In 2009 the Harbour Results’ Tooling Study highlighted the “Differences that Matter” in how automotive OEMs develop low-cost design, engineer and manufacture not only tools and parts, but an entire vehicle. Since then, two major OEMs survived bankruptcy and the third substantially restructured. So what are the differences that matter in the automotive industry today? Are they the same as they were in 2009?
The first attribute in our 2009 tooling study was common vehicle architecture and components. The best OEMs have common platforms, but also standard architecture for vehicles and components. This means a common envelope for designers to engineer the part. This enables tremendous cost savings for the OEM, but also the supply base. All domestic OEMs have made progress commonizing platforms and components. But the next step is common architecture or envelope of design to drive reduced capital investment, common cycle times, efficiency, lower labor, and so on. The impact on total cost is significant.
Tool vendor selection is still critical because the best have a small list of tool suppliers that are the best around the globe, ensuring consistency of engineering, design, manufacturing and overall cost and quality. Most domestic OEMs have new programs to reduce their supply base and certify the best around the globe. Although not complete at all companies, they are headed in the right direction.
Within the selection of tool vendors, technical competency is a critical factor. To get the best leverage, the tool suppliers at the design and engineering table get input on how to develop more effective and efficient designs, not just for manufacturing, but for overall vehicle cost. This is still a gap between the Japanese and domestics. There is not enough value placed on tool supplier capability and their critical role in the early stages of the process.
Payment terms are a larger issue than in the past. OEMs for the most part are not providing progressive payments and are not sure they will ever be able to transition to progressive payments. Additionally, the application across tool suppliers is inconsistent. Some receive progressive payments and others do not.
Low-cost country sourcing is still an open discussion between OEMs and N.A. tool suppliers. Domestic suppliers believe that they manufacture better tools. They understand global sourcing but believe a “build where you consume” strategy is best to maintain a competitive cost. Today, Chinese tool suppliers are aware they are losing their labor advantage, and are working on the best approach to drive out cost. The government recently instituted an across the board wage increase for all Chinese employees, shrinking the labor advantage.
The most significant difference that matters is completeness of data and earlier supplier involvement. OEMs state that they get the tool suppliers’ engaged up front, but the domestics typically have not finished part design, making the tool suppliers opinions inefficient and potentially inaccurate. Multiple data points prove the domestic OEMs are providing data to tool suppliers too early, primarily because they need to meet some internal target. This critical first step drives uncontrollable change at the tool supplier, typically delaying programs and potentially affecting timing.
Domestic OEMs struggle to freeze design. What is the roadblock to meeting timing? When not on time internally, why force dates on Tier One companies and tool suppliers? This needs creative problem solving at each OEM. Until this is resolved, fundamental shifts in behavior and sizable cost reduction for tools cannot occur.
The differences that matter still exist, but they are narrowing, and continuous improvement at the OEMs exists. There is no silver bullet: the common trend where progress is most apparent is within organizations that use a collaborative, creative problem-solving approach. The dedication to overall cost reduction with the input of the supply base will be the agile path to closing the expectation to execution gap.
