Manufacturing flexibility: what constitutes the Holy Grail for some is just business as usual for others

Automotive Industries, Oct, 2003 by Michael Wall

The phrase "if you build it, they well buy it" (to paraphrase the movie line) certainly doesn't apply to everyone in the North American auto industry. With 248 all-new model launches or major revisions coming to the market between 2003 and 2008, there will invariably be a few (likely more than a few) that will fall flat.

The North American light vehicle market remains fairly strong, faded by U.S. sales in particular. The soft pricing environment, however, and influx of attractive, competitive vehicles have increasingly shifted control to the consumer.

Furthermore, there is a clear disparity in profitability between the major automakers in North America. While the Big 3 (GM, Ford, DaimlerChrysler) struggle with profitability as they endeavor to tight-size capacity and cut manufacturing costs, Asian automakers such as Honda, Toyota and Nissan seem to be operating on a different manufacturing plane and are reaping the financial rewards.

Of course, well-received product offerings explain some of the successes; however, the trend of flexible manufacturing has arguably contributed to the achievements and is poised to further elevate those automakers that fully leverage the concept.

Flexibility is more than a buzzword. For most, it encompasses a fundamental change in manufacturing philosophy. In the "good old days" (and for some automakers, that's still today), a company could produce high volumes of one or two vehicles off the same platform in one facility.

For example, Ford produces the Ford Taurus and Mercury Sable in significant volumes at its Chicago, Ill., and Atlanta, Ga., facilities. The vehicles are based upon the same platform and are virtually identical with the exception of some minor badging differences.

All was right with the world for Ford until the competition arrived. As a result of increased competition in the mid-size car segment (particularly from the Honda Accord and Toyota Camry) and a general movement away from cars and into light trucks, Ford is faced with declining demand for its products and significantly underutilized facilities.

While in a utopian world it would be convenient to produce one vehicle (or platform) in a facility, the auto industry dims not operate in a utopian world. The industry is faced with ever changing consumer tastes coupled with a diverse array of competitors with compelling offerings.

As a result, certain manufacturers have made significant progress in creating flexible manufacturing facilities enabling the production of a wide range of vehicles based upon diverse platforms. This allows an automaker to better match production with the prevailing consumer demand.

Nissan is poised to leverage this philosophy in 2004 as it adds production of the well-received Nissan Altima at its Canton, Miss. ,facility. The addition of the vehicle means the facility will produce a sedan (Altima), a minivan (Quest), a full-size pickup (Titan), and two full-size SUVs (Pathfinder Armada & QX56). A diverse cast indeed.

Furthermore, Honda has emerged as a benchmark player in the area of flexible manufacturing. The company has made various investments and plant infrastructure changes, which ensure its major North American production facilities can assemble nearly any vehicle sold in the market.

Not to be outdone, Toyota is overhauling its own facilities to improve flexibility. This flexibility will become even more apparent once the company's San Antonio, Texas, facility comes online in early 2006.

The new facility will allow Toyota to increase production in the popular and profitable full-size pickup segment with an all-new Tundra and other variants such as the Sequoia and LX470 among other full-frame offerings.

A natural extension of the ability to better meet consumer demand is improved capacity utilization. Therefore, it is not surprising that, as evidenced in the adjacent chart, the New Domestics (primarily the aforementioned Nissan, Honda, and Toyota) are expected to maintain fairly high capacity, utilization levels even as additional capacity is added in North America.

Flexible manufacturing facilities have several key characteristics. First, the operation uses programmable robots. In order to manufacture a different vehicle, software is simply reprogrammed, thereby eliminating replacement tooling.

Of the Big 3, GM is perhaps making the most progress in converting its facilities to flexible manufacturing. The company is implementing a process called C-Flex, which uses programmable tools and robots.

GM's mid-size SUV facilities (Oklahoma City, Okla., & Moraine, Ohio) utilize the process as well as the company's new Lansing Grand River operation. The Lansing Grand River assembly plant is noteworthy because it has the ability to produce five different vehicles at a time.

In addition to programmable equipment, flexible vehicle operations employ standardized assembly procedures. The standardized procedures allow for flexibility in running diverse vehicle models through the assembly line. Often offline or outsourced subassembly streamlines general assembly procedures.