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Managing product variety in automobile assembly: the importance of the sequencing point.

Article Excerpt
In recent years, globalization of markets and increased consumer sophistication have led to an increase in the variety of products that customers demand and a consequent increase in the number of variants of any given product line that a manufacturer must supply. At the same time, an increasing number of companies have pushed the task of accommodating product variety up the supply chain to suppliers. This makes it increasingly difficult to understand where and how variety is accommodated. Based on our study of the automotive industry, we introduce the concept of a sequencing point, which we define as where component variants are placed in the sequence that final assembly requires. We discuss the implications of alternative sequencing-point-location strategy on management of product variety. For each strategy, we discuss associated trade-offs and provide short case studies.

Key words: manufacturing strategy; production sequencing.

History: This paper was refereed.

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Internationalization of markets and increased consumer sophistication have led to an increase in the variety of products demanded. The Dell example has clearly demonstrated that it is possible to deliver a high degree of customization at low cost. Together with the Internet, which provides the customer interface, this has put the pressure on companies to respond to the increased variety that customers demand (Swaminathan and Tayur 2003, Swaminathan and Lee 2003).

Analyzing the automobile industry, MacDuffie et al. (1996) argue that companies can no longer stay profitable by producing large volumes of a standardized product. Clark and Fujimoto (1991) state that changes in energy prices and trade structures, internationalization of markets, and increased consumer sophistication are sources for increasing product variety. The average annual sales per passenger-car model dropped by 34 percent in the United States from 1973 to 1989, while model count increased from 84 to 142 during this period (Womack et al. 1990). Abernathy and Wayne (1974) warn manufacturers that consistently choosing a "focus" strategy will result in a reduced ability to respond to market changes.

There are different ways to address this increase in variety. One popular approach is to shift part of the responsibility of accommodating product variety upstream to suppliers. For example, Delphi Automotive Systems delivers the entire driver's cockpit to DaimlerChrysler's Tuscalousa plant in Alabama. The automotive industry pioneered the earliest form of such a strategy, often called just-in-time (JIT) delivery, where parts were delivered at the right time to the manufacturing facility. The main benefit of such an approach was a reduction in parts inventory at the manufacturing facility. For example, recently it has been cited often that Dell mandates frequent JIT deliveries from its major suppliers, forcing them to set up dedicated stock-holding centers near Dell's facility. Academic researchers (Inman and Bulfin 1991, White et al. 1999, Drexl and Kimms 2001) have studied JIT systems. These studies have addressed implementation of JIT principles at the plant, their overall effect on manufacturing performance, and the optimization of product scheduling. The next advancement in terms of manufacturer-supplier shipment coordination that the auto industry adopted relates to JIT sequenced delivery. This takes JIT to the next level wherein the delivery of parts is synchronized with the production schedule of the manufacturer. Therefore, when a manufacturer such as General Motors is assembling a blue car on the line, the corresponding parts such as blue seats and blue fenders are on the feeding-parts line. Such a sequenced JIT system leads to lower inventory (due to JIT delivery) and greater efficiency (in manufacturing time and overhead) because it minimizes the additional work related to sorting parts and matching them to the production schedule. Although there is abundant literature on sequencing and scheduling at a machine or plant level (Graves 1981, Baker 1995), the concept of sequenced delivery across supply chain partners has been explored less often.

Our aim in this paper is to introduce alternative strategies that enable JIT sequenced delivery, and to discuss the role of the location where the components are sequenced within stages of a supply chain. For example, Johnson Control delivers a variety of seats in the correct sequence to Toyota's Georgetown plant. In an alternative arrangement, Prince, a subsidiary of Johnson Control, delivers door panels to DaimlerChrysler's Sterling Heights Assembly Plant (SHAP). Prince manufactures the door panels in Holland, Michigan and delivers them to an intermediate sequencing center, which is fairly close to SHAP. It keeps approximately two days of inventory and brings the door panels into the required sequence before delivering them to SHAP every hour. In another arrangement, the truck line at New United Motor Manufacturing Inc. (NUMMI) in Fremont, California, which General Motors and Toyota jointly own, receives 47 different wire harnesses from one of its suppliers for the various configurations of its trucks. At a staging area within the NUMMI plant, the wire harnesses are then put in the correct sequence to match the final build sequence of the vehicles. In yet another stage of the process, the assembly-line operator at workstation "brake build" on NUMMI's final truck assembly line selects various parts from a large rack displaying seven different part numbers. Based on the brake-pedal code, which is displayed on a specification sheet (manifest) attached to the hood of each vehicle, the operator picks two, three, or four parts according to the codes listed on the manifest.

One result of these possible arrangements is that it is no longer valid to talk exclusively about the level of variety that a final assembly plant accommodates. Rather, one has to look at the whole supply chain, starting at the lowest tier of suppliers and continuing up to final assembly of a product, to get valid pictures of how the assembly plant accommodates variety. At the same time, where variety is accommodated has important implications on flexibility and overall cost effectiveness. In this context, we introduce the concept of a...

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