barcode using vb.net THE UPSTREAM IMPACT ON SUPPLY in Software

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Seeing its supply chain as a strategic asset is nothing new for Autoliv. The company has a history of long-term productive relationships with its sup-
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AUTOLIV PROFILE: Applying Rocket Science to the Supply Chain
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pliers. Our supply base represents over 60 percent of the total manufacturing costs for our products, says Markert. So we recognize [that] our extended supply chain is vital both from a day-to-day operations sense and for our future process and product development. For years, Autoliv used all the traditional approaches to manage its extended supply chain. Commodity teams aggregated Autoliv s supply base demand across business units and monitored the global supply markets. Prospective sup- represents over 60 pliers were qualified carefully, and once percent of the total engaged, their performance was monitored closely. To support Autoliv s transformation manufacturing costs to the new production system modeled after for its products. Toyota s, however, the company s supply chain strategy had to evolve. Beyond just tracking cost and performance of each component of the supply chain, Autoliv had to expand its focus and look at the bigger picture the total cost of ownership of its products and the flow of goods and information from one end of the supply chain to the other. What we are finding, in many cases, is that there is not a lot of money to be saved in individual parts. The real money to be saved is in the interfaces along the supply chain, Markert says. There are trade-offs that can be made to realize substantial savings in a system that aren t readily apparent when you are looking at a component level. So that has led us to increased collaboration, both within the company and with our supply base, to identify these interface costs and take them out of the supply chain. For example, Autoliv s inflator business and its airbag design and assembly business had always operated separately. The inflator unit sold products to the airbag unit, and that was the essence of their relationship. The units each worked to cut costs and maximize efficiency, but their individual strategies did not align for the overall benefit of the company. Design changes were made in the inflator technology that saved pennies but forced the airbag designers to make changes that ultimately increased the finished product s cost. As a result, in the summer of 2002 Autoliv consolidated the manufacturing units into one structure, with all the design teams and assembly units incentivized to reduce the total cost of production. By bringing the systems together, we can make the trade-offs that make sense for the entire enterprise. Now we design the inflator in a way that costs pennies more but captures savings down the line as we integrate it in the airbag,
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Strategic Supply Chain Management
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Markert explains. We see many opportunities like that, and we re already capturing substantial savings. Internal changes, however, would not be sufficient to make Autoliv s new production system work effectively. To meet its objectives, the company had to convince its suppliers to change the way they did business with it. It invested significant resources in supplier development initiatives, precisely as Toyota had done with it. Because our supply base accounts for 60 percent of the cost of our product, the way they engineer their products, the way they launch their products, the way they assess demand and execute to that demand represents 60 percent of our potential for improvement, says Brett Skinner, director of supplier integration and process development for Autoliv inflators. At a fundamental level, the suppliers had to agree to make smaller, more frequent deliveries, typically through a cross-dock facility. Delivery is the key step for the suppliers, Skinner says. Once we get them to understand why small, frequent deliveries are needed and why it s better for them, then we increase the likelihood for success. If we can get quality and delivery, then we ll work on the systems, and price will follow. And we tell our suppliers straight upfront, we re looking for savings, we re coming after money year in and year out, and we ll help you get there. As Autoliv executives often say, Variability costs money. Largebatch production and large shipments are, by definition, subject to larger costs and more waste when demand shifts. This is true for the Ogden plant, as well as for the companies that supply that plant. So Skinner has used the example of the major gains in performance of the Utah operation to develop training programs that will help suppliers make similar improvements. Our whole approach is to eliminate waste. We focus on quality and delivery, and we take it back upstream to our suppliers and to our suppliers suppliers until we solve the problem that caused the waste, Skinner says. And when we solve the problem, we have a formal process in place to share the savings with our suppliers.
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