Automotive Supply Industry

1. Automotive Supply Industry Customer Quality ‘Going the Extra Mile’

2. Knibb Gormezano • KGP is a specialist automotive consultancy focussing on: • Analysis and forecasting of technology based markets • Investment appraisal and commercial due diligence • Lean approaches to all business processes

3. KGP operates World-wide Recent Projects in: • Malaysia • Indonesia • Philippines • China • India • Russia • N. America • Korea • W.& E.Europe

4. Multi-Segment • OE • Aftermarket • Components • Distribution • Logistics • Design • Manufacture

5. This Subject Two Relevant Briefing papers: • The Use of Customer Needs Assessment and Satisfaction Benchmarking in the Automotive Supply Industry • Dysfunctional New Product Development – the nightmare that is a daily problem for many companies

6. Global Drivers

7. Key Industry Drivers • Emissions control • Fuel economy (CO2) • Safety } Technology Forcing

8. Key Industry Drivers • Emissions control • Fuel economy (CO2) • Safety • Price/cost downs • Globalisation • Global Growth } Technology Forcing } Competition & Economics

9. World Vehicle Sales

10. World Vehicle Production • Production shift will be more pronounced than sales • Levels of VM vertical integration declining as more is outsourced • Global sourcing trend continues • Outsourcing growth includes specialist engineering and scientific services (FEA, CFD, combustion research & development etc.)

11. Patterns of world investment (95-15)

12. Products & Technologies

13. UP Feature content Safety & environmental standards Performance & Fuel efficiency Inherent cost Global sourcing Number of model variants (off the same platform) Product & Sector Summary

14. UP Feature content Safety & environmental standards Performance & Fuel efficiency Inherent cost Global sourcing Number of model variants (off the same platform) DOWN Real cost Lead times (3 day car) Number of OEM customers Number of Tier One suppliers Number of base platforms Volumes per model variant Product & Sector Summary

15. Key Changes • CO2 Agreement • Diesels • GDI / HCCI • Light weight materials • Transmission developments • Mild & Full Hybrids • Regenerative Braking

16. Key Changes • Energy demands • 42 volt • Integrated starter / alternator • High power density devices • Electronic power management

17. Key Changes • ELV directive • 1st stage 2007 (85%) • Hazardous waste designation • De-pollution stipulations • Licensed premises • 2nd stage 2015 (95%) • 2m+ tonnes of shredder residue with no current technology available

18. Key Changes Meeting road death targets • Passive systems will peak • Active Systems take up the future challenge • Adaptive Cruise Control • Brake-by-wire • Steer-by-wire • Electronic Stability Systems • Lane Guidance • Driver Alertness

19. Aftermarket

20. Service intervals and parts life increasing • Increased sophistication • Means raising knowledge standards • Independent sector growing • helped by Block Exemption changes • Off-shore supplies increasing • Users shopping around

21. What are the Implications for Supply Chains

22. Implications for Supply Chains • The traditional competitive race will be unsustainable. • Supplier selection and development based solely on QCD factors is not enough. • Supplier partnerships needs to become a reality, not a slogan. • A shift from supplier development to supply chain development is required.

23. QCD Focus Shortcomings • QCD are the fundamental and most basic quantifications of customer requirements. • QCD focus undervalues many important elements of the supplier’s service. • QCD focus, together with competitive tendering can distort customer – supplier relationships. • It can lead to simplistic attitudes on collaboration, performance and waste.

24. Successive Quality Initiatives- Are they working? Quality Circles – TQM – Taguchi/DOE - Kaizen – Six Sigma….. • You have probably been through many of these waves of activity. • Maybe you can point to successful projects. But • How many of you can say that you have been really successful in cascading the discipline into your suppliers? • Can you honestly say that they have have made your company a leader not just a survivor?

25. Our Experience Indicates • Most automotive suppliers focus improvement activities on manufacturing. • Kaizen based improvement programmes predominate in-house and at suppliers. • Programmes such as Accelerate and SMMT IF et al have been beneficial, but there is a growing realisation that they do not go far enough.

26. Our Experience Indicates • Most automotive system and component suppliers focus improvement activities on manufacturing operations. • Kaizen based improvement programmes predominate in-house and at suppliers. • Programmes such as Accelerate and SMMT IF et al have been beneficial, but there is a growing realisation that they are narrow in focus, and do not go far enough. • Not enough attention is given to the customer.

27. So how well do we listen to customers

28. Customer Satisfaction – How do you know? • In a survey conducted by KGP nearly half of all suppliers questioned had not used any form of systematic customer satisfaction measurement (CSM) in the last 3 years • However, 80% of users found the process useful and rewarding

29. Only one company in our survey used customer satisfaction techniques to gain competitor comparisons or benchmark performance

30. Aspects of C S Product DimensionsInterface Dimensions

31. Aspects of C S Product DimensionsInterface Dimensions Performance Credibility Features Competence Reliability Security Conformity Access Durability Communication Serviceability Courtesy Aesthetics Reliability Quality Responsiveness Cost / Value Understanding the Customer

32. Aspects of C S Product DimensionsInterface Dimensions Performance Credibility Features Competence Reliability Security Conformity Access Durability Communication Serviceability Courtesy Aesthetics Reliability Quality Responsiveness Cost / Value Understanding the Customer

33. J D Power CS reports • Their research is with the end customer not your customer. • Customers are asked very detailed questions about the performance of systems within the cars they own. The answers are linked to known suppliers for those parts. • This is a growing business.

34. The (Customer Driven) Lean Business Approach

35. What Sort of Model are We Talking About? World Class companies are known to use four key approaches: • Policy Deployment • Cross-Functional Teams • Lean Operating Systems • Supply Chain Integration

36. Lean is a more powerful and lasting solution than Kaizen and other quality based tools • Quality Initiatives as applied it in the West, have been mostly: • Manufacturing operations centred • Carried out at middle and lower functional levels • Lean Thinking ensures that: • Senior Management have a vital role in the process • There is a recognition of the big problem of waste between functions and companies • There are practical methodologies and tools to use on non-manufacturing problems

37. Lean Supply Chain Approach • Deployment of Strategy & Policy throughout the Supply Chain • Creating a Common Sense of Purpose • Strengthening Trust & Relationships • Developing & Learning Together • Eliminating Waste Between & Inside Companies

38. The Ideal Business Model The traditional watchmaker – personally responsible for: • Securing customer commissions • Design • Development • Production • Installation • After care

39. The Ideal Business Model The traditional watchmaker – personally responsible for: • Securing customer commissions • Design • Development • Production • Installation • After care Get close to mirroring that with a seamless process

40. A Decade On - Where Might We Be (Europe)? • Competitiveness thru higher value added products • Raising the game on technology • Higher proportion of NPD effort • Lean business second nature • Cross-functional effectiveness • Waste removal freaks • At all levels!

41. The Survivors • Extreme dedication to customer needs • ‘Total’ Cost & Quality – throughout the process map • Emphasis on the relationship factors • Awareness of and proactive attitude towards J D Power style supplier satisfaction analysis