Itt Automation: Global Manufacturing Strategy

ITT Automation: Global Manufacturing Strategy

1. What are your recommendations regarding the issue of standardizing process technology across all plants?  Are there motives behind this proposal, other than those stated in the case?

As it is visible from Exhibit 5, the price trends indicate high pressure on the margins of ABS suppliers. The way to improve top line of the company is through volumes. To stay ahead of the competition in this market, ITT must design systems for lower production costs. The logical way to achieve lower costs is through automation hence saving upon high labor costs. Consistent processes will lead to efficiency improvement. Process/Production design best suited for ITT can be implemented to reduce the cost of production. Further learning from other plants can be utilized to boost the learning curve and hence shorten the time to market without any quality issues. Risks of carrying inventory can be mitigated due to demand aggregation.

Recommendation:

1. Standardize process technology across production facilities through automation.
2. To differentiate, use modules as a way of limited customization (Base architecture remaining the same) to target different segments (For American clients). In conjugation, work on improving brand equity for ITT among end users.
3. If required grant separate production line for North American clients which they can monitor for quality but the process technology can remain the same. Any improvements in process technology should can be replicated across all plants.
4. Work with suppliers in North America to decrease the defect rate while initially relaxing tolerance limit which can be gradually improved.
5. After implementation of the new process technology at Frankfurt facility bring other plant managers to show the benefits and improvement in quality. This will help to buy-in those having doubts.
6. Buy-in other manufacturers to move towards standard products. They will be interested in reducing production costs in the wake of squeezed margin and shortening product life cycle.

Other Motives:

1. Market consolidation by introducing MK-20. To gain maximum out of product life through volume sale (Especially with reducing life cycle), as customization doesn’t augur well with decreasing margins.
2. Decrease the influence of OEMs on some meaningful dimensions which are critical to achieve high volumes and reduce investment on unnecessary changes in a production system which are capital intensive.
3. Move the market towards commoditization and be the cost leader.

1. In general, when should `copy exactly’ be used?

Copy EXACTLY!! Is a system developed by Intel to lead technology transfer from R&D setup to other manufacturing facilities without any adverse effect on product quality and running capacity. The following are avenues when this concept should be used:

1. When the technology involved is complex, and there are many interacting variables, the effect on end result due to change in one variable is difficult to understand due to associated changes in other variables.
2. When you need to bring the new process to production in least possible time, owing to fast changing nature of technology or standards or small product life cycle.
3. When you want to standardize and aggregate demand across the globe.
4. When faster learning curve is required owing to nature of competition.
5. When there is a significant effect on final output/result due to 2nd order effects.
6. When process technology transfer needs to be quick without quality disruption or reduction in yield.

1. As Juergen Geissinger, how would you go about implementing your recommendation?  How would you overcome resistance from the plants?  As Steve Dickerson, the plant manager at Asheville, North Carolina, what line of reasoning would you use to convince senior management that full automation is the less desirable alternative?

As Juergen Geissinger:

1. First, implement the new process at Frankfurt facility and detect all the problems and their solutions before moving towards implementation in other facilities.
2. After Frankfurt facility stabilizes, invite the managers of other plants to visit the facility to show the improvement in quality and reduction in defect rate.
3. Show them the corporate vision of the company in terms of reusing the production equipment for subsequent product lines.
4. Convince the manager to actively work with the North American client to bring down the defect rate at sourcing and allow a tolerance limit relaxation with a timeframe for improvement.
5. Allow the manager to do minor tweaks to process to preserve their sense of ownership, and these can be implemented across facilities if found successful.
6. Convince the North American clients that you are providing superior quality product compared to competitors in terms of technology, price, size, weight, and performance. Leverage acceptance of the technology in the global market to convince them.
7. Propose voluntary retirement scheme and skill improvement schemes to reduce the workforce and improve skill levels for new process needs.
8. Involve North American process engineer in subsequent product development team include their point of view and improve trust on the new system.

As Steve Dickerson:

1. North American clients like to have more control and want product differentiation. You might lose out many contracts to competitors, thus losing a big share of revenue.
2. Worldwide equipment standard has changed four times in last five years. Changing the process after every shift in industry standard will be capital intensive and time consuming compared to semi-automated process. Competitors will gain the advantage of reaching faster to the market.
3. Might send the image of the non-customer friendly organization to the clients.
4. The same standard cannot be adopted in North America as Europe due to the variability of material received from US suppliers, human intervention in terms of quality checks is required to maintain the quality. Rather Kaizen has improved quality and productivity which won’t be possible with the fully automated system.
5.  Nonavailability of technical skill level at present, need for investment in human resources which will take time.

1. As Klaus Lederer, what option would you like to see pursued?  How do various options fit into the broader corporate strategy of ITT Automotive?

As Klaus Lederer, long-term strategy will be to reduce the bargaining power of the buyer by consolidating the market and becoming a dominant player. Which is the broader corporate strategy. Hence, he would love to see the fully standardized process. The demand for MK-20 is expected to be around 25 million units, based on previous experience fully automated system aided with faster learning curve can satiate the growing demand. This will usher ITT into an era of low-cost, high volume manufacturing which will increase the demand in luxury segment. Thus, completing the self-uplifting cycle. The ideal process will be to do product modularization and process standardization.