• Investments for internal manufacturing or external purchasing (suppliers’
contribution);
• Other eventual costs derived from fixed costs.
‘‘In-sourcing’’ or ‘‘out-sourcing’’ policies involve not only product components but research and development services, equipment construction, maintenance, logistics, information technologies and other accessory services. The criteria fol- lowed are almost the same as above and must take into consideration economic advantages obtainable over long periods (from 2 to 4 years), involving specialized companies operating on a large market scale (system and service providers).
‘‘Make-or-buy’’ choices influence a company’s structure and assets, capital invested and economic profitability. For these reasons, an accurate cost/benefit analysis for a medium/long term period is needed, making clear that incoherent decisions could highly compromise the level of quality and competitiveness of the final product.
The ‘‘verticalization degree’’ of a company’s production activities is rep- resented by this ratio: total cost of internal manufacturing processes/total cost of sale products plant free.
Beginning in the second half of the 1980s, carmaker strategies have been oriented towards progressively reducing the verticalization degree. Conversely, companies have widened the range of products offered, increasing their presence on international markets.
Production activities verticalization in plants manufacturing cars and light commercial vehicles has a range of a 25 % minimum up to a 30 % maximum, including the manufacturing of powertrain systems (autonomous or inco maker- ship) and excluding components produced by companies that are part of the same industrial group but operate independently on the market. Industrial vehicle plants normally have a minor verticalization degree.
Actually, in Europe, the more vertical carmaker plants are those of Volkswa- gen, Mercedes, P.S.A. and Auto Vaz, while the less vertical plants belong to BMW, Volvo, Saab, Jaguar and Porsche. North American and Japanese plants generally have a minor verticalization degree in spite of the example of those in Europe.
1.4.1 Equipment Level and the Defining of Technological Solutions
In relation to ‘‘making’’ processes, we will deal with the applied criteria in terms of strategic setting.
For each product family, the necessary production levels (maximum quantity for a year and a day) and the level of flexibility for the production mix-models are defined, based on information coming from the product range plan and sales forecasts.
The ‘‘product range plan’’ refers initially to basic models, powertrain and space frame families. Information is then refined into specific vehicle or space frame versions and, finally, the optional contents are considered, and a commitment is made to those important for the industrial structures (for example: automatic gears, integral powertrain systems…). Starting from the ‘‘product range plan’’, the
‘‘strategic component plan’’ is derived, considering the synergies for similar components and sub-systems, and referring to capital intensive modules, for what medium-long term planning is required. The ‘‘product range plan’’ reports the industrial life cycle of the models divided by engine versions, both the basics and then the derived versions, and it also indicates the date (year and month) of commercial launch for the new products in substitution of the old ones.
Equipment level definition (production capacity and the principal features of production systems) derives from the above ‘‘product range plan’’ and from the production capacity required. For this reason, marketing activities are very
Product Range Plan
Strategical Marketing Plan
Product Technical Set-Up
Product Designing
Experimental Tests
Process Technical Set-Up
Manufacturing Engineering
Equipment Development
Operative Plans Product Sales Manufacturing
1
3
2 4
5
SIMULTANEUS ENGINEERING
DESIGN REVIEW
PRODUCT /PROCESS VALIDATION
ACTIVITIES FLOWS DECISION MAKING KEY POINTS
Macrophases sequence Informative flows for test and validation Principal interactions
Project Development Expenses autorization (pre-allocation) Cost Target and investment Profitability test
Production Systems Development Expenses Autorization Product Final decision
Sale Price defining 1
2 3 4 5
Fig. 1.5 Product initiatives setting and controlling process
important; they give origin to the ‘‘strategic marketing plan’’, which refers to a long period of time (for the automotive industry, the period is normally ten years) in which market shares are indicated year by year and model by model.
In relation to the production capacities required and to the best economic solutions for the processes, a ‘‘manufacturing engineering plan’’ is derived, from which equipment and specific tools choices are made.
This argument will be addressed inChap. 3. It is important to understand that technological equipment solutions depend on manufacturing scale and on the flexibility required by the production of mixed-models, based on the ‘‘strategic marketing plan’’.
To exemplify these concepts, the following ‘‘Productive Scale/Technological Solution Correlation Diagram’’, shown in Fig.1.6, is relative to the thin sheet metal part printing process for bodies:
Quantities to be produced in a year and their relative medium quantities a day are reported on the ‘‘x’’ axle, on a logarithmic scale, while the manufacturing costs per unit are reported on the ‘‘y’’ axle, in relation to the single technological solutions taken into account and reported at the bottom of the page.
Each intersection between two curves defines the areas of better economic convenience.
Similar diagrams can be designed for other manufacturing technologies, for example:
SOLUTION 1:transfer multistation press, dies completely mechanized for high cicle times.
SOLUTION 2: press with automathic linking systems, dies completely mechanized for medium cicle times.
SOLUTION 3: press with manual linking systems, dies simplified for low cicle times.
SOLUTION 4: press by water forming system, water dies and laser refining systems, manual loading and unloading.
(CVU)1
(CVU)1 1
CTU = CVU + FF/QP -CVU
4 BE ²/3
6,4 78 420
(CVU)2 (CVU)3 (CVU)4
BE ½ BE ¾
2 3
4
103 104 105 106 107
SOL . 3 SOL . 2 SOL . 1
MANUFACTURING COST FOR UNIT
is the variable cost for unit
-FFis the financial requirment needed for specific investments (actual value + fixed costs of structures due to manufacturing process)
-BEare the break even points for the transformation cost obtainable with the single technological alternative solutions (see beneath)
QPis the quantity of products required during the entire industrial life cicle of the model
MEDIUM DAILY PRODUCTION SCALE SOL . 4
QP
Fig. 1.6 Productive scale technological solution correlation diagram
– for final assembly operations, completely manual assembly stations for little series production are followed by automatic operation cells for medium series production, and then full automatic systems for big series production;
– for mechanical machining, by increase in production scale, ‘‘stand alone’’
machine tools are followed by multi-operational ‘‘machining centres’’ and then
‘‘transfer lines’’ for high cycle times;
– for foundry processes, by increase in production scale, casting manual stations are followed by automatic cells and then completely automatic lines for high cycle times.
In searching for the best technological solutions, in addition to considering the productive scale, it is also important to analyse specific features for each product, and identify common and distinctive aspects for each part, in relation to the transformation processes. According to the availability of flexible and convertible lines, considering also the production volumes and the mix delivered, the best and most effective solutions for high productivity and flexibility are chosen.
Criteria for choosing a location for manufacturing activities
In deciding the most convenient place for the location of production capacities, alternative solutions should be considered, based on the following questions:
(1) Is it convenient to locate the production activity in an existing production site, with an established level of technological know-how and manpower availability?
(2) Are there existing production sites with sufficient area and basic equipment to allow for a significant reduction in the initial investment as compared to starting from scratch?
(3) In the case of new solutions, where are the best conditions to be found in terms of scouting human resources and a supply of energy and material at the lowest industrial cost?
(4) Among available geographical locations, which is the more convenient from the point of view of material and component supply (also considering custom fees)?
(5) Which is the more convenient geographical solution for dispatching the final product to the markets?
(6) In case it is convenient to divide production activities between two or more sites, what solutions make for more effective operative flexibility?
Along with the above, it is also important to consider these other geographical considerations:
• Legal conditions and fiscal policies favourable for industrial development;
• Existing infrastructure for the delivery of goods, supply of water and energy, and process material exhaustion;
• Ease in recovering necessary manpower and the possibility of extending working times, for optimal use of production systems;
• Probability of obtaining quick authorization from the local legal entities for building and general equipment construction;
• Availability of potential funds for employment development in specific areas.
The location of manufacturing activities for the same product and planned volumes can also influence the automation level processes. In fact, the higher the manufacturing cost, the more convenient it is to parse out the automation level.
Criteria for analysis are the same as shown above in the diagrams correlating volumes/technologies, considering the right cost parameters in relation to indus- trial site choice.
Based on the above items, it is clear that decisions concerning equipment level and manufacturing locations require a complex decision-making process that must be supported by specific economic investigations.
Finally, we resume the ultimate purpose for the strategic planning of set- ting technologies and the location of manufacturing activities:
• setting production capacities according to medium/long term marketing plan;
• assuring necessary qualitative and quantitative levels for products, at minimum industrial cost, including direct material, its transformation and assembly, final tests and their dispatching;
• assuring delivering lead times and service levels useful for the commercial and after-market networks;
• restricting the company’s financial resources, considering cooperation for
‘‘co-makership’’ and local public fund opportunities.