Automotive Station

Project Management for the Automotive Industry

 

Project Management can be seen in many different industries: software, construction, films, automotive, etc. In the automotive industry the need for a more efficient way of doing business has become absolutely essential. It is said that “projectized” organizations are approximately forty times more efficient than “functional” organizations. This chapter will look more in depth into the history of project management in this industry and also delve into the organizational structure that a firm in this industry might want to utilize. Computer-aided Design is briefly discussed as well as a glimpse into the future of the automobile.

History

Project management did not become a major part of the Automotive Industry until the Modern Era of the automobile, which defines the industry that has existed for the past 25 years. However, this shift to a more efficient projectized organizational structure had to be made because rising fuel costs following the OPEC crisis and increased competition from new firms entering the industry required companies to increase their efficiency to reduce costs.  One of the first automotive manufacturers to introduce this practice was Toyota, which likely owes much of their current success to switching to a projectized structure earlier than most automotive manufacturers.  Following the Second World War, General Douglas MacArthur was given the responsibility for governing post-war Japan, with him he brought W. Edwards Deming and Joseph Juran (two quality control experts of the time) from the US to teach the Japanese people the fundamentals of quality control. The official story of how what is known as “the Toyota Production System” came to be has not been confirmed.  It is also possible that the strict army training that the Japanese received was enough to increase their efficiency.  Yet, many still recognize “Piggly-Wiggly’s just-in-time distribution system” for the credit.

Masaaki Imai, inspired by the book “Total Quality Control” by Armand Feigenbaum (1951), created a new business philosophy in Japan known as Kaizen, which can be defined as “a means of continuing improvement in personal life, home life, social life, and working life. These practices would later evolve into many others, including Total Quality Management (TQM), Six Sigma, and Twelve Sigma.

 

Organizational Structure

The most prevalent of all the projectized organizational structures closely mirrors the Matrix structure where projects are listed top to bottom and functional areas listed from left to right.  Employees under a Matrix structure report to both a functional manager and a project manager.  Kentaro Nobeoka and Michael A. Cusamano from MIT’s Sloan School of Management further studied the structure of automotive companies to find that they do not use this exact structure, yet in fact they use a slight variation.  In their research paper entitled “Multi-project Management: Stratagy and Organization in Automobile Product Development” they found that the basic Matrix model was much too “function-orientated”, that is to say that there was a lack of “interdependency” between project teams. Interdependency is necessary in the automotive industry because a vehicle has many parts that all must work together, so it becomes necessary to have many project teams collaborate to create the finished product.

Nobeoka and Cusamano interviewed Japanese firms and found a variation of the matrix structure known as the “Differentiated Matrix”

In this version of the Matrix Structure one can see that the functional departments have been further broken down into individual parts of the automobile (Body, Chassis, etc) and also that some of these functional areas share resources across many project teams.  This increased “interdependency” was found to lower the cost and time needed for the overall project; however, it was also apparent that such a structure requires not only a very strong project manager to ensure “inter-project coordination”, but also a very strong functional manager to ensure “cross-functional coordination” as well.

Computer-aided Design (CAD)

In 1982, a company known as Autodesk, Inc. released AutoCAD, and although it was only 2d at the time, it still revolutionized the automotive industry. It was the first Computer-aided Design software to run on a home PC (rather than a large mainframe computer).The use of this software by automotive firms has allowed them to optimize time, cost and scope of their projects during the design phase.

Future of the Automotive Industry

Automotive firms in the economic climate that we currently live in have no choice but to choose a more efficient projectized way of planning, designing and manufacturing their products.  Soaring fuel prices have caused many consumers to reconsider if they should even be driving a car; therefore, automotive firms now face competition from the public transportation sector of the economy.  China and India, the worlds two largest countries by population, have now entered the market and are producing cars at a fraction the cost that Japanese or American firms must pay.  Also, global climate change has had a huge effect on this industry, as firms try to make their vehicles more fuel efficient or even make use of new technologies.  On the forefront of electric automobiles is the Tesla Roadster manufactured by Tesla Motors of San Carlos, California, U.S.A.  Not only is this car 100% electric, but it is also fast enough and stylized enough to be considered a sports car.  Tesla Motors uses project teams and has many project management career opportunities.

The following indicative list gives some of the functions that a firm’s logistics management system is supposed to perform4:1. Customer Service: All the activities that are done to keep the existing customers satisfied come under the gamut of customer service.2. Demand Forecasting: This process includes various statistical measures that enable the firm to estimate the demand in the future, which inturn helps in proper demand management. 3. Documentation Flow: This process covers the movement of the paperwork that accompanies the movement of physical product.4. Interplant Movements: This is only applicable to those firms where production process is accomplished in more than one plant, requiring the movement of semi-finished products from one plant to another.5. Inventory Management: Inventory management requires a cost effective maintenance of stocks of goods and materials.6. Order Processing: Order processing starts with the receipt of an order from a customer and ends when the order is ready for packaging. 7. Packaging: Packaging is done mainly to protect the product when it is being transported from the source to the destination. It can also be used for promotional purposes.8. Parts and Service Support: This covers the whole after-sales service process.9. Plant and Warehouse Site Selection: This function is carried to determine where the plant and the warehouse are going to be located, keeping cost-benefit analysis in mind.10. Production Scheduling: This function’s task is to balance demand for products with the existing plant capacity and availability of inputs.11. Purchasing: This is a very important function in the logistics management as the quality of inputs that are purchased determines the quality of the finished product. Vendor selection is an important sub-process of this function. 12. Returned Products: There are many categories of returned products. A few are subjects of product recalls, meaning that a safety defect or hazard has been discovered. E.g. laptop battery recall by Dell. These products are removed from the shelves, and both retailers and consumers attempt to return them to the manufacturer. This is a form of reverse distribution, with goods moving in the opposite direction of their usual flow.13. Salvage Scrap Disposal: How a firm takes care of its waste material is covered in this function. The firm might recycle its waste or sell the waste to various processors who specialize in recycling it.14. Traffic Management: All the transport requirements needed to move a firm’s freight is known as traffic management.15. Warehouse and Distribution Centre Management: This logistics activity involves management of the locations where the firm’s inventories are stored.

 

 

 

The automotive industry manufactured components fall under six broad product categories according to Automotive Component Manufactures association (ACMA). These are given in table below.

 

 

Table : Classification of Automotive Components according to ACMA

 

Product Group

Products

Share* (%)

 

Engine Parts

Pistons, Piston Rings, Engine Valves, Carburetors, Fuel Injection Systems

23

 

Electrical Parts

Starter Motors and Generators

7

 

Drive Transmission and Steering Parts

Gears, Clutches, Axles

14

 

Suspension and Braking Parts

Brakes, Leaf Springs, Shock Absorbers

11

 

Equipment

Headlights, Dashboard Instruments

8

 

Others

Sheet Metal Parts, Pressure Die Castings, Tyre Tube Valves and Cores

36

 

 

Technology And Manufacturing Process

The body panel and engine constitute a major portion of the total cost of car manufacture. A typical cost structure for car is as given below.

Parts/assembly

% of total cost

Glass

5

Brakes/wheels/tyres

6

Interiors

7

Transmission system

7

Ignition/exhaust system

8

Steering/suspension

9

Comfort fittings

11

Engine

16

Body

18

Others

13

 

Car manufacturing is basically assembly of components procured from ancillaries or auto component manufacturers. Nearly 80% of auto components are outsourced by the car manufacturers. This helps in reducing the capital cost needed to setup a car manufacturing plant.

 

With the new entrants planning to start manufacturing facilities with a small capacity base in the country, the role of auto component players will substantially become important over the years.

 

Product/ Services:

 

Areas of shop Coverage:

 

Services:

GAUTAM KOPPALA,

POME AUTHOR