Sustainability in Automobile Production

Table of contents

List of figures

1 Introduction
1.1 Initial situation and problem statement
1.2 Objective and methods

2 Strategic-tactical planning in sustainable production management
2.1 Objectives and tasks of production management
2.2 Production management in the context of sustainability-oriented pro­duction systems
2.3 Strategic-tactical production planning for a sustainability-oriented production
2.3.1 Strategy of site location
2.3.2 Strategy of technology
2.3.3 Strategy of vertical integration
2.3.4 Strategy of capacity

3 Strategic-tactical planning in sustainable automobile production
3.1 Initial situation of automobile manufacturers
3.2 Industrial application of integrated production planning strategies . .
3.2.1 Strategy of site location
3.2.2 Strategy of technology
3.2.3 Strategy of vertical integration
3.2.4 Strategy of capacity

4 Conclusion
4.1 Critical evaluation and future prospects
4.2 Summary

References

List of figures

Fig. 1: Structure of the work

Fig. 2: Integrated process model for a sustainability-oriented process evaluation

Fig. 3: Environmentally-oriented structure of industrial production sys­tems

Fig. 4: Integration of the planning framework into a model for sustain­able holistic production

Fig. 5: Holistic production facility and interdependences of subsystems on a superior system level

Fig. 6: Important factors for new production sites

1 Introduction

Introductorily, the industrial situation regarding challenges of sustainability is out­lined in this chapter. Furthermore, a problem statement is made and the objectives of this work as well as the methods applied are introduced.

1.1 Initial situation and problem statement

Sustainable production has come a long way from being a mere image campaign towards a competitive necessity. Sustainability is commonly defined as a form of de­velopment which allows the present generation to meet their needs without impairing future generations to do the same adequately (World Commission on Environment and Development, 1987, chapter 2). In order to satisfy all dimensions of sustainabi­lity equally (economic, ecologic and social aspects), industrial production is crucial for a prosperous society and economic stability. Being responsible for some 40 % of the German electric energy consumption, industrial production has to contribute to a special extent to global efforts for sustainability (Tzscheutschler et al., 2009, p. 6). Thereby, energy and scarce resources play a significant role. Thus, Fraunhofer ISI estimates some 15 % of average energy saving potential in German companies (Schröter et al., 2009, p. 1). This is competitively crucial since the elimination of potential additional revenues due to unused energy saving potential has a threefold negative impact on profits (Herrmann et al., 2007, p. 195). Therefore, the pursuit of sustainability is first and foremost supported by industry while economic benefits are expected. However, among cost efficiency, increasing customer demand for ecolo­gically reasonable products has become an important driver of corporate sustainabi­lity efforts, especially in the automobile industry. Thus, the attention of automobile manufacturers has been shifting beyond what is economically reasonable towards a proactive behavior to tackle environmental consequences of their businesses. En­vironmental issues of sustainability concern all people and are therefore subject to special attention of science and the public alike.

Although the major share of some 70 % of an automobile’s ecological impact is caused during its use phase (Facanha and Horvath, 2005, p. 34) its production pro­cess does contribute to a large extent to the overall corporate production efficiency. Whereas production engineering technologies to foster sustainable automobile pro­duction are available little has been published about the integration of characteristic traits of sustainability in the strategic-tactical production planning as the preceding step. The implementation of corporate sustainability strategies calls for a holistic top-down pervasion (O’Brien, 1999, p. 4). In this context, there may be a gap bet­ween normative management decisions and operational production management.

1.2 Objective and methods

Consequently, this paper aims to address various strategies of production planning with respect to their specific applicability to integrate methods for the enhancement of sustainability in automobile production. Therefore, the four production strategies according to Zäpfel (technology, vertical integration, capacity, and site selection) shall serve as a framework. Although these strategies were not initially intended to contribute to sustainability, it shall be the goal of this paper to evaluate whether they can make contributions to a sustainable production. For that purpose, the strategic-tactical planning framework will be placed in the context of sustainable production. Eventually, each strategy will be searched for its individual applicability to sustainability-oriented production. Thereby, the focus will be laid heavily on environmental aspects as reasoned above.

In chapter 2, general planning tasks of a sustainable strategic-tactical produc­tion management in industrial companies and the implementation of integrated production strategies in sustainability-oriented production systems are addressed. Thereby, the reference framework according to Zäpfel is used with respect to the re­quirements for sustainable production. Eventually, the applicability of the reference framework on the described context is investigated. Consecutively, chapter 3 gives a brief overview of the specific initial problems of automobile manufacturers befo­re investigating existing industrial and scientific approaches to foster sustainability in automobile production. Therefore, the case of sustainability-oriented production of automobiles is placed in the context of strategic-tactical production planning as introduced in chapter 2 and subject to respective applicational literature research. Specific information and data from several automobile manufacturers are collected from the sustainability reports from 2010 published by each company. Companies investigated are Volkswagen, BMW, Daimler and Toyota.

The work is concluded by a critical evaluation of the findings and a summary. The structure of this paper is also illustrated in figure 1.

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Fig. 1 : Structure of the work

2 Strategic-tactical planning in sustainable production management

As already stated in the introduction, this paper aims to examine the extent to which traditional production planning strategies can contribute to a company’s su­stainability performance in the actual production phase emphasizing its impact on the natural environment. Therefore, it is essential to identify a starting point for the application of adequate tools. If an enterprise decides to pursue sustainability goals in its production activities, it has to find a way to transform goals into spe­cific action. This mission usually falls to the duties of the production management. Consequently, the following chapter will deal with the tasks of production manage­ment and introduce some concepts that are especially suited to integrate sustainable thinking into industrial planning activities.

2.1 Objectives and tasks of production management

In the manufacturing industry, the actual fabrication of goods still is one of the most important functional areas of companies (Zäpfel, 2000, p. 7). The qualities of the produced goods highly influence the success on the market. Therefore, there is a significant need for a production specific management in charge of all relevant operations in the production process to maintain existing potentials or create new potentials for an advantageous position on the market (Zäpfel, 2000, p. 115). According to Zäpfel, the production management has to plan and control the production in a goal-oriented manner (Zäpfel, 2000, p. 1).

However, every business needs a superior entity which develops a holistic policy for the entire company. All functional areas - including the production - have to align their goals and strategies to the overall goals of the company (Zäpfel, 2000, p. 7). In conclusion, there can be a comprehensive compilation of diverse (and someti­mes contrary) business objectives that have to be transformed into sub-goals for the various functional areas. Traditionally, the main objectives are of monetary nature and aim to preserve the company as a profitable business. Nevertheless, there are numerous forces in the company’s environment (laws, customers, suppliers, share­holders, etc.) that influence the setting of targets (Zäpfel, 2000, p. 4 f.). Usually, being environmentally sustainable is not considered a company’s main mission, but it can become a relevant target through legal regulation or public demand as already mentioned in the introduction. In the latter case, a superior sustainable performance could even constitute a competitive advantage in terms of Porter’s differentiation strategy (as opposed to cost leadership) (Porter, 2008, p. 71 ff.). Assuming it is recognized by the relevant customers, it then would lead to monetary benefits and competitive advantages (Simon, 1988, p. 464 f.). No matter what factors determine the company’s objectives, the production management has to accommodate them as a frame for its further planning (Zäpfel, 2000, p. 1).

The tasks of the production management can be categorized according to their scope. On the strategic level, production specific goals and strategies are defined to create and maintain a competitive production. The tactical production manage­ment has to specify the given strategies and determine the best way to achieve the goals. The decision making on this level mainly corresponds to the questions what to produce, what equipment to use and how to organize the production process. The operational production management’s tasks are strongly characterized by the decisions that were taken beforehand on the superior levels. Its main objective is the optimal operation of the existing production system (Zäpfel, 2000, p. 2 f.). Sin­ce there are interdependencies between all levels of management, it can sometimes be difficult to draw a line between them. According to Schultmann, this is especi­ally true for the boundary between strategic and tactical production management (Schultmann, 2003, p. 48). Given that a complete analysis of all levels would be beyond the scope of this paper, the operational component shall be neglected in the further course of this work. The strategic-tactical production management, on the other hand, determines the essential orientation of the production system and will be examined more thoroughly in the following.

With regard to the content of the production management’s tasks, the decision making can be divided into input, output and throughput aspects. Every level of the production management has to deal with those aspects, even though the intensity might vary with the level (Hoitsch, 1993, p. 3450 ff.; Fröhling, 2006, p. 22).

2.2 Production management in the context of sustainability-oriented production systems

The integration of environmental protection measures into production processes con­sists of two different aspects. On the one hand, it requires engineering know-how to design and operate technological equipment and processes in the best way. On the other hand, it also calls for knowledge in the field of business sciences to ideally incorporate the protection measures into the organization’s structures. The general target has to be the best possible allocation of environmental protection measures under consideration of the frame given by superior decision levels (Spengler, 1998, p. 48). Thus, the management has to achieve the company’s superior environmental objectives at optimal cost (Spengler, 1998, p. 81). That is where the production management has to apply its tools to contribute to an environmentally sustainable production. While in traditional models the controlling provides financial figures as feedback solely, this does not comply with the requisites for an environmentally su­stainable production system. Besides purely economical numbers, information about all material and energy flows that enter and exit the production system is needed to support the decision making on the different levels of the production manage­ment. For this purpose, Spengler suggests to extend the production management creating a management of material and energy flows (Spengler, 1998, pp. 2 f., 42 ff.). The thought of integration of economically negligible factors is also picked up by Herrmann et al. and depicted in figure 2. Similarly, Schultmann claims to broaden the definition of production systems and look at economic systems of circular flow instead to account for the consumption of resources (input), material and energy emissions to soil, water and air (output) as well as for efficiency in the use of ma­terial and energy (throughput) in production management (Spengler, 1998, p. 44; Schultmann, 2003, p. 49 f.).

Therefore, it is essential to rethink the structure of the traditional process chain which consists of resource extraction, production, product utilization and discard of used products. In the context of life cycle assessment, also phases beyond produc­tion become relevant for environmental considerations (Schultmann, 2003, p. 2 f.).

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Fig. 2: Integrated process model for a sustainability-oriented process evaluation (adopted from Herrmann et al., 2007, p. 196; Schultz, 2002, p. 44)

Even though this paper is concerned with the stage of production, a certain reper­cussion becomes evident since recycling of components and old products originating from the end of the life cycle directly influences production and its inputs. This environmentally-oriented structure of industrial production systems is illustrated in figure 3.

A concept that resembles the discussed notions is called industrial ecology and represents the intention to make industrial systems compatible with natural eco­systems. It is based on the thought that industrial systems distribute information, material and energy flows and are inseparably linked to their biological environment anyway (Erkman, 1997, p. 1). In a way, industrial ecology tries to combine physical principles like the conservation of mass and energy with economic efficiency thin­king. To this end, the concept is focused on the system itself balancing material flows and seeking to make it a closed-loop system. Applying this mindset, industrial ecology might be economically beneficial as well if the resource productivity can be improved sufficiently to exceed the costs for closing loops (Esty and Porter, 1998, p. 36 f.).

The fundamental classification of task levels and contents in production mana­gement can be retained in an industrial management of material and energy flows as well. With focus on environmental protection, it can be said that all content categories (input, output and throughput) contribute to the sustainable performan­ce in terms of environmental impact and deserve consideration in a comprehensive analysis of manufacturing companies. Generally, industry should seek to prevent

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Fig. 3: Environmentally-oriented structure of industrial production systems (adopted from Speng­ler and Schröter (2001, p. 228))

ecological detriments in the first place and make efforts to reduce inevitable eff]ects subsequently; by recycling activities those waste flows for example that cannot be eliminated can be deployed in a beneficial way, leaving the final disposal as last re­sort only (Hulpke and Müller-Eisen, 1997, p. 147). However, another restraint shall be introduced here: outputs will only be regarded as relevant in the context of this paper in form of emissions and residues. Further examination of the actual products’ environmental impact on the other hand would call for consideration of activities further downstream the life cycle and would thus be beyond the focus of this work. The contemplated domain of this paper can be referred to as production integra­ted environmental protection in distinction from product integrated environmental protection (Spengler, 1998, p. 47).

2.3 Strategic-tactical production planning for a sustainability-oriented production

In the previous subsection, the necessity for an integrated process understanding was introduced. The combination of economically and environmentally relevant input and output flows was outlined as a prerequisite for a holistic understanding of a production system. Consequently, the embedment of a production system in a closed- loop and life cycle-oriented structure was illustrated (as shown in figure 3).

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Fig. 4: Integration of the planning framework into a model for sustainable holistic production (on the basis of Herrmann et al. (2008, p. 85) and Herrmann (2010, p. 313))

The framework chosen for the investigation of strategic-tactical production planning is naturally placed in an all-economic environment. Therefore, it shall be high­lighted how it is intended to be integrated into a model for sustainability-oriented production for holistic production systems. For that purpose, an entirely production- focussed model is introduced which contains four production levels that vary in their degree of aggregation (Herrmann et al., 2008, p. 85; Herrmann, 2010, p. 313). As depicted in figure 4, the chosen production planning framework covers all levels of the sustainable production system model. Each strategy will be addressed more tho­roughly in the following. Thus, some characteristics are briefly introduced to explain the matching of the strategies and production levels without foreclosing a deeper introduction.

Strategies for capacity and technology are naturally connected with the lower production levels. Thus, capacity problems occur within workplaces, machines and processes and their superior aggregated entities due to the inherent problems of the allocation of resources. Technology strategies are also established here since technologies for value creation are applied to machines and process chains, hence affecting machines and segments. The strategy of site selection corresponds to the production site level and requires no further explanation. The strategy of vertical integration contains decision problems regarding the degree of in-house production and is therefore to be associated with the superior production level, namely the production network. Since the strategic planning of the vertical integration of a company requires intensive cooperation and supply chain coordination, it can be conducted most effectively on the production network level.

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