China, the country that is increasingly known as the actory othe world, is now supplying leading Western automotive manuacturers with high quality parts, while local automotive companies are working more and more as part ojoint ventures with leading brands such as GM, Ford and Fiat. But manuacturers now recognise that to take ull advantage oopportunities presented by the indigenous market - as well as exports – they need to adopt best practice processes underpinned by manuacturing simulation techniques. Just having lower cost, more plentiul resources to throw at the manuacturing process is not enough: global brands will increasingly demand that third party suppliers use the same simulation sotware as they do when building manuacturing and supply chain processes. This is not just important rom a cost point oview – China is increasingly aware othe green agenda and needs to demonstrate its ability to reduce carbon emissions in line with global targets. This paper looks at how the Chinese automotive sector is meeting the challenges othe automotive industry and the role that simulation sotware will play in developing best practice. In our view, the sector is not just growing in terms ovolume – it is also growing up ast. This is no longer a young market, but is rapidly growing in maturity and global inuence. The paper also o utlines Lanner’ s experience and expertise in developing simulation sotware or the automotive sector, and includes a case study about how GM Shanghai is already using Lanner’s WITNESS sotware to reduce co sts and improve productivity . This is no longer a young market, but is rapidly growing in maturity and global inuence Abstract China’s automotive industry Executive Briefng Supporting the growing maturity of China’s automotive industry: the role of simulation software Enabling efcient and sustainable manuacturing processes in the Chinese economy
China, the country that is increasingly knownas the actory o the world, is now supplying
leading Western automotive manuacturerswith high quality parts, while local automotivecompanies are working more and more as parto joint ventures with leading brands such asGM, Ford and Fiat.
But manuacturers now recognise that to takeull advantage o opportunities presented bythe indigenous market - as well as exports –they need to adopt best practice processesunderpinned by manuacturing simulationtechniques.
Just having lower cost, more plentiul resources
to throw at the manuacturing process isnot enough: global brands will increasinglydemand that third party suppliers use the samesimulation sotware as they do when buildingmanuacturing and supply chain processes.
This is not just important rom a cost point o view – China is increasingly aware o the green
agenda and needs to demonstrate its abilityto reduce carbon emissions in line with globaltargets.
This paper looks at how the Chinese automotivesector is meeting the challenges o theautomotive industry and the role that simulationsotware will play in developing best practice. Inour view, the sector is not just growing in termso volume – it is also growing up ast. This is nolonger a young market, but is rapidly growing inmaturity and global inuence.
The paper also outlines Lanner’s experience
and expertise in developing simulation sotwareor the automotive sector, and includes a casestudy about how GM Shanghai is already usingLanner’s WITNESS sotware to reduce costsand improve productivity.
This is no longer a youngmarket, but is rapidlygrowing in maturity andglobal inuence
Abstract
China’s automotive industryExecutive Briefng
Supporting the growing maturity of China’sautomotive industry: the role of simulation softwareEnabling efcient and sustainable manuacturing
The Chinese economic miracle has ascinatedbusiness commentators or the past decade.Overall, China’s GDP grew by only 6.8 per centin Q4 2008, the lowest rate o growth or 10years. Since then, the market has recovered,with the Chinese Government predictinga urther 8 per cent growth or 2009. InSeptember 2009, both the China Federation o Logistics and Purchasing and the HSBC ChinaManuacturing Index reported manuacturinggrowth – the latter or the fth month in a row.
One o the drivers or recovery is the automotivesector. China is now the world’s largestautomotive market, drawing rom two mainsources or its success: oreign exports anddomestic sales. The market dipped at the endo 2008 in line with the global recession: itsreliance on the US marketplace in particular
meant it was vulnerable to the downturn indemand or imports and or investment. Inresponse, the Chinese Government hasintroduced eective fscal stimuli to encouragegrowth.
The local Chinese market is addressed byindigenous vendors such as Great Wall,Foden, Chery, Wuling and Xiali, many o whom manuacture small, light vehicles thatare suitable or Chinese consumers andbusinesses. The Government also changed tax
arrangements to encourage the purchase o vehicles with engines below 1.6 litres.
More recently, those vendors have also been joined by the big brand names o the globalindustry, such as Buick, Toyota, Ford and GM.
The approach taken by the big global brandshas been to establish joint ventures with localvendors. The Chinese Government is keen topromote low-emission vehicles and stimulateautomotive manuacturing in its central region,and has provided unding or oreign companiesto establish JVs with indigenous vendors.
The stakes are high. In July 2009, or example,Fiat entered into a JV with Guangzhou Automobile Group to make new cars andengines rom 2011. Together, Fiat and GAC
will invest more than $557 million in a newproduction plant.
Sales o locally produced vehicles have alsobeen driven by legislation introduced tostimulate the economy in January 2009. TheGovernment now provides subsidies to buyerso light commercial vehicles in rural areas, andthis has had an impact on the industry already,with dealers ordering inventory in anticipation o greater demand through the rest o 2009 andbeyond.
Background
Despite the success o the Chinese automotivesector, it is not without its challenges. According to a study1 by Mercer ManagementConsulting published in 2005, production costswere 10 to 20 per cent higher in China than inother regions. The main reasons or these highproduction costs, said Mercer, were high costsor raw materials and subcontracted parts andcomponents, and low productivity.
This is not wholly surprising. As an emergingeconomy, China did not have the same longlegacy o industrial and engineering know-how as the West, nor the same levels o understanding about how inormation systemscan add value to organisations and processes.Until recently, manuacturers have been morelikely to address productivity issues by addingmore human resources to the problem thanto apply new technologies such as simulationsotware to planning and optimising businessprocesses.
The enormous growth o the Chineseautomotive market is exacerbating the problem.Demand rom the indigenous population androm partners in JVs requires a much asterspeed o build than most companies arecapable o using sub-optimal processes.
The availability o investment rom the West orrom the Government means companies weremore likely to build a new actory than improveinternal processes.
But the industry is growing not just in volume,but also in maturity. Today companies withglobal operations who are moving into theChinese market are bringing their knowledge
o simulation sotware to bear on joint ventures– just as they have done in other emergingeconomies such as Russia. Indeed, companiessuch as Ford request that companies whowant to supply parts to their vehicles build theirmodels using Lanner’s WITNESS simulationsotware.
As a consequence, indigenous Chinesecompanies are also learning about the beneftso simulation sotware to the automotivesector. This is also being driven by the actthat simulation sotware is now very much onthe curriculum o Chinese universities, rom
which hundreds o thousands o newly trainedengineers graduate every year.Over time, simulation sotware will be seen asa normal element o automotive manuacturingand engineering, rather than a novelty.
The Challenge
production costs were 10 to20 per cent higher in Chinahan in other regions
ndigenous Chinesecompanies are also learningabout the benefts o simulation sotware to theautomotive sector
The benefts o simulation sotware includethe ability to model processes within themanuacturing and supply chain environmentso that they are as cost-eective and efcientas possible – even beore companiescommit investment to building new acilities.
Increasingly, Chinese companies are alsoconsidering the environmental impact o theiroperations, and this can also be modelled usingsimulation sotware.
It is not just indigenous automotive companiesthat need to adopt simulation sotware whenoperating in China. The global supply chainor the automotive manuacturing sector is
necessarily complex, and a huge industry hasalready sprung up in China or automotive partsand spares.
There is also a requirement or automotivemanuacturers to understand the fnancial and
ecological balancing act between manuacturingin China and distributing new vehicles in theWest. Global brands must understand culturaldierences between the West and the Chinesemarket, which requires smaller, greener vehicles. They must avoid making cars that people don’twant, or can’t aord. Getting those calculationswrong can mean the dierence between marketleadership and ailure.
Lanner’s heritage in the automotive sectorstretches back as ar as 1978, when theworld’s frst visual interactive simulation toolwas developed in the operational researchdepartment o British Leyland Motors, whichsubsequently became AT&T Istel. Lanner Groupwas ormed by an MBO rom AT&T Istel in 1996and is now recognised as the world’s leadingbusiness process simulation and optimisationorganisation.
WITNESS has been used extensively within
the automotive industry or over 15 years,by organisations that include Ford, Michelin,Nissan, ArvinMeritor, Cummins, DaimlerChrysler,Delphi, General Motors, Honda, JohnsonControls, TRW and Uniroyal. It is the de aqtostandard or simulation models in the globalautomotive marketplace.
One o the strengths o WITNESS is its exibility. The sotware is ideally suited or use in theautomotive industry, where material delivery,production, and distribution involve such diverseprocesses.
• Demonstrating capability and compliance tokey stakeholders to prove plant perormance
• Applicable throughout the retrieval, processingand encapsulation processes as well assupply chain and logistics requirements
• Provides increased perormance throughbetter resource utilisation and identifcation o bottlenecks
• Enables reduced operating costs and lowercapital expenditure by engineering a solutionto meet the needs o the business
Lanner’s automotive customers haveused WITNESS to address issues insuch areas as:
• trim operations
• paintshop• body assembly• powertrain• stamping operations• material delivery logistics on application a
reas such as:• production design, planning and scheduling• facilities layout• supply chain logistics• capital equipment justication• engineering process improvement
Companies report improved confdence in
decision making, better communication o recommendations and team integration, andaster buy-in to proposed changes.
A New Approach
equirement or automotivemanuacturers tounderstand the fnancial andecological balancing actbetween manuacturing inChina and distributing newvehicles in the West
Simulation sotware can help organisations inthe automotive sector to manage the constantchange that they ace on a daily basis.
Automotive manuacturers and suppliers alikeare under constant pressure to shorten leadtimes while reducing costs and responding torapidly changing or globally dierent consumerdemands.
In an industry where success orces companiesto implement many complex changes soquickly, the risks o making mistakes areenormous. Lanner’s simulation sotware canhelp organisations make changes with thecertainty that they’ll achieve their intendedresults beore they commit to them. Manyo the world’s most successul automotivemanuacturers and suppliers are using Lanner’sWITNESS simulation sotware.
Lanner’s heritage in the automotive sector
he world’s most successulautomotive manuacturersand suppliers are usingLanner’s WITNESSsimulation sotware
GM Shanghai GM has eight joint ventures and two whollyowned oreign enterprises as well as more than21,000 employees in China. Products are soldunder the Buick, Cadillac, Chevrolet, Opel,
Saab and Wuling nameplates. GM and its jointventures sold 1,094,561 vehicles in China in2008.
Shanghai GM Dong Yue Motors Co. Ltd. is a joint venture manuacturing acility situated in Yantai, Shandong. Shanghai GM holds a 50percent stake and oversees the company’smanagement. GM China and SAIC eachhold 25 percent stakes in the acility, whichmanuactures Chevrolet brand vehicles. Theplant has an annual capacity o 240,000vehicles.
Shanghai GM Dong Yue Automotive PowertrainCo. Ltd. is a joint venture located in Yantai,Shandong. Shanghai GM owns 50 percent,while GM China and SAIC each own 25percent. The acility has an annual capacityo 375,000 engines and supplies engines orvehicles manuactured by Shanghai GM.
Shanghai GM Dongyue Powertrain hasdesigned and implemented cost-eectiveand efcient acilities using Lanner WITNESSsimulation sotware. Speaking at Lanner’s
recent China user conerence, which was heldat Tianjin Polytechnic University, Mr. ZhouBaoyuan, IE engineer at Powertrain, said:“Seamless workow is our goal. Efcientinventory management and work in progress(WIP) have been regarded as important KPIs tokeep car engine assembly lines running but atlower costs.
“We used to manage WIP levels within eachwork cell by experience. However, this couldcause problems when we could not oreseerandom events such as machine breakdowns,schedule changes and re-setting assembly lines
or new models. WITNESS simulation providesus with a way to try out and optimise processesby simulating the assembly line running withvarious conditions in place. As a result, wehave successully cut down the WIP by 20%and reduced the assembly line re-setup time byone hour.”
In Practice
NissanWhen Nissan Motor Co. Ltd planned toestablish a £100 million production plant in StPetersburg, Russia, it sought guidance rom theteam at Sunderland-based Motor Manuacturing
(UK) Ltd in the UK. Using Lanner’s WITNESSsimulation suite, NMUK produced a modelo the St Petersburg paintshop using CADand perormance data to demonstrate tothe Russian team and paintshop developersDurr how simulation technology could driveproduction at the new site.
The WITNESS model enabled users to visualisehow to control the ow o vehicle production inthe paintshop. By using WITNESS sotware todesign a model o the Russian plant beore itbegan production Nissan’s Russian team wereable to uture gaze events beore they havetaken place. This is invaluable as it eradicatespotential mistakes and inaccuracies
in production methods, which means thepaintshop team can be confdent that they starton the right ooting, enabling them to meet theirtargets rom day one.
Anthony Timmiss, Engineer at NMUK, whodesigned the WITNESS model or the StPetersburg paintshop, said: “It is excitingtimes or Nissan with the launch o the newassembly plant at St Petersburg. The Russianautomotive market has seen huge growth in thelast ew years and this is expected to increasesignifcantly in the next three or our years.Having successully used Lanner’s WITNESS atthe Sunderland plant to drive production o theQashqai model, Nissan decided to implementthe simulation technology in St Petersburg tohelp ulfl production o 50,000 cars. WITNESSis ideal as it is easy to implement and use, costeective and oers highly accurate predictions.
Volvo Volvo’s Gent plant in Belgium relies uponLanner’s WITNESS simulation sotware tocontinually optimise efciency and productivityin the plant, and maintain its reputation orquality.
In particular, WITNESS helps Volvo to identiythe optimum approach or new or revised carmanuacture or models including the V50,C30, S60 and the new XC60; prove scenariosin a virtual environment beore investment iscommitted; and identiy and remove blockagesand bottlenecks in the production process.
successully cut down theWIP by 20% and reducedhe assembly line re-setupime by one hour
Nissan decided tomplement the simulationechnology in St Petersburg
In many ways, the Chinese automotive industryis a victim o its own success. As the world’slargest steel manuacturer, it has access to theraw materials needed to build huge numberso vehicles or its own market, as well as or
export. It also has the resources to build asmany actories as are required, as well asdesign innovation leadership and engineeringskills.
The last piece in the jigsaw is the design andmanagement o actories and manuacturing / supply chain processes. The automotivemarket can only continue to grow in China:the companies that lead the industry onto a
global stage will be those who understand themultiplier eect o good process design usingsimulation sotware.
1 ‘Chinese Automotive Market 2010’ by Mercer
Management Consulting
Conclusion
Lanner is transorming the way managers andservice owners in large, complex organisationsimprove delivery and process perormance.Lanner is organised to add value at each stageo a customer’s journey oering consulting that
provides guided discovery and expert analysiso the problem, applications that empowerprocess users and increase an organisation’sability to improve and save money, andautomated simulation components embeddedin leading sotware suites. Lanner’s proven
simulation and planning technology is suppliedto simulation proessionals through its Witness®brand and as embedded components tosotware developers under its L-Sim™ brand.Based in the UK with subsidiaries and partners
in Europe, The Americas and the Far East,Lanner applications are use by more than 3,500companies globally and its services group hasdelivered projects to over 1,000 customers.www.lanner.com
