issue 1 - Roland Berger

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p industry report oems will reduce in-house production from 35 percent today to 20 percent in 2015 (From left to right) Tony Brown (Ford), Wendelin Wiedeking (Porsche), and Bill Fluharty (Johnson Controls): “The traditional role of car manufacturers is changing.” Toyota’s US branch chalked up higher profits than General Motors, Ford and Daimler- Chrysler (its three biggest competitors) combined, despite the fact that Toyota builds fewer cars in the US than its domestic competitors. According to Dyer and Hatch, the key to the company’s success has been a consistent exchange of knowledge between the group and its suppliers. “Toyota provides its US partners with a tremendous amount of expertise and technology geared toward increasing productivity, particularly with respect to manufacturing processes specific to the production of its own vehicles,” concluded the researchers. Alliances with suppliers and learning teams are the two pillars on which Toyota’s prominence rests. In particular, Toyota is more physically present than its competitors. For example, the company sent its in-house consultants to suppliers an average of 13 days a year during the research period, which spanned 1990 to 1996. In this way not only did the various parties reduce the number of production errors by a seventh, but they also decreased the inventory level of COMPARED WITH ITS COMPETITORS, TOYOTA IS CONSIDERABLY MORE PRESENT AT ITS SUPPLIERS’ FACILITIES Toyota-specific parts by a third. At the same time, supplier productivity in the manufacture of these components increased by a hefty 36 percent. In comparison, General Motors, Ford and DaimlerChrysler each invested only six consultant-days per year and performed worse in all key areas, even though their parts are manufactured in the same plants as Toyota’s. “We would not be where we are today if we had not collaborated with Toyota,” says George Hommel, former chairman of Continental Metal Specialty Inc., a supplier based in Stanton, Kentucky. He adds, “We owe 75 to 80 percent of the insight we gained from our customers to Toyota.” This observation is all the more surprising because most top managers still preach that it takes a strong negotiating position to achieve low unit prices. For example, Bernd Bohr, head of motor vehicle engineering at Robert Bosch GmbH, which, like Porsche, is also based in Stuttgart, cannot echo Hommel’s praise. “Although car manufacturers worldwide are touting partner relations with suppliers, the proposition varies widely depending on region and brand.” Guenter Baumann, chief operating officer of J. Eberspaecher GmbH & Co. KG in Esslingen, Germany, is even more critical. He believes that because of sinking margins, the increased load ultimately needs to be fairly remunerated. However, auto industry 42 think: act
automotive industry report f Tremendous potential savings Changes in the automobile industry’s structure continue. According to a study by Roland Berger Strategy Consultants titled “Automotive Engineering 2010,” only manufacturers who optimize research and development will remain competitive. researcher Dudenhoeffer does not consider these types of complaints constructive. “Growth under the constraints of cost pressure requires intelligent concepts, and only those suppliers who create real customer benefits will be the champions of tomorrow,” he says. That process is impressively demonstrated by Johnson Controls Inc., an automobile supplier based in Milwaukee, Wisconsin. Its managers knew from publicly available studies that people increasingly pay attention to “inner values” when purchasing a car. They also knew that the number of older car buyers is on the rise, and that they have different requirements from younger drivers in terms of both equipment and functions. Yet many questions remained unanswered. What are the concrete needs of the various target groups? Are they dreaming of unconventional interiors? Do they love the newest technology? Are they demanding more space for their luggage and sports equipment? Bill Fluharty, vice president of industrial design and market research at Johnson Controls, North America, surveyed more than 7,500 people online. The study’s results showed that above all people want nice, user-friendly products. “This information helped us to develop, together with the car manufacturers, innovative solutions that exactly satisfied the specific preferences of their customers,” he says. This strategy enabled the interior-equipment company to climb to number seven on the list of the leading 50 US manufacturing companies. According to the trade magazine Industrial Week, no other company in the industry performs better. Even its competitors praise its strategy. In July, Visteon Corporation, which is based in Dearborn, Michigan, even went so far as to appoint Fluharty’s former colleague Michael F. Johnston as CEO to steer the former Ford subsidiary to new shores. F A Efficiency and innovation in automotive engineering E A 0ptimizing the global r&d network International auto manufacturers are increasingly moving their research facilities to regional expertise centers and utilizing resources worldwide as required. B use of modular concepts If OEMs were to increase to 10 percent the proportion of parts that could be installed in multiple models, development costs would drop by around 5 percent. C technology and electronics development The standardization of electronic systems has substantial cost advantages. Currently, 50 percent of all warranty costs are caused by defective software and electronics. That is reason enough to increase expertise in electronics development. Product strategy Optimizing the global R&D network Personnel planning and training Concept development Design Prototype Pilot E integrating suppliers Suppliers are playing an increasingly significant role in the auto industry. By 2015, their share of value relating to development will have far surpassed that of the car manufacturers (see chart at right). Use of modular concepts Integrating suppliers F personnel planning 30% OEMs should strengthen their manpower capabilities, especially in the areas of electronics research and development. 70% Beginning 2010–2015, a shortage of qualified engineers will become apparent. 1990 30 B Launch/ production Planning of vehicle platform Planning of vehicle types within the platform Computer-aided engineering Integration of vehicle and platform Integration of suppliers Simulation of production Production setup Accelerated testing Changeover mgmt. Launch mgmt. Value proposition in billion US dollars/ percentage increase +4.6% +7.2% +3.1% Technology and electronics development D C D optimization/ product planning Manufacturers who use the best process tools currently available for their planning and development save 10 to 20 percent in related costs. 55 40% 60% Optimization of product development 75 +2.5% Supplier value creation +4.8% +0.5% 55% Manufacturer value creation 45% 2002 2015 Source: Roland Berger Strategy Consultants
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