Lean: a Key Success Factor in Automobile Industry

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Lean: A key success factor in automobile industry

Abstract

The concept of Lean Manufacturing is well known and is being applied widely in industry. As industry moves forward in deploying lean concepts, it is important to recognize the potential benefit for attacking waste in above-the-shop-floor processes. While the benefits are significant in production, this typically constitutes less than 30 percent of the total cost of a product. Furthermore, the distributed, collaborative nature of manufacturing today depends extensively on efficient and cost-effective information processes among sites and throughout supply chains.

Keywords: Distributed, Lean, total cost, supply chains

Introduction

The complexity a manufacturing system has to cope with is largely determined by the customer and his or her articulated needs and requirements. In the past, vehicle manufacturers offered the market unique models that had a small variety of attributes and long life cycles. Manufacturing organizations must now provide a high product variety to remain competitive as they are facing increasing customer sophistication and fast- paced technological developments in the industry. On the one hand organizations can foreclose market entry and maintain or increase their market share, increase their prices and serve customer needs better by closely matching customer preferences and offered products.

Costs involved in automotive industry

The auto manufacturing industry is considered to be highly capital and labor intensive. The major Costs for producing and selling automobiles include: •Labor - While machines and robots are playing a greater role in manufacturing vehicles, there are still substantial labor costs in designing and engineering automobiles. •Materials - Everything from steel, aluminum, dashboards, seats, tires, etc. are purchased from suppliers. •Advertising - Each year automakers spend billions on print and broadcast advertising; furthermore, they spent large amounts of money on market research to anticipate consumer trends and preferences. The auto market is thought to be made primarily of automakers, but auto parts makes up another lucrative sector of the market. The major areas of auto parts manufacturing are: •Original Equipment Manufacturers (OEMs) - The big auto manufacturers do produce some of their own parts, but they can't produce every part and component that goes into a new vehicle. Companies in this industry manufacture everything from door handles to seats. •Replacement Parts Production and Distribution - These are the parts that are replaced after the purchase of a vehicle. Air filters, oil filers and replacement lights are examples of products from this area of the sector. •Rubber Fabrication - This includes everything from tires, hoses, belts, etc. [1] Lean Manufacturing

The origins of lean manufacturing dates back to Henry Ford and his first production line in 1913 (Lean Enterprise Institute 2007). Ford was the first person to consider the flow of production. In today’s teachings though, Ford’s first assembly line is used as an example of mass production that goes contrary to many lean principles. The problems are not with the flow or even inventories, which he was able to turn entire inventories every few days. The problems were with his ability to make only one variety of cars. There has been so much focus on lean teachings in recent years that some additional facets, tools, or methodologies have been pulled under the lean umbrella with the Toyota Production System based on how each company takes the lessons and applies them. Regardless of the name or the origins of the methodology, lean enterprise is all about serving the customer more efficiently and effectively. Impacts on the bottom line are in elimination of wastes and growth of customer base. “Lean” Focuses on abolishing or reducing wastage or “muda” the Japanese word for waste and on maximizing or fully utilizing...
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