Stand out from the crowd with a mass product
In a time when one can even customize their sneakers online, customers want to find their personality in many products. The automotive industry for example addresses the need for individualization with an increasing number of models and variants. The result: a 700 % increase in the number of variants already between 1980 and 20021. Customers must weigh a plethora of decision options until they have configured the vehicle of their choice online. This leads up to 1 Mio. possible configurations for a middle-class car. And these variants must also be developed, tested and produced. Can this still be healthy?
The vast and increasing number of variants leads to an increasing complexity – for the customer and the producers. On the customer side it becomes visible in the fact that online car configurations are aborted within the configuration process to a very high percentage. The diversity of the end products effects almost all the component levels and ultimately has to be dealt with in the production.
This results in two guiding questions:
- What number of variants do I need to make my customers happy?
- How many variants is my company able to produce efficiently?
1. What number of variants really make my customer happy?
European companies in particular tend to design their product portfolios according to technical feasibility rather than customer demand. If we look at the developing megatrends, the question arises if this approach is still the one companies should follow. For a closer look we want to focus on the automotive industry – just to emphasize this upfront: similar development can be seen in other industries as well.
Looking on current megatrends, future client needs and changes in customer demands and behavior can be derived. One relevant megatrend for automotive industries is the urbanization and the consumer trend of personalization, which describes the tailoring of a service or a product to accommodate specific individuals.
In 2015, 50 % of the word population lived in megacities (> 10 Million inhabitants), until 2050 this will rise up to 70 %. This will lead to a pronounced increase in the density of population within the cities. If we have a look into existing megacities like London we see a strong decrease in the cars per person ratio. Owning a car is becoming more and more inefficient. This is one – but not the only – reason for the strong growth of car sharing providers. Already 20 % of the road traffic kilometers are driven with shared mobility. And this number is believed to increase with an average annual growth rate of 3 %. The annual turnover of car sharing providers in 2015 was 1.1bn € and in 2024 this number is estimated to rise to 6.5bn € – which equals a growth of 590 %.
The demand for personalization is the main driver for the vast amount of configurable car variants. Studies show that 7 out of 10 consumers demand a personalized product and/ or service. But the main shift we can observe right now is regarding what a consumer interprets as personalized, especially in the light of the above mentioned trend for sharing. Car manufacturers offer more and more variants to their customers – but these variants are mainly based on differentiations like color, engines and other hardware features. The consumer perception on personalization has already changed towards digitalized features – like connecting their own mobile phone with their car, and thus achieving an individualized experience while driving. Studies show that 20 % of current car buyers would change brands for better connectivity. These numbers show that companies must react to these developments.
In one of our recent analysis across German OEMs it was not unusual that about 35 % of produced variants generated around 95 % of the turnover within the total car model turnover! Car manufactures are overdelivering and over-engineering their products.
2. How many variants is my company able to produce efficiently?
Since 1913, cars have been efficiently produced with the introduction of assembly line and cycle time by Henry Ford. These principles still characterize today’s production, though market changes resulted in mixed-model-lines. At the same time, lean management has streamlined processes, new robotic solutions have increased automation and digitalization will lead to connected productions. And digital trends will intensify in the coming years. But are they still effective measures to increase automotive manufacturer’s efficiency?
Let’s take a closer look at the assembly process, the most affected step of the increase in variants. The aim is to achieve a production with minimum throughput times and stock levels, while maintaining a high delivery reliability and capacity utilization of assets and employees. In the course of continuous improvement, many companies are steadily approaching these goals, even if 100 % target achievement remains utopian.
But what happens when the number of variants gradually increases in the standardized processes? The deviation from the standard increases. This is particularly evident in the cycle time. The mean value across all variants is an adequate approach but leads to efficiency losses due to lower capacity utilization. These deficits are to be managed by intelligent production control and planning. However, due to its high complexity, this is anything but easy. In addition, the challenge does not stop at the delivery of the materiel to the line but continues throughout the entire supply chain. At the same time, more and more flexibility is required. Quantities and variants vary according to demand and customers want to be able to make changes also shortly before delivery. Thus, long-term, predictive planning is only possible to a certain extent, improving the situation but not fully resolving the challenge; short-term responsiveness without efficiency losses is required.
What does this mean for production as we know it today? Is this the end of the assembly belt and cycle time? In this context, modular assembly is a frequently suggested, though controversial approach. Products control themselves through assembly, communicate with the stations and navigate through the production hall according to the priority graphs. Accordingly, there would no longer be a fixed cycle time. Apart from the hype of modular assembly, there are also other approaches making rigid production systems more flexible. Automated guided vehicle belts increase the dynamics, a variable cycle allows more individual adaption according to the variants.
Figure 1: Costs & benefits of product variants2
Real-time data from the shop floor open up new potentials in production control as well as situational worker support to produce all variants quickly and with high quality. Predictive analytics in forecasting allows a more reliable planning basis.
What does that mean? How many variants are healthy for the organization? An increasing number of variants does not result in an exponential growth of customer benefits, but rather of costs (see figure 1).
Thus, one has to first answer the question: “What number of variants do I need to make my customers happy?” Companies must prepare their organization to produce any number of variants efficiently but always based on a good understanding what the customer really needs. The future is probably not about mass production but about customer focused production. This will change manufacturing paradigms as we know it today. Applying new technologies in combination with lean thinking but also changing the way how production efficiency is measured will define the future production.
Co-Author: Daniel Heinen
1. WILDEMANN, H.: Variantenmanagement. Leitfaden zur Komplexitätsreduzierung, -beherrschung und -vermeidung in Produkt und Prozess. 19. Aufl. München: TCW Transfer-Centrum für Produktions-Logistik und Technologie-Management (Hrsg.) 2011.
2. Rock, G.: Variantenmanagement – Forschung und industrieller Einsatz. „Automotive Software Engineering“ Kolloquium TU Darmstadt 02.06.2009