The observation that a Smart Car roles off the assembly line on average every 96 seconds elicits an important question: If lead times average between two and three weeks, is the discrepancy between a possible lead time of minutes and an actual lead time of weeks due to intended postponement or undesired logistical causes?
MCC’s supply chain is both lean and agile, but not evenly. While the module system permits customization in the dealer channel through logistical postponement (i.e. fitting of swappable parts at the Smart Centre), final assembly is performed by MCC at Smartville.
Concerning Postponement and the Balance of Supply and Demand
Logistical postponement allows for late stage customization, which is advantageous because units can remain in modular form longer, reducing lead times. Standard modules can be preassembled when necessary, harnessing the forward loading advantages of push style production. The higher the degree of customization required, the longer the lead times will be. MCC’s usage of standardized parts mean customization of the Smart Car involves the exchange of essentially equivalent components, whose lead times for fitting will vary little. Short lead times are therefore achievable.
The Smart Car Supply Chain: Order and Retail Phase
The following diagram outlines the demand side of the Smart Car production system. The customer initiates production by ordering a customized car or simply purchasing a car held in stock. Balance between supply and demand is thus managed to a reasonable degree.
Basic Complementarities Afforded by MCC’s Performance of Final Assembly The centrality of MCC and the Smartville information system means the manufacturing process resembles a closed loop/MRP system. The following table reports the benefits of MCC’s acting centrally by performing the final (main) assembly:
Complex, multipart components, such as engines, have a higher probability of failure so must undergo check processes more frequently than simpler swappable parts or fittings. Benchmarking must identify the subcomponents most prone to failure. Checking processes must be frequent and thorough. Failed components are removed from the system; achieving components are installed.
In the current supply chain management literature, “lean thinking” principles hold that high stock or inventory levels within a process leads to problems. These may be as simple as storage costs, inconvenience, or cash flow problems. However, excess stock can mask many serious problems within an organisation’s supply chain, such as overlong set-up times and bottlenecks. This is demonstrated in the “River and Rocks” analogy: reducing inventory enables management to identify potential problems and address them. Progressive inventory reduction could also be seen as a kaizen principle of continual improvement, since kaizen promotes attainment of efficiency through reductive measures (Schonberger, 1982).
Gearing machines to produce right-hand drive components poses disruption to flow due to switchover times. For this reason, production runs will have to be estimated. MCC and its partners must factor in some level of buffer stock for these components. Since it is possible that MCC will run short on these components, and reconfiguring machines in the middle of a standard left-hand drive run will not be immediately possible, stockouts could result. Unplanned switches between sidedness for single units will be impracticable. To counter this, some degree of batch planning for right hand-drive components will be necessary.