When Mercedes-Benz U.S. Internation-al Inc.'s plant in Vance, Ala., began production last year, it became one of the leading practitioners of modular auto assembly. Mercedes uses 65 suppliers, with 15 to 18 delivering most of the content for the M class.
Bob Birch, vice president of purchasing and logistics, joined Mercedes-Benz U.S. International in 1994 to help create the company's first non-German plant. Birch began his career in engineering at General Motors in 1967. In 1981, he went to work for Nissan Motor Manufacturing Corp. U.S.A., where he worked in quality control, purchasing and supplier development. Birch spoke with Staff Reporter Lindsay Chappell in April, prior to the announcement that Daimler-Benz AG would merge with Chrysler Corp. this fall.
The Alabama factory is on the leading edge of using fewer suppliers and modular assembly. Can you offer any advice to others considering this approach?
The modular system has really worked well for us. It's not a new idea. Most of the OEMs now receive their seats as a complete module, delivered in sequence with production. All we really did was expand on that by doing most of the car in modules.
It turned out to work extremely well for us with very few problems. Occasionally something might go wrong, and instead of broadcasting over the computer network to our suppliers, we'll resort to faxes. We get creative and we get by, and it's invisible to the plant.
So you would recommend it to the rest of the industry?
To be competitive, yes, the industry is going to have to go modular and deliver in sequence. It reduces your inventory dramatically. The capital investment in the plant is less because you can build it smaller.
That's going to be the trend in the future: smaller assembly plants that don't need big warehouses to keep inventory. If you continue to build plants full of warehouses and material, you're going to have a hard time competing.
How much of the vehicle is delivered in sequence?
It's a large percentage of the vehicle: the cockpit, the headlights, headliners and seats. We will have 18 sequential suppliers this year.
We're phasing in a few new ones, like the bumpers from Rehau. Until now, the bumpers were all the same color. Axles are starting to come in sequence. Prior to now, we only had one axle. But with the new V-8 engine, we have a second axle with different brakes. There will be other variations.
It's important to start up the broadcast and in-sequence delivery before you take on a lot of part variations. It gives the suppliers some practice before you start using multiple parts.
It also requires a closer working relationship with suppliers, right?
When it comes to the in-sequence delivery, we have to deal more frequently with them on a day-to-day basis. They have to know what we're doing. We can't just decide on our own to work an hour overtime, for example.
We've got 18 suppliers out there moving in lock step with us. If we work an hour overtime, they have to be able to do the same. So it requires a lot of communication.
How secure can one of your suppliers be? Can you shop around for better deals?
We have eight-year contracts with our suppliers, and that pretty much ties our hands against shopping around. If we have a problem on quality or cost, our contact allows us to look for other suppliers. But we haven't done that in any case.
Daimler-Benz has the TANDEM program in Europe, to encourage suppliers to improve efficiency and deliver cost savings. Is the U.S. plant ready to participate in that program yet?
Not yet. But TANDEM is really about developing a close relationship with our suppliers, and we already have that relationship. Probably within the next year, we'll go formally with TANDEM.
You've said you want to be able to leave the job of managing Tier 2 supplier issues to your Tier 1 companies. Are you there yet?
We've made a lot of progress in that direction over the past year, especially in the area of quality.
Just about every (Tier 1) supplier we have is now responsible for the quality of its own suppliers. Some of the smaller ones aren't as well staffed yet, and they've asked for a little assistance. Delphi, our cockpit supplier, has completely taken over on its Tier 2 quality issues.
With the exception of a few parts, the Tier 1 modular suppliers are already selecting their own subcomponents. In the case of the Delphi cockpit, we kept a hand in choosing the audio system and the heating and air-conditioning system. But we're involved in only a small amount of the Tier 2 content, and it's getting smaller.
How tight is the schedule for your in-sequence suppliers?
When we begin production, the supplier has 169 minutes to deliver its part to the line. We broadcast the order to the supplier when the vehicle comes out of the paint plant. The vehicles go into what we call our 'selectivity bank,' where we can chose from several vehicles. So if there's a breakdown in the paint plant, it can have a very dramatic effect on the schedule.
In some cases, we've had to send messages to change a delivery. We're continually talking back and forth. Some of this was pretty new for the industry, and we didn't have the answers. We found the solutions just by working together with the suppliers.