The Covid-19 crisis: The greater need for cost control in the auto cutting room
The Covid-19 pandemic has upended the automotive industry and disrupted production lines worldwide, causing simultaneous supply and demand shocks. Experts have predicted a sharp drop in consumer demand for vehicles over the following months. According to Boston Consulting Group’s automotive team and Center for Macroeconomics, sales will most likely decline by 14-22% for the Chinese, American, and European markets in 2020. However, some specialists still think that new business opportunities might arise because of it, such as increased demand for small, affordable, and ‘low maintenance’ cars like Citroen Ami, for example, for consumers who would feel safer with private transportation.
During this period of uncertainty, what remains clear is that OEM and Tier 1 vehicle interior manufacturers need to shift their focus from boosting sales to achieving operational excellence and reducing costs in the cutting room to protect their profit margins. Streamlining their cutting processes will also help them gain the needed agility and flexibility to jump on short-term trends by producing a wider variety of seat upholstery and covers in small batches. In turn, operational leaders are working on speeding up and improving their decision-making processes to adapt their manufacturing strategies to this new normal for their worldwide production sites.
This entails gaining more data visibility to identify where in the production process they can cut costs, streamline and eliminate to help their company become more profitable and agile. These are big challenges, given the current business context, as they are often limited by time, budget constraints, and lack of technology to gather and store data, especially since this crisis has heightened geographical barriers. They also have to keep in mind the way their operators work now, for example, more shifts and fewer personnel, and increased division of labor due to social-distancing rules. We have identified four best practices that can help operational leaders achieve operational excellence with the help of data and advanced technology, even in the most difficult business environment.
How to achieve operational excellence in the most challenging of times
Build resilience in your cutting room
Most automotive companies have developed value chains and production lines for efficiency, profitability and speed, but not for resilience and flexibility that are much needed in today’s context. Globalization has made supply chains more complex, and geographically extensive, which is mostly beneficial, but this exposes them to more risks and shocks. Today, in such a volatile world, supply chain disruption is happening regularly and companies can no longer afford to adopt a wait-and-see approach.
It is hence important to build resilience in your cutting room by implementing a technological infrastructure based on forecasting and predictive methods. According to an article by McKinsey & Company, enterprises should invest in technology for ‘running scenarios, monitoring many layers of supplier networks, accelerating response times, and even changing the economics of production’. In the cutting room, having a dashboard or system in place that can predict machine breakdowns and provide data on cutting performances is helpful. With this information, operators can ensure that their cutting equipment are running at full speed in urgent situations where there are sudden peaks in workload.
Flexibility and agility are also forms of resilience. If you can adapt your cutting processes quickly to unexpected changes in the marketplace, you will be able to cushion your company against external shocks. You can create products in small batches that really meet the consumers’ needs at that specific point in time. For example, some factories in Asia can create two different items on the same assembly line. In a matter of minutes, Honda’s manufacturing plant in Ohio can transition from manufacturing the Civic, a passenger car, to a CR-V, a sports vehicle.
Identify and close performance gaps with better data visibility for all production sites across the world
The COVID-19 pandemic has merely exposed, not created, the weaknesses of each business that have already existed before. What is badly needed right now is tighter collaboration across all geographical borders to close these gaps. Now with social distancing rules, quarantines and curfews, you will need more data visibility than ever before into your cutting processes to monitor your production sites remotely. This way, you can see if there are lapses in productivity and compare performances between different production sites to set benchmarks. You can also identify the most costly and wasteful (i.e. the least productive) parts of the process and see if you want to eliminate or change them.
By having a centralized platform such as a dashboard to gather and share data coming from all cutting stages, you can keep track of your machine performance and availability, using indicators such as cutting time, speed, scrap rate, production quantities and total amount of interrupted time. With a permanent monitoring system, you can also establish KPIs for your team with the help of actionable data and identify areas of improvement. You can detect machine behavior anomalies and get real-time alerts on critical errors, manufacturing operations, product quality, delivery, safety and costs.
Get connected and convert your data into actionable insights
This pandemic has affected companies with labor-intensive value chains the most, as they require the physical presence of their personnel on site in order to be fully operational. It is essential for vehicle interior suppliers to automate their cutting processes as much as possible, to be able to function remotely, minimize the risk of human errors, lighten the workload of each operator while reducing fabric waste.
Forward-thinking manufacturers are digitizing their plants by investing in Industry 4.0 technology such as cloud-based analytics to get a better overview of each production stage, allowing them to continuously improve their processes. Doing the same for your cutting room will allow you to examine past failed products together with your team members, adjust your current processes and as a result, reduce your scrap rate. It is also important for all operators and plant managers to get remote access to this data, as not everyone can be on site at the same time. Cutting room operators should be able to control their blades effectively with a software so that they can cut more intricate shapes and patterns for their seats, and minimize fabric waste.
Two of the biggest and most common barriers to productivity are unplanned machine downtime and heavy maintenance needs. Preventive maintenance is also an important factor in increasing cutting time, and keeping daily operations safe and productive. You can improve machine availability by using equipment that comes with intelligent built-in monitoring systems that are connected to your vendor’s technical support teams. That way, you can plan regular cycles of checkups and schedule on-site visits ahead of time.
Prioritize your teams’ wellbeing and safety
Times may be tough, but you still need to maintain a safe and conducive work environment for your operators and plant managers according to new social distancing and hygiene rules. When they feel secure in their working environment, they tend to work faster and better. Industry 4.0 technology enables companies to drastically improve workplace safety and put the operator at the heart of the production process. It is hence essential to constantly upgrade your cutters and include automated safety features such as built-in sensors around the blade area, light beam radars, embedded cameras to detect blade wear and tear. They should also comply with international safety standards. The equipment itself should be intuitive – to facilitate the onboarding process for newcomers and the everyday working life for operators. Improving the training process via quick wins and a step-by-step method will help your operators gain confidence and ample knowledge to use the machines with ease. Having a system to store data on your previous cutting jobs can help you transfer knowledge to new staff.
There are four main factors of a high scrap rate: low quality raw materials, equipment, poor operating practices, and cumbersome production setup processes. First and foremost, it is important to provide your cutting room personnel with easy-to-use machinery that has high-quality blades to increase precision. Additionally, improving teamwork is important - singling out the operator might not be the right approach – everyone has a role to play. Having a connected dashboard or a platform can help all team members access centralized data and analyze past cutter performances to identify and eliminate roadblocks.
Like all markets, the automotive industry has been badly affected by the health crisis, but all is not lost. What really matters to companies right now is to have clarity of vision so that they can rethink their strategies and adapt to this new normal. This could be achieved at the operational level if leaders have the technological means to gain data visibility and examine their current business landscape and manufacturing processes. This will enable them to see what areas of the cutting process they can eliminate, simplify and improve, and as a result, gain resilience and flexibility. While this may seem like a knee-jerk response to the pandemic, this clarity of vision, once gained through a systematic manner of gathering and analyzing data, can serve as a long-term advantage for companies even after the crisis.
To learn more about building resilience and increasing flexibility in the automotive cutting room, read our latest e-guide, ‘How to improve Toyota Boshoku’s operational excellence in the cutting room’ .