ITT AutomotiveGlobal Manufacturing Strategy: 1994 Group 2 Aman Anshu Poorva Gadre Puneet Manot Yogesh Sham Gupta ) Anti-lock Brake Systems (ABS) Case summary Intensifying cost pressure and rapidly growing demand for lowercost ABS OEMs gained leverage and margins on ABS were declining ITT Automotive is in the process of developing a new-generation antilock brake system (ABS). fluid handling…. Germany ITT Automotive manufactures 8 different product types (Brake systems. Headquartered in Frankfurt. designated the MK-20 3 Manufacturing units: Frankfurt (Germany). Morganton & Asheville (US) Indian Institute of Management Raipur . Wiper. Questions Indian Institute of Management Raipur . What are the implications for both cost and flexibility of Question 1 automation? Do you agree with the assertion made by one of the managers in the case : "If you automate. you stagnate?" Indian Institute of Management Raipur . Cost Implications of Automation MK20 Proposed Automated Process Total Manufacturing Cost High Capital investment Quality assurance accounted for 25% equipment cost of MK4 MK20 Mixed Manual/Automat ed Process 77 81 Costs as a % of Total Cost: Current Process 100 High Quality High Process control Expected first time yields of 98%. compared against yields of 87-88% in manual process Materials 70% 70% Direct Labour 10% 15% Overhead 13% 10% 7% 5% Depreciation MK4G Requires 50% fewer operator than the more labor intensive process used for MK4-G Indian Institute of Management Raipur . Implications of Automation FLEXIBILITY Considering the completely new advancements. fully automating MK20 will lead to a non reusable investment for further designs. Conveyor systems with automatic routing used Dedicated assembly lines not possible Standardization would hugely affect Flexibility with no customization Kaizen will be hard to implement henceforth. Indian Institute of Management Raipur . If you automate. you stagnate Automation will make the process more efficient With the product cost and lifecycle decreasing. full automation will reduce the scope for customization and minor design tweaks Standardization will reduce variety and flexibility Indian Institute of Management Raipur . other than those stated in the case? Indian Institute of Management Raipur .What are your recommendations regarding the issue of Question 2 standardizing process technology across all the plants? Are there motives behind the proposal. Indian Institute of Management Raipur . standardization followed by automation would favour production Motives behind Standardization of lightest. and most sophisticated automotive anti- lock brake system With similar processes being followed and similar quality products being manufactured. lowest-cost. centralized decision making can be adopted for better control. High Competitive pressure and decreasing propensity to pay With cost reductions being one of the major roadblocks. The Frankfurt plant which faces high order quantity and low cost expectations should continue their process of standardization. Follow geographic Standardization Indian Institute of Management Raipur . Supply qualities (% defected) differ greatly in various geographies Market requirements and labour wages differ between US and Europe. Recommendations Kaizen implementation will hit roadblocks everywhere. As Juergen Geissinger. how would you go about implementing your recommendations? How would you overcome resistance from the Question 3 plants? As Dickerson. the plant manager at Asheville. what line of reasoning would you use to convince senior management that full automation is the less desirable alternative? Indian Institute of Management Raipur . North Carolina. For each plant transformation. Indian Institute of Management Raipur . proper execution plan should be prepared before hand. Phase wise implementation of the standardization process. Work with suppliers to provide input materials with high quality similar to that of Europe. Morganton plant to be standardized first MK4-Gi employed high level of Juergen Geissinger – IMPLEMENTATION automation and workers are ok with it. Show the results achieved at Morganton due to full automation to Ashville. It is very important for proper knowledge transfer about successful transformation and to facilitate this the overlooking team can be sent to overlook the process at Ashville. High set up costs with automation and lesser flexibility for changes to product specifications. automation equipment may soon become Line of reasoning Not going for full Automation obsolete. Indian Institute of Management Raipur . Automation will reduce cost but also cause low customer allegiance as customization will be offset. Considering small product life. hence no need to invest heavily in automation equipment. Relatively cheap labor is available at Asheville. Training of workers for automated processes will add to the additional cost implications. Kaizen remains a no go with automation as it leads to standardization and also offsets flexibility. what options would you like to see pursued? How do various options fit into the broader corporate strategy of ITT Automotive? Indian Institute of Management Raipur .Question 4 As Klaus Lederer. Increase negotiating power with suppliers for better Strategy of ITT quality supplies and with the OEMs due to the low cost on offer. Corporate Strategy – “COST LEADER”. Complete Automation at Frankfurt and Morganton plant since purchase of equipment is already complete and phased automation at Ashveille plant. Indian Institute of Management Raipur . Achieving Economies of scale (Cost Reduction). Indian Institute of Management Raipur .