Ron Harbour • President • Harbour Consulting
Evolution of the Manufacturer / Supplier Continuum Presented by Ron Harbour May 17, 2007 The Definition of an OEM
The Harbour Enterprise Model Global Strategic Footprint Quality Products and Improved Profitability Product Teardown and Analysis Leadership Training Lean Product & Process Design Manufacturing Process Optimization Assembly Time Reduction Greenfield Plant Design & Development Global Competitive Benchmarking Product Quality Improvement Strategic Sourcing & Supplier Optimization Manufacturing Assessments & Transformations Part Count and Piece Cost Optimization
2006 Harbour Report™HPV Trend Percent Change from 2005 -0.2% 6.0% 3.3% -1.5% -5.4% 3.3% GM excludes medium duty. Honda, Nissan and Toyota data includes partial reporting of North American plants.
Introduction • What is an automotive company? • What function does an automaker perform? • What does a manufacturer produce (core business)?
(Continued) • Where is the line between an automaker and a supplier (or is there one anymore)? • What forces are most influential anymore… market economics or labor unions? • How will the transition define the future?
The Plant of Yester-Year Ford Rouge Complex
Progress Phase 1 Phase 2 Phase 3 Phase 4 1950’s to 1980’s Early to mid 1900’s 1980’s to Present The Future High Vertical Integration Modern Sourcing Definition Outsourcing Rush, Core Re-Defined No Accepted Norm Includes foundries, steel mills, rubber plants, textiles, upholstery, wiring, chassis components Vehicle assembly, metal stamping, engine, transmission, and select key components • Marginal outsourcing of services, components (seats, IPs, door trim, chassis, bumpers) • Sequencing centers • “Hallowing out” of engineering • Lean logistics • Supplier ownership & responsibility for body, paint, chassis • Supplier work in OEM plants • Pay on production • Major modules delivered
Assembly Support ServicesSourcing Trends GM / Chrysler / Ford New Domestics
Engine Sourcing Trends * 3 C’s 5 C’s *U.S. Owned Companies
Assembly Plant Capacity (1990 – 2008) Annual North American production grew 28% from 12.5 million vehicles in 1990 to 16 million in 2006. Net
Component / Service Sourcing The “Core Business” Strategy Part Cost Logistics, Containers What influences the sourcing decision? Labor Cost and Availability Available Capital Control of Overall Quality of Key Components Product and/or Process Technology
Why the Major Shift? • Growing gap between supplier and OEM wages • Limited funds for R&D • Growing technical complexity of product • Lack of flexibility to manage lower volumes
What Does the Future Hold? • Demand for more flexibility • Less manufacturing process / performance differentiation • Spread of capital required for new product development