Lean production guru James Womack has a solution for automakers seeking to cut costs while creating products consumers want: Take orders far in advance and build vehicles to customers' specifications.
Buyers could order cars two to three months in advance, Womack said, and lock in their options in the final days of production.
"If you can actually plan ahead, believe me, it takes cost out," he said yesterday in an interview after his presentation at the Management Briefing Seminars. "Most people do plan ahead, but there's nobody to plan ahead with in the automotive world."
The risk, Womack says, is that consumers dissatisfied with their immediate options at dealerships will replace parts to keep their car running instead of buying a new vehicle.
That's also true if customers are low on cash, he said.
"If economic headwinds are strong, I don't have to buy a new car. I can just fit it out with old parts, and it will keep running," he said. "But they might be willing to say, 'I'm helping you plan your production, so why don't you help me plan my budget?'"
Womack runs the Lean Enterprise Institute in Cambridge, Mass., which he started after years of writing and lecturing about the Toyota Production System, most famously in his 1990 book, The Machine That Changed the World.
Womack acknowledged that his idea runs counter to the thinking of some of his former Massachusetts Institute of Technology colleagues, who have argued automakers should build cars to order in a matter of days.
"What kind of factory are you going to build that can build-to-order and deliver the car in a couple of days?" Womack said. "That has nothing to do with the facts of this universe."
Still, he acknowledged that his approach may sound implausible to consumers as well as industry experts. So he suggested automakers test the idea.
"You don't have to sell this to the entire American public," he said. "Right now, there's no experiment with one customer."
Automakers also can cut vehicle costs by working with suppliers to set a price for vehicle components instead of accepting the lowest bid, Womack said during a panel discussion after his presentation.
"We don't know in our factories how to calculate total cost. We know how to calculate piece-part cost at the factory gate," he said.
But automakers could get components for an even lower price if they sat down with suppliers and selected a target price, making sure both parties had profit margin in the deal.
"All of the games and the reverse auctions and all that have led us to Chapter 11," he said, referring to the bankruptcies that staggered the U.S. industry this year. "Everything is transparent, you don't have to trust anybody. All cards are on the table."