Karthik Arumugham [1311299]

1


ITT Automotive: Global Manufacturing Strategy 1994

1. What are your recommendations regarding the issue of standardizing process technology across
all plants? Are there motives behind this proposal, other than those stated in the case?

Recommendations:
1. As per the product-process matrix, high volume with few major products would need a
connected line flow. Mass customization (postponement) strategy to be adopted for higher
efficiency and utilization of equipment and resources.
2. To implement in phases starting with Frankfurt. Then bring the other plant managers to witness
the operation improvements of full automation and benefits of standardizing process
technology and get their buy-in.
3. Work on supplier terms to provide input material with high quality similar/identical to that in
Europe and engage in continuous improvement with the supplier. Procurement standardization
to be adopted to leverage equipment commonality and avoid quality related issues.
4. Match the output of each process step, module level and product characteristics with the R&D
parameters to ensure quality. Regular audits may be required to ensure this.

Motive factors:
The time to development and market provided by customers are shrinking with newer generations
of ABS systems. By standardizing process technology across all plants both manufacturers and
customers can reduce time to market.
New process and products can be introduced to production in minimum time with equivalent
yields and without introduction of product quality issues
To enable manufacturing improvement systems to be agile and flexible, requiring multiple
factories running the same process and have the products matched.
Enables centralized decision making and control due to replication.
Risk pooling in terms of inventory of raw materials, semi/fully finished goods due to demand
and inventory aggregation.

2. In general, when should `copy exactly be used?
When new process/products need to be introduced to production in minimum time with
equivalent yields and without introduction of product quality issues.
When both manufacturers and customers need to reduce time to market.
When technology is complex and has many interacting variables affecting the end
result/product.
Only for production and not for technology development.
When manufacturing improvement systems need to be very fast moving and flexible, requiring
multiple factories running the same process and have the products matched.
When new approaches are tested in one site and are implemented in others, when proven.
When leveraging free capacity at a different site, copy exactly must be used to have all the sites
in sync with all the process, products, etc.
When better and faster learning curves are required
When 2
nd
order effects have significant effects on the process results


Karthik Arumugham [1311299]
2

3. As Juergen Geissinger, how would you go about implementing your recommendation? How
would you overcome resistance from the plants?
As Steve Dickerson, the plant manager at Asheville, North Carolina, what line of reasoning
would you use to convince senior management that full automation is the less desirable
alternative?

Line of reasoning from Juergen Geissinger (Director, Central Industrial Engineering) perspective, to
overcome resistance from the plants for full automation,
Changing market dynamics of ABS systems: ABS systems rapidly became less expensive and
more sophisticated each year and was headed into an era of higher volume and lower cost of
manufacturing. Auto manufacturers called for ABS systems to fit to a wide variety of vehicles and
had to be smaller and lighter and priced lower.
Ramping up capacity: In case of manual operations, increasing capacity would require hiring more
employees and training them. This would take time. Whereas MK20 assembly equipment could be
installed in modules with each module capable of producing 1 million units. Moreover the
equipment could be shipped wherever capacity was needed, but similar isnt the case with
employees.
Complexity: MK20 was a drastically different design and wouldnt be any more complex than
manual process.
Design for Manufacturability (DFM): As per DFM, MK20 had 130 parts, (50 fewer than the
predecessor) achieved through self-clinching design. The increased complexity (more orifices and
connectors) made it more susceptible to problems. So full automation would ensure right fit through
accurate calibration and eliminate manual errors thereby reducing costs for rework.
Modular design: MK20 was based on modular design to fulfill more customer requirements at low
cost
Opinion of QA team: Quality assurance team strongly supported high level of automation, as
automated processes were easier to check and monitor. This saved costs in QA due to process
simplification. 25% of capital equipment for MK4 was towards QA. With automation, product
quality gets built in.
Flexibility: MK20 had variants for different customers and hence the robots at each station had to be
capable of performing a given assembly operation with a high degree of flexibility. Aim was to delay
customization and customer specific tooling. Thus the flexibility would be taken care of.
Reliability: Flexible path was designed to route each work piece to a specified workstation. It was
designed with high degree of reliability to isolate failed process without hindering other processes.
Two people were staffed to perform few assembly operations that couldnt be automated. Designing
the system for some level of human intervention also provided extra flexibility.
Future capability: Designers hoped that next generation of ABS wouldnt be dramatically different
from MK20 and expected to reuse more than 50% of the equipment on the next generation ABS.
Also other technologies such as FSR and EBD were integratable with MK20. So MK20 wouldnt be
phased out quite quickly and that its modular design enabled improvisations at a module level.

Recommendations:
1. To implement in phases starting with Frankfurt. Then bring the other plant managers to witness the
operation improvements of full automation and get their buy-in.
2. Work on supplier terms to provide input material with high quality similar to that in Europe.
3. Regular firmware updates could prolong the life of the MK20 ABS system.

Karthik Arumugham [1311299]
3

Line of reasoning from Steve Dickersons (Asheville Plant Manager) perspective to avoid full automation,
Quality variations: Design and engineering of MK20 had to be adapted to US requirements, due to
quality variations in input material. So automating material handling wasnt the right choice.
Cost index: As per Exhibit 7, proposed automation cost index for MK20 is 77 and mixed
manual/automation process cost index is 81 vis--vis MK4-G as the base. There is no significant
improvement in cost reduction for full automation to justify the initial investments and process
changes.
Labor productivity: As per Exhibit 8, Valve blocks produced per total labor hours, increased from
.68 to .81 from May 93 May 94. Moving forward, the productivity will still improve and result in
cost reduction.
Quality: As per Exhibit 8, Parts rejected in process reduced from 5.3% to 3.3% from May 93 May
94. Finished parts rejected reduced from 4.1% to 2.5% from May 93 May 94. So from a quality
perspective, it is expected to improve over the years and reduce the rework costs. So investments in
full automation wouldnt justify the marginal improvements in quality.
Labor costs: Frankfurt has expensive labor ($30-35 per hr). Whereas in Asheville it is $20 per hr. So
there is higher incentive to take labor out of process for Frankfurt and not for Asheville.
Layoff: Automation at Asheville would require layoffs and hiring freeze and additional expenditure
on training for long term creation of skilled manpower required for handling the automated setup.
Moreover layoffs would create discontentment among the existing employees resulting in lower levels
of productivity and attrition.
Less flexible: MK20 equipment not flexible to change for future generations of ABS. New product
was predicted to replace MK20 in another four years.

4. As Klaus Lederer, what option would you like to see pursued? How do various options fit into
the broader corporate strategy of ITT Automotive?
From Klaus Lederers (President ITT Automotive & ITT Teves) perspective to implement full automation
Porters forces: Medium rivalry. No threat from substitutes and entrants. Increase in bargaining
power of suppliers and buyers. Long term strategy would be to decrease their power by
consolidating market shares and becoming a dominant player.
Improvise on contribution margins: Margins of component manufacturers eroded. Average ROS
dropped from 5% to 1.5% from 1987-1991. Average margins which had been 10-15% were also
declining. Margins on conventional brake systems were about 6%. So the only way to exist in the
market and stay competitive was to focus 90% of MK20 objectives to get the costs down and
produce at half the price of MK4-Gi. Automation would achieve lower costs (requires 50% fewer
operators than MK4-G process) at high volumes
Increase sales & market shares: Demand for MK20 was expected to grow rapidly as ABS systems
were no longer a luxury car feature. Expected to sell 25 million MK20 units worldwide over the
product lifecycle and increase market shares. Only full automation can respond at a faster rate to the
growing demand.
Faster learning curve: Plants could benefit from each others learning and not have to deal with
different problems with automation. This would save a lot of time and costs in resolving issues.
Pre-production: Global sourcing would enable pre-production series before commercial production
began. This would enable ITT Automotive to bring their customers to any production site to
demonstrate the new version/model before production.
Karthik Arumugham [1311299]
4

Incentives: Incentivize the Plant Manager based on cost reductions and continuous improvement
activities by engaging with the R&D team.