Micro Compact Car is using parent DaimlerChrysler's purchasing power and production expertise to reduce costs on its Smart models.
An initiative known as Target Smart has reduced material and parts costs by 15 percent on the City Coupe and Cabriolet.
Now Target Smart teams are helping plan the new Roadster. This is expected to result in basic changes to the Smart manufacturing model. More work will be done in-house and a larger number of suppliers will be involved.
'If Siemens VDO is supplying airbags for 100,000 Smart cars and DaimlerChrysler is buying 3 million units, there is a leverage factor to pursue,' says Rainer Christian Genes, vice president of production, procurement and supply.
As part of the Target Smart initiative started three years ago, MCC compared the prices Smart suppliers charged with those DaimlerChrysler was obtaining. It also looked at each Tier 1 partner's supply chain prices, and conducted detailed make-or-buy studies on each major module.
MCC found a number of potential savings. For example, it was cheaper to build the Smart front-end module in-house than to source it from Bosch.
'Basically, the front-end module business for Bosch in Hambach was too small. The added value in making the front-end module did not warrant the overhead,' Genes said.
Buying for suppliers
MCC took over purchasing functions from its suppliers. For example, MCC will purchase aluminum wheels and tires for the new Roadster and ship them on to Continental for assembly when production starts next year, rather than giving Continental total responsibility.
Another example is the cockpit module that Siemens VDO will build for the Roadster. MCC conducted the purchasing process and negotiated prices for the main components including the steering column, airbag and heating and air conditioning.
'It makes more sense that we use the purchasing power of DaimlerChrysler to negotiate prices,' Genes said.
MCC will also increase its supplier base for the new Roadster. The original Hambach plant relied on 10 large systems partners and an additional 20 suppliers who delivered sub-assemblies such as seats on a just-in-time basis to the assembly line. The new model will use about 60 suppliers in total.
'We have decided to take responsibility for a few more parts,' Genes said. 'It is still a lot less than the 500 suppliers of a traditional OEM.'
Genes is hoping to benefit in the future from common and similar parts between models.
'To be competitive in the small-car business you need to have volume,' he said. Parts that are common between Smart, DaimlerChrysler and new models that Mitsubishi will build at the NedCar plant in Born, the Netherlands, would raise parts volumes. Mitsubishi will build the Smart four-seat model that MCC plans to launch in 2004.
Supporting MCC's cost-saving drive is a new organization based on cross-functional groups. Before, each component was allocated a manager who handled every aspect of purchasing including technology, quality, scheduling and cost.
Now, a team of engineers, cost controllers and purchasing specialists work together to assess how to obtain an optimum solution for each component.
Such a cross-functional group can consider a possible design change if that would let a supplier produce parts more cheaply on existing equipment, for example. Such groups are currently working with suppliers for the new Roadster.
The Roadster will be built at a new facility that is under construction on the Hambach site, including a new body shop, paint shop and final assembly facility.
Genes believes that the new plant is more integrated than the original Smart City production system. For example, system suppliers are no more than 12 meters from the assembly line.
A single building will house both the assembly line and the suppliers. Each supplier will have a clearly defined area to work in, but will not be separated by walls. The system partners for the Roadster will be the same as for the City model, apart from one that has been replaced.
By setting up a new line for the Roadster, MCC is creating flexibility and new capacity for future models.
'Modifications would have been necessary but it would have been possible to build the longer [more than 3500mm] Roadster alongside the shorter 2500mm City in the original factory,' said Genes. 'However, everything in the existing Hambach plant is focused on a [small] vehicle. Now we have the capacity for a car beyond three meters. It gives us the flexibility for more derivatives.'