THE MERCEDES-BENZ US International plant in Vance, Alabama, is one of the world's leading practitioners of modular auto assembly.
Mercedes uses 65 suppliers for the operation. Fewer than 20 deliver most of the vehicle's content. Delphi Automotive delivers a cockpit assembled from 35 sub-suppliers.
Bob Birch, vice president of purchasing and logistics, spoke with Lindsay Chappell of Automotive News Europe, prior to the announcement that Daimler-Benz would merge with Chrysler.
The Alabama factory is on the leading edge of using fewer suppliers and modular assembly. Can you offer any advice to others considering this approach?
The modular system has really worked well for us. It's not a new idea. Most manufacturers now receive their seats as a complete module, delivered in sequence with production. All we really did was expand on that by doing most of the car in modules.
It turned out to work extremely well for us with very few problems. Occasionally something might go wrong, and instead of broadcasting over the computer network to our suppliers, we'll resort to faxes. We get creative and we get by, and it's invisible to the plant.
So you would recommend it?
To be competitive, yes, the industry is going to have to go modular and deliver in sequence. It reduces your inventory dramatically. The capital investment is less because you can build the plant smaller.
That's going to be the trend in the future: smaller assembly plants that don't need big warehouses. If you continue to build plants full of warehouses and material, you're going to have a hard time competing.
How much of the vehicle is delivered in sequence?
It's a large percentage of the vehicle: the cockpit, the headlights, headliners and seats. We will have 18 sequential suppliers this year.
We're phasing in a few new ones, like the bumpers from Rehau. Until now, the bumpers were all the same color. Axles are starting to come in sequence. Before now, we only had one axle. But with the new V-8 engine, we have a second axle with different brakes. There will be other variations.
It's important to start up the broadcast and in-sequence delivery before you take on a lot of part variations. It gives the suppliers some practice before you start using multiple parts.
Does it also requires a closer working relationship with suppliers?
When it comes to the in-sequence delivery, we have to deal more frequently with them on a day-to-day basis. They have to know what we're doing. We can't just decide on our own to work an hour's overtime, for example.
We've got 18 suppliers out there moving in lockstep with us. If we work an hour's overtime, they have to be able to do the same. So it requires a lot of communication.
You're working a fair amount of overtime now, aren't you?
We run 10 hours a day, five days a week. No Saturdays. Our employees preferred not to work weekends.
We hit the 270-vehicle-a-day mark that our original plan called for, and now we've moved on to 300 a day. We're expanding and adding people. But for now, we're doing it through overtime.
How secure are your suppliers? Can you look for better deals?
We have eight-year contracts with our suppliers, and that pretty much ties our hands against shopping around. If we have a problem on quality or cost, our contract allows us to look for other suppliers. But we haven't done that in any case.
You've said in the past that you want Tier 1 companies to manage Tier 2 supplier issues. Are you there yet?
We've made a lot of progress in that direction over the past year, especially in the area of quality.
Just about every (Tier 1) supplier we have is now responsible for the quality of its own suppliers. Some of the smaller ones aren't as well staffed yet, and they've asked for a little assistance. Delphi, our cockpit supplier, has completely taken over on its Tier 2 quality issues.
With the exception of a few parts, the Tier 1 modular suppliers are already selecting their own subcomponents. In the case of the Delphi cockpit, we kept a hand in choosing the audio system and the heating and air conditioning system.
How tight is the schedule for your in-sequence suppliers?
When we begin production, the supplier has 169 minutes to deliver its part to the line. We broadcast the order to the supplier when the vehicle comes out of the paint plant. The vehicles go into what we call our 'selectivity bank,' where we can choose from several vehicles. So if there's a breakdown in the paint plant, it can have a very dramatic effect on the schedule.
In some cases, we've had to send messages to change a delivery. We're continually talking back and forth. Some of this was pretty new for the industry, and we didn't have the answers. We found the solutions just by working together with the suppliers.
All of your North American suppliers have the ISO-9000 quality assurance certification. What's the next step for them?
There is a German system, similar to the ISO system, called VDA 6.1. Our question is whether to also require VDA certification.
