Automotive Industries spoke to Prof. Ing. Ján Košturiak, PhD, managing director of IPA Slovakia
In 2000 IPA Slovakia was established by the Fraunhofer Gesselschaft and the University of Žilina to help industries in Slovakia, the Czech Republic, Poland, Hungary, and Slovenia, find ways to quickly implement the latest productivity, quality, flexibility, innovativeness and enterprise organization methods. The idea was to create an association made up of leading professionals in the area of industrial engineering which would act as a knowledge base for industry in these countries and help them compete in European Union markets.
IPA Slovakia joined hands with Fraunhofer IPA a few years ago to enable it to get international projects. The result has been that the organization has offered successful solutions to the automotive, paper, food-processing and chemical industries. “Our long-term experience from the Slovak and Czech enterprises and the link with this top European organization enable us the approach to globally utilize the latest knowledge and solutions and to implement them locally into practice with the knowledge of specific conditions. Joining Fraunhofer IPA enables us to be involved into international projects in the EU framework together with our Slovak and Czech partners. We are better prepared to carry out the mutual benchmarking and to look for optimal forms of collaboration between European and our enterprises,” says IPA Slovakia.
Today, Fraunhofer IPA Slovakia claims to be the leading consultancy and educational organization in the areas of industrial engineering and lean methods, Six Sigma and Systematic Innovation in Central Europe. Its professional service is based on the long-term building of know-how both in Germany and Slovakia, on the knowledge of the entrepreneur environment and long time experience of the Fraunhofer IPA Slovakia employees from the industrial practice.
The team of internal employees is completed by external specialists from significant enterprises, but also a group of internationally acknowledged experts from Europe, USA and Japan. The organization builds on its relationships with universities, research organizations, industrial enterprises and other consultancy and educational firms. “The basis of this partnership is professionalism and fair, mutually advantageous collaboration. This enables us to achieve synergic effects, to learn and to inspire each other and to provide complex and high-quality services. The network of our partners is open and we want to build it in such a way that we would be a network of professionals who are able to find the best solution for their clients,” says IPA Slovakia.
The organization says that it has transferred its past experiences with over 150 European enterprises to practical examples. So when in the early 90’s the concept of lean manufacturing in the automotive industry became a buzzword, IPA Slovakia, looked at how to build these into its customers manufacturing processes right from inception and finding ways to cut waste in the production process.
“Over the last decade, many companies have tried to copy Toyota‘s principles. They are applying methods for waste elimination from production and business processes, they compare benchmark indicators like value added index or working hours per product. But the essence of Toyota’s excellence is not captured in the common sense methods like 5S, Kanban, value stream management or manufacturing cells. Toyota has been developing this system consistently for over 50 years. Toyota has developed a system of knowledge which creates reusable knowledge, maintains it, and leverages its use in the future. Nobody from Toyota employees wrote a handbook of the Toyota Production System, this is the business of other management gurus. The values and principles of the Toyota Production System are developed in the minds and daily jobs of all the employees. All the knowledge gained throughout the design or production process, what works and what doesn’t work, could be captured and consistently applied for all future projects. Toyota doesn´t call its system “lean”, but it is lean, Toyota doesn´t speak about knowledge management, but it does it!” says Jan Kosturiak, managing director of IPA Slovakia in his paper, The New Role of Industrial Engineering in a Flat World.
Automotive Industries spoke to Prof. Ing. Ján Košturiak, PhD, managing director of IPA Slovakia.
AI: What is the current situation in the automotive industry of Central and Eastern Europe - both with OEMs as well as suppliers?
Some years ago the company Volkswagen analysed more than 470 production locations in Europe. The analysed factors were – work force potential, production and logistical costs, production density, life quality and environment quality, inftrastructure, research development, private service network, political stability, etc. They selected 5 most attractive production locations – 1. Bratislava (Slovakia), 2. Mlada Boleslav (the Czech Republic), 3. Györ (Hungary), 4. Poznan (Poland) and 5. Cluj (Romania). In the meantime Volkswagen started its production facilities in the first 4 locations and other car producers followed this way. Now all the important car manufacturers as well as their suppliers are producing there (Peugeot, Citroen, Daimler, Ford, Fiat, GM, Toyota, Suzuki, Renault, Hyundai. KIA, etc.) There is now so much motor manufacturing in Slovakia, the Czech Republic and neighbouring countries that the area has been called the New Detroit or the Deitroit of Eastern. Skoda, the Czech Republic’s car manufacturer, has been part of the Volkswagen group for 17 years, and now it is one of Volkswagen’s most profitable operations making more than 600,000 cars a year. Skoda plans to increase the production volumes to 1,5 millions cars in the next 10 years. Volkswagen also has a factory in Bratislava, Slovakia, that produces the SUV Touareg 4x4 as well as the Porsche Cayenne and Audi Q7.
About 4% (more than 3,3 mil. cars) of the car volume produced world wide is manufactured in this area of central Europe in a distance of about 400 miles. The forecast of this region for 2015 is about 7,5% of worldwide annual car production. Labour qualification and productivity are comparable with western countries, but the labour costs are only 15-20% of the western average labour costs. The annual GDP growth in this region is between 5-9%, the annual labour cost growth is between 5-10%, EBIT taxes are between 15-20%.
AI: What are some of the problems facing the industry?
In many locations the logistical costs are very high, because the suppliers of the parts are located in the west European countries. Some years ago, the VW plant in Bratislava (Slovakia) had 3 times higher logistical costs than the similar plant in Spain (the both plants produced the VW Polo). Solution of this problem are supplier parks. The basic idea of this concept is grouping of different technologies, services of suppliers and service providers for various customers, in order to achieve synergetic optimization through economies of scale. More than 25 supplier parks have been developed and established in Europe in the recent years. Other reason for higher logistical costs is the trend of increasing value creation by suppliers. In the next years the suppliers should produce more than 75% of car value and OEM only 25%. Europen car producers increased the number of variants by car customisation exponentially. Each car produced in production line is different. This mass customisation increases also the logistical costs in comparison with many japanese and american car producers. Other problem is separated product and process development and production, because many companies have their research, design and development centers in their domestic countries. But the highest problem for all the producers in Central Europe are missing qualified employees (workers but also specialists for logistics, industrial engineering, etc.).
AI: Why do so many European producers have lower productivity ratios compared to Japanese companies (something a Harbour Report states)? What are some of the productivity improvement programs you offer?
There are many reasons for lower productivity mentioned above – not sufficient co-operation between product development, process planning, logistics and production or higher logistical costs because very high variability of the different parts and materials in car configuration. There is more waste in production and logistical processes – e.g. waiting for material, higher inventories, rework, etc. Typical management focus in many companies is on the short term results, not on the development of employees, their skills and the culture of continuous improvement process (kaizen). “Savings at whatever cost" – this is a slogan that can be heard in many firms with a little bit of humorous exaggeration. Often, the result of this is thoughtless outsourcing that brings lower costs per product or service on the paper, but total costs eventually grow up. Attempts to reduce numbers of overhead workers are funny, too. For example many Japanese experts, say that there should be one “overheader” per 15 workers in production and his task would be to improve process. Many managerial decisions results in the effort to use the equipment at any cost, to produce pieces and pieces and pieces... This is the worst thing production managers may ever commit. Not to stop the production process in case of abnormalities, errors, deviations from standard means not to solve a problem, to sweep issues under the carpet, to learn how to tolerate disorder and imperfection. Result-orientation in many European companies is not enough. Results are just an outcome of using or not using the potential of a given firm or process. Managers therefore need to deal with developing the potential – human potential in particular. “Improve people around you and they will improve processes; our people do not go to the firm to work, they go there to think; the principal task of our managers is to teach their colleagues“ – these are the principles of one of the most successful manufacturing companies in the world – Toyota. Managers therefore need to identify and develop talents around them; the word “teacher" means that they need to learn and improve themselves, too; that they need to be a role model for their colleagues both in professional and human terms. This is the only way of replicating genes in the corporate DNA, but this is also the way of respect and regard to each other that is missing in many companies. Many successful companies invest into complex and costly equipment. There is nothing bad about it, provided that capacities of the existing technologies are over. In every firm there is one more “hidden firm” – unused potential and capacity of machines and staff. Another problem is that people often buy inadequate equipment with capacities and technical features that cannot be fully utilized at the company. This increases unnecessary fixed costs, but expensive and complex equipment can be risky for flexibility of the business, too. Several companies are dealing with issues of simple modular equipment and low-cost automation in recent years.
AI: Please tell us little about the research and consulting areas of Fraunhofer IPA Slovakia. What does your research say about problems in the Central European automotive industry?
Individualization of the markets and mass customization have influenced also many projects in the European automotive industry. Automotive companies are preparing radical changes in the whole supply and production network - from the "stock push" and "mass production" thinking to a stockless "build-to-order" (BTO) production strategy. This will require the reinvention of the complete automotive value stream from the material producers to the end consumers of the cars, through a cost optimized system delivering what the customer really wants without delay. Within the full framework of the "EU 5-Day Car Initiative", the Integrated Project "Intelligent Logistics for Innovative Product Technologies - ILIPT" focuses on the following:
1. Product configuration for build-to-order supply chains addressing new product
technologies with the tools and management methods.
2. New concepts in delivering flexible production networks addressing collaboration
across complete value streams and interoperability of these processes.
3. Novel methods and tools to assess and validate this radical business model for the European automotive industry
This stockless vehicle supply system to deliver a customer ordered vehicle in 5 days is based on a radical new concept including a tremendous level of modularity, the joining methods and novel integration approaches. This concept aims at a groundbreaking renewal of current thinking from the traditional concept of supply chains, toward high-added value networks
There are three fundamental business concepts used and developed in our research and consulting activities - Lean Management, Theory of Constraints and Six Sigma.
Lean concept originated in Toyota is oriented on waste identification and elimination from the whole process chain (Value Stream Management). In other words – lean focus is maximisation of added value in all the production, logistical, administrative and development processes. TOC (Theory of Constraints) is based on the identification and elimination of the system´s constraints with the goal ongoing throughput improvement. The throughput is defined as the rate at which the organisation generates money through sales. In other words throughput is the added value in the process chain per time unit. The Six sigma philosophy specifies the value in the eyes of the customer (Voice of the customer) and identifies and eliminates variation from the value stream. Six Sigma, Lean and TOC continuously improve knowledge in pursuit of perfection and involve and empower the employees.
Many companies in Central Europe are oriented on low cost strategies. But some cost attack programmes and transfer production facilities to the low cost countries showed that it is not the only right and strategic solution.
Company success is not only in optimisation of current processes (doing right things right) but first of all in innovation (looking for new – but as fast as possible). The productivity world will be replaced by the world of creativity, the world of the perfect planning will be replaced by the world of the experiments and generating new ideas and opportunities.
All systems contain contradictions - something gets worse as something gets better (e.g. strength versus weight). The traditional approach usually accepts a compromise or a trade-off, but this is often not necessary. Powerful, breakthrough solutions are the ones that don’t accept the trade-offs. Such solutions are actively focused on contradictions and they are looking for ways of eliminating the compromise. This is the new orientation of our research – development of contradiction oriented systematic innovation methodology.
Other interesting topic of our research is measurement and development of the human potential in the following areas – physical potential (PQ), mental ot intellectual potential (IQ), emotional potential (EQ) and moral or ethical potential (MQ).
AI: What are some of the qualification programs you run for the automotive industry, people development and so on?
Some years ago we developed very successful international Master study program Industrial Engineering and Logistics (Master of Industrial Engineering). We developed also many special training programmes for development of supervisor skills in production as well as workers (one point lessons). Our training programs combine theoretical background with practical project in the company and on the job training. The last degree of training modules is the training of trainers.
Typical training programs are e.g. Lean academy (lean workplace, value stream management, 5S, visualization, poka yoke, TPM, SMED, low cost intelligent automation, kaizen, kanban, manufacturing cells, etc.), Team work development, Innovation School, Lean Six Sigma training, Strategy deployment, Work analysis and measurement, etc.
In the next years we would like to create an education centre with a university degree (maybe with some foreign university) with strong links to the industry.
AI: What are some of the new challenges and trends in the industrial engineering sector?
The father´s world of the business has been changed radically in the recent years. The old world of compromises (e.g. quality OR price, customisation OR delivery time) has been replaced by the new world where the tradeoffs are not accepted. When you have two options – take both! The industrial engineer will still focus on value stream improvement, but not only in manufacturing. Administrative, product development, customer service and logistical processes offer huge improvement potential. The concepts for waste elimination, reduction of process variation and throughput increase will be combined with concepts for customer value creation. I am sure, that in the near future, the industrial engineers will penetrate into the departments for product and process development and innovation management, where the higher opportunities to reduce costs, eliminate waste and improve quality rather than production are. Industrial engineers have to increase their orientation on the people. Not only in the traditional sense – ergonomics, but also in the areas of emotional intelligence, co-operation, knowledge management, coaching, training, leadership, communication, etc. The companies should be able to solve the following important questions regarding knowledge management: How to reach and keep the best talents and individuals? How to share, communicate and develop the best corporate practices in the organisation? How to transfer knowledge between employees on the projects and actions in the company? How to increase and measure knowledge? How to change knowledge into innovation as fast as possible? The design and development of teamwork in the entire company – this is the crucial competence of industrial engineers for the future. Not only the classical autonomous teams in production or logistics oriented on performance and productivity, but also the creative teams of strong individuals, focused on innovation ability, will be important. The other important task is to build multi-cultural teams in the global production networks. Work analysis and measurement is the traditional competence of industrial engineers. New opportunities for this discipline are in logistics, distribution, office, and product and process development.