Supplier relationships and quality in the automotive industry have
seen significant evolution since its inception just over 120 years ago.
While vast production improvements were initially offered by Henry
Ford's introduction of the moving assembly line in 1913, the
automotive industry has seen its greatest strides in the past 20-25
years in its quality, engineering, efficiency, and customer
satisfaction. As anyone involved with Supply Chain Management or
Production Engineering is well aware, a significant percentage of this
can be attributed to Toyota and its lean production-based TPS business
model. Toyota's TPS concepts brought drastic improvements not only
to the automotive production world, but to the entire industrial world
as we know it today (Womack, et al, 2007).
2. TPS QUALITY AND EFFICIENCY IMPROVEMENTS THROUGH PROPER USE OF
As is already well-known in the supply chain industry, an item that
is absolutely critical for effective supply chain management in the
automotive industry is forming an efficient supplier
relationship--especially at the first tier (or tier-1) level. This
relationship, dubbed "keiretsu" by the TPS model, specifies
that virtually all company information and knowledge is shared (sans
proprietary or sensitive information), so both parties can have a full
understanding of what is necessary to get the job done, and what the
exact costs and benefits are. With mutual interests at stake, this
results in a very efficient relationship--oftentimes innovative and
technologically groundbreaking--along with commensurate improvements in
quality and profitability (Liker and Choi, 2004).
At the heart of the TPS is a production system that has become
known as Just-In-Time (JIT). The JIT method states that instead of
inefficiently carrying large amounts of inventory, a manufacturer relies
on their supply chain to have the proper components available for
production at the right time, at the right place, and of course in the
right quantity and at the right quality (Drake, 2006). This heavy
reliance upon suppliers is what makes the TPS work, but definitely
requires a secure and trusting relationship with suppliers in the supply
chain--and the suppliers' suppliers as well (Womack, et al, 2007).
The TPS theory (or lean production theory as it is often now
called) relies on a pull-type production system, where only the parts
that are needed are present, (plus a minimal number of additional units
for the approaching work in progress). As previously mentioned, this
type of lean production assembly line is quite efficient, but enormously
depends on suppliers to have the right part at the right place, at the
right time (Wisner, et al, 2009).
3. A NEW AND ENVIRONMENTALLY FRIENDLY APPLICATION OF JIT/MODULAR
This paper presents the next major evolutionary step for the
automotive production model: Further dependence upon suppliers, more
efficient production methods, and improved product quality, while at the
same time satisfying our constantly-escalating environmental regulations
and responsibilities. This cannot be accomplished very easily (if at
all) with the current methods in place--hence a new approach must be
developed to achieve all of these goals.
While the preceding parameters may seem insurmountable at the
present time, the implementation of the modular vehicle construction
principles outlined here can easily satisfy these requirements, along
with improvements in other important areas as well, some of which
include customer satisfaction and transportation costs. Reduction of
holding costs, labor repair time and costs, and production delivery time
can also be significantly reduced with the application of this
4. SPECIALIZED ASSEMBLY FACILITIES AND JIT LOCAL SUPPLIERS
Further dependence on JIT suppliers is crucial for the
implementation of our production model and for improved efficiencies in
automotive production. An excellent example of capitalizing on JIT
supplier relationships is Hyundai Manufacturing's Montgomery,
Alabama plant (HMMA) which was put into operation in 2005. The floor
plan layout of this plant has taken JIT and automotive supplier
relationships to what may be the highest level possible, given current
assembly line production methods.
Rather than physically consolidating all departments in a central
location under one roof, the facility was designed with a campus-type
layout. This layout enabled additional dock doors to be placed around
the exterior of the main factory building, (130 total), allowing for
more efficient receipt and processing of deliveries from the surrounding
departments, as well as from their local tier-1 suppliers. These dock
doors along the perimeter of the building allow deliveries to be as
physically close to the point of installation as possible, significantly
increasing efficiency by reducing handling time--sometimes down to only
a matter of seconds--before the part is installed on a vehicle. During
normal production, one trailer arrives to the facility on the average of
every 60 seconds, and virtually all processing and unloading duties are
automated and sequenced. With this operation, lead time for orders
placed to the local departments or suppliers is approximately two hours,
at which time all relevant product details, options, and specifications
are provided, including delivery time and location (Kalson, 2008).
HMMA's reliance upon its suppliers is not only of utmost
importance, but also demonstrates the fact that this level of
time-critical dependence is indeed realistic and achievable. For a
supplier to provide this level of performance, efficiency, and quality,
it obviously requires a serious commitment from both the supplier and
automotive manufacturer. Commitment levels and delivery performance of
this caliber can provide the building blocks for our modular vehicle
5. MODULAR VEHICLE DESIGN AND CONSTRUCTION VERSUS CURRENT METHODS
The majority of today's vehicles are of a unibody-type
construction, meaning that a main body structure is the basis for all
parts or subassemblies to be attached to--this type of structure is
conducive to an assembly-line production method. Body-on-frame vehicles
are similar, adding a frame for the body to sit on. Nonetheless, the
production method for either type of vehicle is the same: a main body or
frame travels down an assembly line, while parts or groups of parts are
added along the way. In recent years, the consolidation of certain
portions of the vehicle have made the work on the actual assembly line
much easier, such as complete instrument panel assemblies, complete
subframe assemblies with engines already installed, complete door
assemblies, etc. However, it is at this point where the limits of this
production method materializes: Parts or assemblies are still required
to be delivered to a certain place at a certain time to be attached onto
a vehicle traveling down the assembly line at a factory.
Modularly designed and constructed vehicles can be assembled in
less space and with significantly less manpower and equipment in compare
with current methods. With this reduction of necessary resources, it
accommodates the use of smaller assembly locations, with the possibility
of placing them closer to demand locations, and thereby reducing
transportation time and costs. The increased reliance upon suppliers for
larger portions of the vehicles also reduces complexity and allows for
easier, quicker assembly.
6. POTENTIAL DRAWBACKS OF MODULAR PRODUCTION
While the danger of proprietary method or information loss is
always present, (and even more so with larger and larger portions of the
vehicle being sublet to outside suppliers), the TPS keiretsu model again
specifies that trust and an open information exchange between the
supplier and customer is of utmost importance if an effective long-term
relationship is to be maintained. This has proven to work for Toyota
(and those who choose to fully implement the TPS model), while the
detrimental opposite also being proven true by manufacturers that have
developed a paranoid and vicious treatment with their suppliers, and the
accompanying downward spiral in quality and supplier relations (Liker
and Choi, 2004).
The actual installation of delivered components by the supplier can
pose problems with consistency and final quality, and should be avoided
unless absolutely necessary. This allows for tighter regulation and
quality control by manufacturer personnel, and contributes to brand
integrity as well (Marinin & Davis, 02).
7. GREEN MODULAR PRODUCTION ATTRIBUTES VERSUS CURRENT METHODS
The use of recyclable modules, using eco-friendly materials and
reusable or recertifiable cores, can bring a welcome change to the
existing automotive production supply chain. Currently, there is
virtually no reverse logistic implementation in place, with only a
minimal amount of reuse or recycling performed on decommissioned or
discarded vehicles, (virtually never by the vehicle manufacturers), with
the majority of the remains being relegated to third party scrap metal
Present reverse logistic efforts are minimal at best, with only a
handful of components being regularly recycled in this way (alternators,
starters, power steering pumps, brake calipers, steering racks, and
water pumps). Sadly, the recycling of these components is not for the
overall benefit of the environment, but simply for third party vendors
to save costs while marketing remanufactured items (at a lower retail
price than new replacements from the OEM dealership). There is little to
no involvement from the OEMs with this segment of the recycling and
remanufacturing market at this time, and in fact, in an almost
irresponsible manner, they vehemently advise against purchasing non-OEM
third party parts for vehicle repairs.
As mentioned previously, by utilizing modular subassemblies to
construct vehicles that have the ability to be reused or recycled, a
significant improvement in the automotive industry's attempts at
being environmentally friendly could be achieved. In the event that a
vehicle is damaged and determined to be un-repairable, a credit could be
issued to the customer based upon the value of remaining reusable or
recyclable parts. Depending on the subassembly or part, it could be
refurbished and recertified for subfactory use in the construction of a
new vehicle, sent back to one of the first tier suppliers for reuse,
(picked up at the same time that modular assemblies are being delivered,
for the ultimate in transport efficiency), or packaged for resale as a
service part for the dealership.
This recycling operation could be implemented at the same grounds
as the sub-factory, further reducing lead time for processing and reuse
of the parts. The vehicles destined for recycling could also be
transported from the dealerships to the sub-factory/recycling facilities
on the return trip from delivery of new subassemblies, resulting in
little to no transportation and handling cost.
8. HEWLETT PACKARD'S GREEN LOGISTICS PRINTER MODEL
HP's complete commitment to their printer division's
green business model is evidence that environmentally friendly
production and distribution methods can work quite well--even when
designed into an existing product. Not only did HP revise their product
design to accommodate an effective reverse logistics supply chain
program, they realized increased profits and efficiency by doing so.
HP's recyclable ink cartridge and electronics recycling program has
revolutionized the printer industry, and has become the benchmark for
all others to follow (Rose, et al, 2009). A similar renaissance in the
automotive industry is long overdue, especially when one considers the
size and scope of how significantly it affects our both everyday lives
and the environment in which we all live.
9. INDUSTRY ASSIMILATION TO PULL-TYPE SYSTEM AND IMPROVED DELIVERY
With this modular concept implemented, only certain modules or
sections of vehicles would be shipped from the manufacturer (rather than
completed vehicles). For the ultimate efficiency in supply chain, a
complete elimination of the main assembly factory is possible, with
modular subassemblies being shipped from first tier suppliers directly
to specially equipped regional assembly sub-facilities (or even directly
to dealerships). These sub-factories or dealerships would then perform
the final mating together of the components (which would be produced and
delivered with various customer-chosen options), similar to the way that
Dell computers are optioned and assembled (Gunasekaran and Ngai, 2005).
This would convert the entire automotive manufacturing process into an
efficient and lean pull-type system, as opposed to the current pull and
then heavy push system. Note that ironically, the automotive production
process has evolved to become a very well-oiled pull system, but once
the product is completed, it is still subject to bottlenecking and
overstock with a very slow and inefficient push system.
With this system, a further reduction of dealer inventory could be
realized, while the customer delivery lead time could be reduced (from
months) to a matter of days for a custom ordered and optioned vehicle
thereby increasing customer satisfaction by providing more agile
production and delivery capabilities (Christopher and Towill, 2000).
This would substantially reduce transportation and holding costs, with
commensurate increases in profits and efficiency. An evolution such as
this would bring the world of automotive production to the next level of
lean production implementation (Holweg and Pil, 2004).
10. ELIMINATION OF PRIMARY ASSEMBLY FACTORY
A significant benefit would be that the modular pieces could be
assembled with less machinery or specialized equipment than current
factories require, and would reduce the space and cost necessary for
assembly. Dealerships could conceivably be the location where vehicles
If modules were to be delivered directly to dealerships from first
tier suppliers, (which would result in the shortest and most efficient
supply chain), the current concept and function of automotive
dealerships would need to be reformulated. In addition to retail sales
and repair service, additional areas, equipment, and personnel would be
necessary to perform the final assembly of the vehicle from the
delivered modular components. This assembly would not be terribly
difficult or beyond current capabilities, and would simply require more
space and the addition of assembly equipment. It would also vertically
integrate the sales, ordering, and production processes into one
location, significantly improving the supply chain efficiency.
An accompanying increase in quality level would also result, due to
easier testing and quality monitoring of the modular subassemblies by
each supplier. In addition, troubleshooting during or after assembly
would be much easier--worst case scenarios would simply have complete
modules removed and replaced, and the defective part returned to the
supplier on their departing supply delivery truck.
The major shift with this process would obviously be to have more
dependence on the supply chain's first tier suppliers (and their
subsequent dependence on second and third tier suppliers), as they would
be doing a larger part of the production of the vehicle, rather than
simply supplying parts or minor subassemblies as they do now.
11. REDUCTION OF TRANSPORTATION COSTS AND TRANSIT DAMAGE
When a vehicle is currently shipped from the factory, it must be
loaded onto a special vehicle carrier, and great care must be taken to
avoid (or at least minimize) any damage. This is in many ways
inefficient and expensive, and still requires after-transport damage
repairs on a certain percentage of vehicles. By default, vehicles are
shipped to regional staging or pre-delivery preparation facilities
(located in various areas around the country) before they are sent to
dealerships, so they are transported a minimum of two times from the
factory--again, very inefficient and expensive. With modular production,
these preparation facilities could be converted to handle both staging
and preparation (their current function), as well as sub-factory duties.
With modular pieces of the vehicles or certain subassemblies
palletized and stacked safely, a significantly more efficient use of
transport space would be realized, and would virtually eliminate any
damage during transport that would require repair or touch-up. Cosmetic
external or fragile pieces could be sourced locally to each sub-factory,
or safely packed and shipped in bulk (in a manner which would still be
considerably more efficient than shipping one complete assembled
vehicle). These space-efficient transportation methods would
substantially lower costs for both transportation and holding (Coyle, et
Currently, a version of this portion of our modular model is used
in Chrysler's Campo Largo, Brazil plant, at which complete rolling
chassis assemblies are delivered to the assembly line by supplier Dana
Corporation (Marinin and Davis, 2002).
12. MODULAR CONSTRUCTION PARAMETERS CAPITALIZING ON BUS TECHNOLOGY
Aside from the engine and engine compartment, there are minimal
items--fluid, electrical, or mechanical that are required to traverse
from one area of the vehicle to another. Other than electrical items
(which will be addressed below), the only major items that typically
traverse to the rear of the vehicle are: two brake fluid lines, exhaust
pipe, fuel line(s), driveshaft (if rear-wheel-drive or all-wheel-drive),
and various small diameter vacuum lines or hoses. Each of these can
easily be sectioned or designed in a way to be easily disconnected at
any point along their length. Most other items are generally
"local," meaning they are installed in their specific area in
the vehicle, and only operate in that same area.
Virtually all electronic items in a vehicle generally require a
power and ground, and have some sort of signal input and/or output. With
today's advanced vehicles housing numerous convenience and
technology items throughout the vehicle, this quickly adds up to very
extensive wire harnessing around the vehicle. And while simple plugs to
separate each modular section would still allow modular vehicle design
to be convenient and practical, even this is an archaic picture of
things: with the advent and increasing use of bus technology, a simple
power and ground with a single bus line going to each section of the
vehicle will soon be the norm, which makes the modular concept even more
Of course, this production method would require a vehicle to be
designed in such a manner that it could be modularly assembled, which
would require a top-to-bottom change in current design and engineering.
As previously mentioned, the move toward modular bus-type data control
systems in today's vehicles (CAN, Flex-Ray, Lin, and MOST Bus
systems, for example) makes them very conducive to modular design and
assembly--even more so if they were battery- or electric-powered
(Sangiovanni-Vincentelli and Di Natale, 2007).
The current smart car is probably the best example of a vehicle
that could have easily been constructed using this modular technology.
The size, vehicle styling, and relative simplicity are conducive to the
requirements necessary to construct a vehicle in such a manner. Of
course, larger, more complex vehicles could be produced as well with
this method, but would obviously need to be designed as such from
13. AFTER-SALE BENEFITS--SERVICEABILITY AND IMPROVED CUSTOMER
An additional byproduct of a vehicle produced in this way would be
easier after-sale repair in the case of damage or collision, as each
section of the vehicle could be replaced if necessary, with no trace of
the previous damage. This is oftentimes not possible with the current
unibody-type construction that most vehicles currently employ. Lower
labor costs would result due to quicker repair times, and a sizable
credit could be issued to the customer for portions of the exchanged
modular section that are not damaged, or are reusable or recyclable.
This could significantly lower not only repair time, but repair costs as
well, resulting in a further increase in customer satisfaction (Cohen,
et al, 2000).
Our modularization methods presented here are key to creating a
green and sustainable automotive production industry. This ideology
should already be at the forefront of every automotive
manufacturer's current and ongoing agendas, and can be realized
with the implementation of the ideas presented in this paper. At the
same time, quality improvements, increases in profits, and customer
satisfaction can also be achieved by simple virtue of adopting these
We are conducting further research on the actual design of the
vehicles themselves for this application, as well as logistical modeling
of the subfactories, dealerships, and transportation costs and issues.
Analysis of production improvement efficiencies (over current methods)
and various levels of modularization and supplier dependence are also
A forward-thinking manufacturer, if able to capitalize on this
modular concept, could achieve a significant first-to-market advantage,
not only in marketing, but with initiating new recycling credit programs
or more stringent environmental programs with the government, thereby
raising industry standards for all to follow. Environmental sensitivity
is an important factor for any industry today, especially when looking
towards the future. This modular concept, with its complete business
process reengineering, substantial gains in environmentally friendly
production over current levels, along with its significant improvements
in efficiency and quality, would truly begin the next generation of
automotive production methods.
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K. Todd Matsubara, California State University, Dominguez Hills,
Hamid Pourmohammadi, California State University, Dominguez Hills,
K. Todd Matsubara, undergraduate student, California State
University Dominguez Hills. Currently manager/owner of TM Engineering,
designing, producing, and distributing high performance automotive
components. Previous position as Product/System Engineer, OEM Division
at Clarion Corporation of America (tier-1 automotive OEM supplier), and
technical/contributing editor for Primedia, HachetteFilipacchi Media,
and Curtco Publishing.
Dr. Hamid Pourmohammadi, earned his Ph.D. in Industrial and Systems
Engineering from University of Southern California. Currently, he is an
assistant professor of Operations Management at the California State
University, Dominguez Hill. His primary research area is on Reverse
Logistics, Supply Chain Management, and Optimization.