I came across an old article a couple of weeks back about Toyotas history. The story about the masters of lean management, very efficient automotive production and at the side some figures from their (at that time) last year. Toyota sold 8.5 million cars that year. On average only 5 have been the same – same engine, same doors, same colour, same seats, ect. Now that means that Toyota has produced approx. 1.7 million individual cars that year. Crazy.
I continued my research a bit and stayed in the car manufacturing sector. I just looked up Mercedes. Big German Brand, again very efficient car makers. And here I found similar figures. What do you reckon, how many different covers can you choose for your Mercedes seat? Good guess but not enough – the answer is more than 140 different types. Amazing.
And now lets think about the actual production process. Once a customer decides to get a red car with yellow leather seats the production process gets initiated and a couple of weeks later your customised car gets delivered. How car manufacturers deal with all this special wishes?
The key element is a supply chain which works over several tiers. Basically you have to include your suppliers and of corse your suppliers suppliers and their suppliers. They all have to be informed about the request, than the machinery kicks in and parts / products get delivered. If we stay with our leather example – basically even the farmer should know when the next leather supply is needed from his cows.
The second important element is material flow. In many factories production is based on JIT (just in time) deliveries. For example BMW orders their cockpits from a supplier and allows them two days notice. The BMW supplier then tells his supplier that they’ve just sold model X or Z to BMW and that they now have to restock / reproduce certain elements. The even faster production method is JIS (just in sequence). For example Ford asks its suppliers to deliver doors for a Ford Fiesta with a two hours notice. Of course that means the supplier manufactures literately next door and can deliver in short sequences.
Now we discussed customised cars and their supply chain but does it work in other sectors as well? Certainly, because if you think of any furniture like a couch or kitchen, quite often you can choose fabric, colour and design. So those products are customised for you. Delivery takes longer but you’ll get your blue sofa as you like it. Customers requesting more and more individual styles. They want to decide which parts go to their car, how the new flat / house should look like and what colour the fridge will have. In that sense we lose the classical mass production.
Manufacturers do face a main problem: they have to be very flexible with their production. In the industry one of the flying phrases at the moment is “one batch production”. It just means that companies don’t produce millions of products cheap in Asia and ship them around the world. They have to focus on their main clients and produce near the area where the demand occurs. So areas like Birmingham, UK or Dusseldorf, Germany will become very interesting because lots of people / demand are around.
The companies will lose out on the economy of scale compared to mass production and the labour costs are much higher in Europe than in Asia but you could compensate this with automotive production. Robots, integrated supply chains, RFID technology all the nice things industry 4.0 is aiming at. The second big benefit is a new way of logistics. So far businesses mainly focused on the suppliers but now they even have to improve the demand side of the business. This allows them to change delivery strategies and reduce empty trucks after delivery.
In one of our next blogs we’ll talk about the effects of 3d printing and recycling schemes for future manufacturing.