DaimlerChrysler plans to slash the time finished vehicles sit in inventory to less than 12 days, down from the present 40 to 100 days.
The company also wants to save money by speeding deliveries of components to the assembly plant, said Steven Brostek, director of production control systems.
DaimlerChrysler already has saved nearly $53 million in 1999 simply by eliminating cardboard in parts packaging, Brostek said.
Brostek said the expanding ability of technology to link supplier and automaker operations is bringing automakers efficiency benefits.
'We believe many of our supply chains ... are filled with space and waste,' he said.
DaimlerChrysler has modeled its supply chain management after that of computer maker Dell Inc., which specializes in build-to-order computer systems and which doesn't carry a huge inventory of parts or finished computers.
At Dell, a computer is made when a customer orders it and pays for it, and is delivered within five days.
SMALLER STEPS TO START
Automakers would love the low carrying costs, low inventory and early payment the computer maker gets, Brostek said. But they realize it will take many smaller steps before they approach that kind of efficiency.
'We are not satisfied with all of the dealer inventory we have ... (with) vehicles sitting from 40 to 100 days,' Brostek said. 'We do see that number coming down. We believe our next plateau is eight to 12 days.'
Brostek did not predict when DaimlerChrysler would be able to reduce its inventory.
The same efficiencies apply to the delivery of parts to the plant. DaimlerChrysler has pared plant inventories down to 1.6 days worth of production components, a savings of $15.8 million so far this year, he said.
The company is working toward a 'pay-as-used' system for its components, with electronic transfer of payment to suppliers once their part is put on a car, rather than the current 'pay-as-built' system.
'We have pilots running now where suppliers have taken responsibility for all the inventory,' Brostek said.
DaimlerChrysler paint shops now are what Brostek calls 'zero-inventory zones,' where the supplier owns all of the paints, pre-coats and body washes up to the point that they are actually sprayed onto the car.
The trade-off for such systems is allowing suppliers a much greater role in vehicle planning and production, even direct connection to the assembly plant floor.
It has meant prying executive fingers from strategic data which once was proprietary even within the auto company. Daimler-Chrysler is using supply-chain software called EasyMap that gives anybody within the supply chain access to inventory data, usage rates and production data.
The automaker's online production 'blue book' is getting 4,000 supplier visits each week, and data is going directly to suppliers rather than being interpreted through DaimlerChrysler's purchasing department.
'We are taking away from purchasing the right to re-source to suppliers,' Brostek said, holding up DaimlerChrysler's new Stars electronic supplier-managed inventory system as an example.
Stars lets hourly workers in the assembly plants tell a supplier when parts are needed. Parts are delivered in small batches, and the delivery and quality are monitored using a Federal Express-style material tracking system.
'This year for the first time we are linking the operator on the line to a supplier outside the compound on which the plant sits,' Brostek said.
That makes how the components are delivered almost as important as the quality of components delivered, and lets DaimlerChrysler eliminate unnecessary steps in the supply delivery process. Those steps include waste, such as packing, unpacking and repacking parts in cardboard containers as they journey from stage to stage of assembly into modules. DaimlerChrysler believes the new supply chain management system will chop away at the need for internal middleman tasks that aren't central to getting vehicles built and delivered. Instead of looking at its own systems, the company can simply evaluate its suppliers.
'Our own inventory turns are no longer important to us. Those sorts of measures are now being replaced by supplier measurements, supplier performance as measured against our own consumption rates in manufacturing,' Brostek said.