsive in nature rather than progressive. Further, traditional business strategies do not provide clear competitive advantages. In section “Organizational learning in the automotive manufacturing”, the manuscript discussed the new strategy based on the concept of “learning organizations”, with a focus on the development of proactive human engineering resources. This strategy is sought to provide a sustainable resource for innovation, and to respond to the changes in the operating environment, and serves as the basis for a new automotive engineering curriculum developed at Clemson University. The case of RLB was presented and analyzed, to show the realization of the automotive sector of the “continuous
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learning” as a strategic choice. Lastly, the latest development in education strategies was discussed through the CU-ICAR establishment and its curriculum structure. This manuscript aims to persuade further research in manufacturing education as a future strategy in the automotive sector.
References American National Standards Institute, ANSI. (2002). National standards strategy for the United States. Washington, DC: ASNI. Argyris, C., & Schoen, D. (1978). Organizational learning: A theory of action perspective. Reading, MA: Addison-Wesley. Atkinson, J. (1984). Manpower strategies for flexible organizations. Personnel Management, 16(8), 28–31. Berggren, C. (1997). Advanced automation or alternative production design? A reflection on the new Japanese assembly plants and the alternative approach of Volvo Uddevalla. In K. Shimokawa, U. Juergen, & T. Fujimoto (Eds.), Transforming automotive assembly, experience in automation and work organization. New York: Springer. Bratton, J. (1992). Japanization at work. Basingstoke: Macmillan Press. Constanze, C. (2005). Automotive production systems and standardization. Heidelberg: Springer. Dahmus, J., Gonzalez-Zugasti, J., & Otto, K. (2001). Modular product architecture. Design Studies, 22(5), 409–424. Fung, R., & Chong, P. (2007). An active styling platform for designing and developing product families. Journal of Intelligent Manufacturing, 18(1), 47–58. Hahn, R. W. (1995). An economic analysis of scrappage. The RAND Journal of Economics, 26(2), 222–242. Hawkins, P. (1994). Organizational learning. Management Learning, 25(1), 71–82.
J Intell Manuf Hitomi, K. (1996). Manufacturing systems engineering. London: Taylor & Francis. Jiao, J., Simpson, T. W., & Siddique, Z. (2007). Product family design and platform-based product development: A state-of-theart review. Journal of Intelligent Manufacturing, 18(1), 5–29. Juergen, U. (1995). Lean production and Co-determination; the German experience. In S. Babson (Ed.), Lean work: Empowerment and exploitation in the global auto industry. Detroit: Wayne State University Press. Kenney, M., & Florida, R. (1993). Beyond mass production. Oxford: Oxford University Press. Legge, K. (1995). Human resource management: Rhetorics and realities. London: Macmillan Business. Lueth, T. C., Laengle, T., Herzog, G., Stopp, E., & Rembold, U. (1994). KANTRA-human-machine interaction for intelligent robots using natural language. Robot and Human Communication, RO-MAN apos; 94 Nagoya, In: Proceedings of the 3rd IEEE international workshop. Morgan, G. (1997). Images of organization (2nd ed.). London: Sage Press. Nonaka, I. (1988). Toward middle-up-down management: Accelerating information creation. Sloan Management Review, 29(3), 9–18. Ray, S. (2006). Manufacturing interoperability. Journal of Intelligent Manufacturing, Special issue on E-manufacturing and web-based technology for intelligent manufacturing and networked enterprise interoperability, 17(6), 681–688.
Restructuring Engineering Education. (1995). A focus on change, The national science foundation, http://www.nsf.gov/pubs/stis1995/ nsi9565/nsf9565.txt. Senge, P. (1990). The fifth discipline: The art and practice of the learning organization. New York: Doubleday Business Press. Storey, J. (1994). New wave manufacturing strategies. London: Paul Chapman. Storey, J. (1995). Human resource management: A critical text. London: Routledge. Taylor, A. (1992a). It is slow lane for automakers. Fortune, 133(6), 59–61. Taylor, A. (1992b). The new golden age of autos. Fortune, 129(7), 50–61. The Economist. (1997). Issue: May. Todd, R. H. (2001). Manufacturing: A strategic opportunity for engineering education. Journal of Engineering Education. West, P. (2000). Organizational learning in the automotive sector. London: Routledge Advances in Management and Business Studies. Winnes, R., Die Einfuehrung Industrieller (2002). Produktionssysteme als Herausforderung fuer Organisation und Fuehrung, Karlsruhe: Universitaet Karlsruhe TH. Zuboff, S. (1988). In the age of the smart machine. New York: Basic Books.
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Organizational learning in automotive manufacturing: a strategic choice M. Omar · L. Mears · T. Kurfess · R. Kiggans
Received: 8 May 2008 / Accepted: 12 December 2008 © Springer Science+Business Media, LLC 2009
Abstract This manuscript surveys the changes that affected the automotive industry in recent years with the evolution of industrial focus on globalization forces. Further, it proposes organizational learning as a viable strategy for the automotive industry, to effectively embrace and be agile to the continually changing environment. First, the manuscript characterizes and surveys the impact of globalization (global markets and competitors) on the current automotive industry in three categories: challenges in new markets, challenges in mature markets, and challenges in customer demands and hence sales trends. Second, the traditional strategies implemented in the automobile industry such as the “Company” and “Plant” specific production systems are presented. Lastly, the manuscript supports its proposal through case examples from Original Equipment Manufacturers the Rover group and Volvo AB. Keywords Globalization · Computer integrated manufacturing CIM · Customer demands · The automotive industry · Company specific production system · Plant specific production system
Introduction The automotive industry has gone through profound changes in the recent years forcing some Original Equipment M. Omar · L. Mears · T. Kurfess (B) Clemson University International Center for Automotive Research CU-ICAR, 4 Research Drive, Greenville, SC 29607, USA e-mail: [email protected] R. Kiggans South Carolina Research Authority, 91 Technology Drive, Suite 200 Clemson Research Park, Anderson, SC 29625, USA
Manufacturers (OEMs) to re-invent themselves and their managerial and production techniques. The triggers for these changes in the 70s were the lack of the product differentiation, and the oil crisis. While in the 1980s, and 1990s the triggering forces were: market maturity, over-capacity, and the increased penetration of the Asia-pacific producers (especially from Japan) into established markets. To provide a numeric example, in 2000 the automotive industry had the capacity to produce 25 million more vehicles than the world needed (The Economist 1997), and the south Korean OEMs produced five times their projected domestic market. Due to these changes, the automotive industry went through following phases: 1. The dominance of the Japanese production practices of lean production such as Just-In-Time JIT and cellular manufacturing since the 1980s (Kenney and Florida 1993). 2. The end of mass production and the beginning of the flexible specialization era (Atkinson 1984), and finally, 3. The increasing interest and analysis in the human resources management and its implications on any proposed manufacturing systems (Bratton 1992; Storey 1994, 1995). Today, globalization is triggering further and different challenges in the automotive industry, first by changing the operating environment in terms of production/product placement and markets, with implication on logistics and customers, respectively. Second, the global environment is increasing the number of competitors along with more diversity in their managerial and production techniques. These triggering forces are creating new set of challenges for the automotive producers. The following summarizes such challenges
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in emerging (new) markets, mature markets, in addition to challenges in forecasting and adjusting to customer demands.
The implication of globalization We can begin by using the production and buying trends in China from 2002 to 2004 to illustrate the impact of increased competition in emerging markets. The automotive market (sales) in China increased from 116.5 million vehicles in 2002 to 197 million vehicles in 2003, an increase of almost 70% in one year. This jump has motivated most of the OEMs to increase their investment in new plants and operations in China, however, the reported data from the China Automotive Information Conference CAIC showed that the OEMs’ profit ratios have dropped by 50% in 2004. This drop is due to the increase in the level of competition in China. This example presents the adverse, drastic effect of competition. This not only complicates the OEMs’ return on investment justification but also demands a higher level of flexibility in adjusting the production volumes, to avoid market saturation and lower profits. The repetition of this phenomenon in other emerging markets such as Russia, Eastern Europe and South America will further exaggerate the OEMs’ and suppliers’ challenges. Second, more challenges are emerging in mature markets in Western Europe and the US; because, (I) the automotive OEMs have had to respond to different, changing trends in governmental and the societal demands. Currently, the European governmental regulations are seeking higher levels of safety, which is apparent through the issuance of the new European regulations for pedestrian safety and the development of new safety technologies such as lane departure and blind spot sensory. On the other hand, the US regulations demand greener vehicles and an increase in the Corporate Average Fuel Economy CAFE standards to 35 mile per gallon. In addition new, scrap policies are being introduced and continually modified in California (Hahn 1995). (II) The mature markets have also developed several National Standards Setting Bodies (NSBs) to coordinate the automotive companies and the industry level standards and their reconciliation with the international standards; such as DIN (German Institute for Standardization) and JIS (Japanese Industrial Standards). However, these NSBs assume different roles between accreditation (such as the American National Standards Institute ANSI) or setting and disseminating of regulations (such as DIN, and CEN (The French Creative Environmental Network)). Additionally, some NSBs, mainly the European based, are considered to pursue a strategy of “aggressively and successfully promoting its technology practices to other nations around the world through its own standard processes and through its national representation” (American National Standards Institute, ANSI 2002). Fur-
123
ther, even though the standardization between these NSBs was achieved through the International Standards Organization (ISO), certain applications for niche markets or legislative environment reasons are still to be developed within the European standards (as indicated in CEN regulations), which for example include vehicles with electric propulsion. Third, globalization has affected markets through increasing the customer base in quantity and quality; in other words customers now exist with more diverse expectations and demands. These different expectations have motivated a shift toward mass customization and shorter models life cycle. Mass customization challenges the current manufacturing infrastructure and the supply chain management styles, while the shorter model life cycles demands shorter development cycles. To illustrate with an example, the typical development cycle in the 1990s was between 3 and 5 years between design freeze and the Start of Production (SOP), while current development cycles at Toyota and Honda are between 13 and 23 months. Additional challenges are emerging due to the change in the most demanded customer features in the vehicles. For example, most of the customers in China are buying their first vehicles and so they lack the experience of owning a vehicle. The lack of this experience tends to focus their attention on the quality, convenience and reliability of the aftersales service. In addition, the China Association of Quality (CAQ) conducted a study in 2002 to reveal a strong correlation between the quality of the after sales service and the vehicles sales in China; currently the Honda accord ranked the first in sales in China and the first in the after-sales service quality. This means that the OEMs should shift their attention to the cost of the after-sale service, and possible outsourcing or competition of/in such services. The following section discusses the different strategies available for automobile manufacturers to respond to the above-noted global challenges.
Traditional strategic responses employed in the automotive industry Traditional manufacturing strategies reported in the literature (Hitomi 1996) are based on: strategies to achieve minimum cost with highest availability, and the highest quality with highest flexibility. To achieve these strategies, several techniques were also traditionally defined and sought: positioning of the production system, capacity/location decisions, product and process technology, workforce and job design, and finally the vertical integration of suppliers. In the automobile industry, typical strategies can be usefully categorized into technological strategies, managerial strategies, and the most recently proposed organizational learning strategies. All of
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these strategies aim at improving the product development process, time to market, and sales and marketing. The technological strategies are evident through wider implementations and developments of the computer and IT technologies. This can be usefully categorized through: (1) the computer aid to the production function and the automated flow of material Computer-Aided manufacturing (CAM); which enabled small lot production for a variety of products with minimum human (workforce) contribution. (2) The computer aid to the design function through the automated flow of technological information CAD; CAD enables quick design and product development, and (3) the computer aid to the management function through the automated flow of managerial information Computer-Aided Process Planning (CAPP), which facilitates the reduction of lead times and enables quick production planning and scheduling. Moreover, some OEMs have focused their efforts on developing new active styling tools and technologies for designing and developing new vehicles and product families (Fung and Chong 2007) in addition to dedicating some resources for research in the human-machine interaction HMI research (Lueth et al. 1994), to reduce the need for elaborate process setup efforts. However, most of the technological strategies mentioned above are not developed within the OEMs and are not part of their or their suppliers’ competence or part of their core business. Additionally, the reliance on external consulting groups to achieve above technologies might not provide the OEMs with any competitive advantages or knowledge base because; other competitors will be utilizing similar if not the same third party groups. The managerial strategies devoted more resources to solve the mass customization issues, through developing and utilizing new concepts of product family designs and the adoption of the platform-based product development (Jiao et al. 2007). Other OEMs have focused on outsourcing more vehicle components and sub-assemblies to their suppliers; following the observations of Dahmus et al. (2001) that the more product architectures enables late customization. Additionally, a study conducted by the MIT international motor vehicle program; and summarized by Taylor (1992a,b) indicated that “predictions for the future suggest that the role of the
manufacturer will increasingly move towards the coordination of highly involved and integrated suppliers; the role will be one of the integration of the vehicles in a “virtual factory”. It is also possible that suppliers themselves will assume a more dominant role in their relationships with production”. However, the increased level of outsourcing will add serious complications to the after-sales support and will also increase the warranty prices. Additionally, this will have adverse impacts on the quality assurance, the logistics and will further complicate the implementation of a JIT system. Furthermore, the increase in outsourcing levels will require further analysis of the data and the standards interoperability (Ray 2006) between OEMs and suppliers and between the different tier suppliers. Other managerial strategies include; the mergers between the different OEMs, and the introduction of a “Plant specific” production system and a “Company specific” production system. The “Plant specific” production system was pioneered and used by Volvo AB in each production plant. In the Kalmar and Uddevalla plants, Volvo abandoned the mechanically driven assembly line and introduced small groups to assemble a complete vehicle. While, other Volvo production plants in Torslanda employed the traditional assembly lines (Berggren 1997). “Plant specific” production was also evident in Mercedes Benz plant Rastatt I, which followed the model employed by Uddevalla (Juergen 1995). The “Plant specific” production systems did not find great success, which is evident through the closures of both Uddevalla and Kalmar in 90s, and the switch to the more traditional assembly lines in Rastatt I, in 1995. The “Company specific” production system strategy was triggered by the success of the Toyota Production System (TPS) in different countries and under different operating environments. Figure 1 shows a historical presentation of the different “Company specific” production systems, which were introduced starting by the TPS and ending by the Mercedes Production System (MPS). However, most if not all of the “Company specific” production systems were built based on the TPS practices. For example, the Chrysler Operating System (COS) introduced in 1994, was the result of several benchmark studies conducted at Toyota in Japan in 1992 and 1994 (Constanze 2005). This means that the
Fig. 1 The evolution of the “Company specific production systems”, adopted from West (2000)
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J Intell Manuf Table 1 The Mercedes Production System (MPS) standardized tools, adopted from Juergen (1995) Human infrastructure
Standardization
Quality focus and robust processes and products
Just-in-time
Continuous improvement
Leadership (12 tools)
Standardized methods (8 tools)
Production smoothing (2 tools)
Waste elimination (10 tools)
Role clarity (3 tools)
Visual techniques 5 S (2 tools)
Quick issue detection and coordination (8 tools) Robust processes/products and preventive quality assurance (12 tools) Customer focus (internal and external) (4 tools)
Employee involvement and development (6 tools) Work groups organizational structure (9 tools)
“Company specific” production strategy will not offer the OEMs a competitive advantage, merely meeting a benchmark that has since been outdistanced by the founder. To further illustrate this point, Table 1 shows the MPS substructure and operating principles, which in essence is very similar to the TPS. The following section proposes organizational learning as a strategic tool for the automobile industry. Organizational learning in the automotive manufacturing From the above discussion in section “Introduction” and “The implication of globalization”, it is clear that the automotive industry is embarking into new ventures, facing new challenges, and will be operating in a continually changing environment. This sentiment was also suggested by Kenney and Florida (1993); he stated that the future of the automobile industry appears characterized by uncertainty, continuous change and innovation in technology, work practices, and markets. These factors necessitate the learning of new skills and the development of sustainable source of new strategies. Legge (1995) has suggested that the employees might be such a source; he indicated that the human/employee input is a proactive rather than a passive input into the production process. Additionally, Zuboff (1988) and Nonaka (1988) indicated that the automobile production models will continue to evolve with the central focus shifting from the “abstract mass” of systems and structures, to the creative processes associated with the development of the individual and the group within the organization. To utilize human resources as a sustainable resource for the automotive sector, several OEMs have established educational units and systems for the development of their engineering force. In 1990 the Rover group recognized the concept of “learning organization” as a means of survival in the contemporary automotive sector. Rover defined the
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Pull production (4 tools)
Continuous flow processing (6 tools) Customer demand rate (2 tools)
learning organization to involve the development and the integration of a double loop learning system to scan the environment and to develop new strategic approaches that are emergent and participative Hawkins (1994); Morgan (1997). To achieve this, Rover introduced a new business group within the company named the Rover Learning Business (RLB). The double loop learning can be differentiated from a single loop scheme from Argyris and Schoen (1978), where Argyris and Schoen defined a single loop organization as one that modify its course of action based on difference between the planned and the actual outcome, while a double loop organization reviews its basic assumptions and policies that resulted in their strategic actions. In Rover, the RLB board and structure involved not only senior managers from the Rover but also, people from other industries and educational institutions. Additionally, the RLB established strong and clear connections with different academic universities such as Warwick University, London Business School, and Liverpool John Moores University, in addition to the European Council for Learning Organizations (ELCO) (West 2000). The RLB have also utilized the Group Learning Exchange Network (GLEN), to make the developed or acquired knowledge institutionally available. The RLB was dissolved in 1996, following the merger with BMW in the February of 1994. Even though the RLB was successful in providing Rover with highly skilled innovative engineering force, the RLB faced several challenges because the RLB was an internal educational entity within Rover. This resulted in the difficulty that sponsoring such a learning system is too expensive for a company to handle; especially in the case that this learning system does not add direct/immediate contribution to the business case (the RLB cost was estimated to be one million dollar per year (Winnes 2002)). Secondly, the RLB did not offer any external recognition to the participants and was confined to the Rover’s internal culture. Further, the RLB system focused on the technical knowledge without providing the engineers with the managerial and market analysis or “soft” skills.
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Volvo was another OEM that recognized the importance of organizational learning and the need for companies to reinvent their strategies in changing environment. Volvo’s approach to learning as a new strategy was apparent through the different partnerships and relationships established with other OEMs. In 1993 Volvo announced a partnership with Renault, to learn new production concepts at low product volumes. Further, In 1996 Volvo established a joint venture with Mitsubishi in Born, Belgium with the goal of having a collaborative and a creative approach to production and the development of mutually supporting work and learning structures. This manuscript proposes the concept of “learning organization” from a different perspective. That is, learning through a collaborative, integrated relationship with an academic institution. This is proposed to enable a multi-dimensional approach to change and to reduce the perceived instabilities in the contemporary automotive sector (market and competitors) using integrated tools from the technical and the business administrative disciplines. This enables a continuous review of the basic assumptions about markets, supply chain strategies, and even the business case models currently implemented as the norm in the industry. This requires the development of an integrated managerial and engineering understanding of the different market forces and customer demands. The integrated managerial-engineering (technical) skills were further sought in recent National Science Foundation (NSF) surveys and the Journal of Engineering Education published studies (Todd 2001; Restructuring Engineering Education 1995). The concept of “learning organization” was originally coined and defined by Senge (1990) to include five basic pillars; personal mastery, mental models, shared vision, team learning and systems thinking. The proposed education based approach addresses some of these pillars. The proposal focuses on the student individual development through education to aid in his/her personal mastery, while it challenges the current representations of the auto. industry realities thus motivating new mental models that might steer the decision making process in new directions. Next paragraphs further match the proposed model to some of the “learning organization” pillars mainly; structured team work toward a unified vision with accountability, and systems-level thinking. The Clemson University recognized the need for a professional, integrated educational program for the automotive sector. Through the establishment of the Clemson University -International Center for Automotive Research (CU-ICAR), which serves as a integration platform for the different educational disciplines from the college of business, engineering, languages, and the center of entrepreneurship, to provide the combined managerial-technical analysis tools and skills, required in the contemporary automotive sector. Also, this helps in developing an enterprise or system-level perspective in more words; the enterprise horizontal (outside sup-
pliers and collaborators) and vertical branches (the company own departments), technical and non-technical failures and effects are investigated for each of the enterprise planned or current activities. The CU-ICAR established a multi-dimensional educational approach; through a four layered curriculum. The first layer covers the core automotive sector, defining its business and history through four “core courses”; while the second layer consists of different “system courses” that introduce the automotive OEMs activities; starting by vehicle conception through design and development, launch, and finally its marketing. The third layer consists of “technical courses” with specific focus on the manufacturing of vehicles or vehicles’ technologies and physics. The third layer is further supplemented through a certificate program that provides vocational skills in vehicle testing and quality; in addition to an internship program at an automotive enterprise. The fourth and final layer consists of the managerial, leadership, and entrepreneurship education. Furthermore, the context of cultural exposure and education is provided through a cultural and foreign language immersion courses. Figure 2 displays the CU-ICAR multi-layered curriculum structure. Even though the curriculum is multi-layered in nature, each course or component was developed with participation from all faculty members to ensure integration and coherency. Furthermore, the development was structured using Quality Function Deployment (QFD) matrices to match the University’s competence (i.e. colleges and programs) with the needed outcomes. The CU-ICAR curriculum combines the surveyed needs of several automotive OEMs and supplier groups. Additionally, it provides the integrated manufacturing education most needed, to operate effectively in a globally, changing environment, a need indicated in recent NSF workshops (Restructuring Engineering Education 1995). The CU-ICAR approach complements the advantages from some of the previous educational systems such as the RLB, while providing a multi-dimensional education. From the OEMs perspective, outsourcing such continuous learning program will eliminate the need to spend multi-million dollar budgets on internal entities on yearly basis. Moreover, the CU-ICAR educational program is a platform for idea-sharing and collaboration between the different OEMs in a less restrictive environment and with far less investment than found in joint industrial ventures. This collaboration between OEMs and suppliers can also be achieved through collaborative research projects and with scalable scopes. Furthermore, the CU-ICAR educational system focuses on team-based projects and assignments that might aid the students in forming a shared vision and developing a team learning attitude, while formalizing the cross-functional team creation and enforcing accountability.
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Fig. 2 The different layers of the Clemson University automotive engineering program
Summary conclusion Automobile production is the largest manufacturing activity in the world with turnover of trillion of dollars and employment of tens of millions of people. In recent years the automotive industry has undergone many mergers between existing OEMs, changes in consumer demands and the explosive entry of the Asia-pacific region manufacturer into established markets (particularly the US), and the rise of new markets in China, India, Eastern Europe and South America, with new customer demands and cultures. This manuscript presents the specific challenges that have emerged in the contemporary automotive sector due to the globalization of the industry. Furthermore, the text discusses and classifies the traditional strategies employed by the automobiles’ manufacturers to counter recent challenges. The authors indicate the need for new strategies because, traditional strategies are not compatible with the new challenges and are responsive in nature rather than progressive. Further, traditional business strategies do not provide clear competitive advantages. In section “Organizational learning in the automotive manufacturing”, the manuscript discussed the new strategy based on the concept of “learning organizations”, with a focus on the development of proactive human engineering resources. This strategy is sought to provide a sustainable resource for innovation, and to respond to the changes in the operating environment, and serves as the basis for a new automotive engineering curriculum developed at Clemson University. The case of RLB was presented and analyzed, to show the realization of the automotive sector of the “continuous
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learning” as a strategic choice. Lastly, the latest development in education strategies was discussed through the CU-ICAR establishment and its curriculum structure. This manuscript aims to persuade further research in manufacturing education as a future strategy in the automotive sector.
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