Is 'Lean' getting 'Mean' for auto?

Every single practice in the auto business is going through a rethink. At such a crucial time, here is what bigwigs in the industry think is going to be the future of things to come

Jun 05, 2020 SHWETA BHANOT MEHROTRA No Comments

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Yes, of course, and we mean that quite literally. The COVID pandemic has opened doors for auto makers to streamline their supply chains and ready themselves for future mobility to become both, leaner and meaner. The automotive industry is in a transitional phase towards electric mobility and industry experts believe that this is an apt time to review, reflect and redefine supply chain strategies, and get a leaner approach across the product development cycles. They believe that cost and operational efficiencies, data sharing within the supply chain, understanding supply chain risks and more importantly, digitalization across value chain, would play a key role in the entire vehicle lifecycle, while multi-supplier bases closer to home would become the focus of many henceforth. 

"Though at first sight it may seem that the founding principles of 'Lean' are being questioned, we believe that the approach of Lean 2.0 powered by Digital, Automation, and ICT (Information & Communication Technology) will open up wider arenas for our journey of Operational Excellence," says Ganesh Mani S, Director – Production, Hyundai Motor India Ltd.

The COVID situation has prompted industries across sectors to re-look at operational systems and would allow new practices to come to the forefront. "At Hyundai too, we are re-evaluating our operational efficiencies to look for underlying strengths and vulnerabilities, evolve new paradigms for advancement across the entire value chain, and are building working plans for various scenarios," says Mani.

Some of the new practices like Remote Accessing Maintenance, regrouping specific operations among Tier II & III partners, and consolidating interoperability of component moulds across value chain partners, to name just a few, have emerged as possibilities from this exercise, explains Mani, adding that "the ongoing situation also re-emphasises on the need for building the last-mile flexibility within a fixed operating plan."

In a recent report (COVID and the automotive industry), PwC US, mentions that in the current situation, "everything should be on the table for consideration, including changes to vehicle design and materials when possible and as required." The report highlights on the need to have deeper and careful planning, rather than merely identifying alternate suppliers. 

Raju Ketkale, Deputy Managing Director, Toyota Kirloskar Motor, says, "To assure product quality and performance sourcing, good supplier base is both, critical and vital. We cannot just alter the same due to transient external factors or challenges. The entire sourcing process takes about 12 to 18 months, depending on the type of parts and components. This involves design, equipment and tooling preparation as well as proto making."

Ketkale says that ‘lean’ manufacturing is the need of the hour for the entire manufacturing industry, and supporting the supplier partners tide through the current disruption. "Basically, future changes will come through regulation compliance and appropriate technologies to fulfill compliance requirements and customer expectations as well."

"Leading MNCs are likely to ensure sufficient regional manufacturing capability closer to home in addition to continuing to look at ways to exploit factor cost advantages in a global supply chain. This will make multi-national corporations more robust, however, at the detriment of either profits or higher consumer prices," says, Dr. Wilfried G Aulbur, Senior Partner, Roland Berger and ex-Mercedes Benz India, MD and CEO.

Explaining that lean manufacturing, off-shoring and outsourcing has been successful in helping to drive down cost and inefficiencies in the automotive industry for decades, Justin Cox, Director, Global Production Forecasts, LMC Automotive, says, "OEMs will be analysing the impacts of the recent crisis and looking at ways to reduce their vulnerabilities."

Cox adds that this vulnerability "may indeed result in changes to sourcing, whether in the form of adopting multiple suppliers or favouring those with shorter supply routes. It may simply highlight that a better understanding supply-chain risk is required and that this could lead to increased collaboration and data sharing within the supply-base." 

Reiterating the same, Ammar Master, Senior Manager, Asia-Pacific Vehicle Forecasts, LMC Automotive, says, "One change that we might envisage is manufacturers sourcing from suppliers that are closer to their manufacturing bases, or to have more of their key suppliers invest in facilities that are near the OEM plants in order to minimise supply chain disruptions. This then allows them to continue to keep a lean inventory of components." Moreover, it also provides opportunity for the Indian components industry to increase their business with OEMs that may be looking to improve local sourcing. 

"We might also see some consolidation in the supplier industry, as vendors with complementary products and services look to forge partnerships in order to reduce their costs and improve efficiencies," says Master.

"Supply chain redesign will primarily happen at geography de-risking, single source de-risking and risk associated with cost arbitrage," says V G Ramakrishnan, Founding Partner & MD, Avanteum Advisors LLP. He adds that "design changes and other usual industry challenges are definite factors in a linear progression."  

"With the industry likely to go through an energy transformation, there would be a profound change in the supply chain. One needs to think of the big picture issue. In the normal course, we would have altered supply chain in the ICE technology to fit the future mobility, which today is attributed to post COVID supply chain transformation," explains Ramakrishnan. 

He also highlights how local sourcing of alloy wheels, tyres and other mechanical auto components could be areas that Indian companies can look at for quick gains. Meanwhile, dependency of imports for electronics components is expected to continue in the short term. 

The Government of India's recent schemes to promote electronics manufacturing in India under the Aatma Nirbhar Bharat model of Prime Minister, Narendra Modi, is expected to significantly benefit the automotive sector as interoperability and futuristic mobility fades the sector specific lines, making technology fluid, across various industries. 

As the automotive industry shifts gear to carefully reignite the engine of growth and stability, Ketkale adds that the future technology trend will be towards CASE - Connected, Autonomous, Shared and Electrified. "In electrification, the first step will be to enhance the efficiency of IC Engine (Euro VI etc), Electrification of IC engine like Hybrid Electric Vehicles, Battery Electric Vehicles and Hydrogen Fuel Cell Vehicles. Technology adoption and promotion will happen based on country specific conditions, and government policy and direction."


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