Complying lean principles at a traditional site - the Leanfield approach of Opel in Rüsselsheim

Contents

1 Executive Summary

2 Motivation

3 Background
3.1 The situation of Opel
3.1.1 Opel Company Profile
3.1.2 Numbers
3.1.3 Rüsselsheim
3.2 The development of car production
3.2.1 Lean Production
3.2.2 Brownfield and Greenfield

4 Purpose

5 Method

6 Theory

7 Empirical investigation
7.1 Greenfield, Brownfield or Leanfield
7.2 Development of plant concepts at General Motors
7.2.1 NUMMI
7.2.2 CAMI
7.2.3 Eisenach
7.2.4 Rosario/Argentina
7.2.5 Gliwice/Poland
7.2.6 Rüsselsheim
7.3 Elements of Leanfield’s realization
7.3.1 Conceptual matters
7.3.1.1 Architecture
7.3.1.2 Quality control
7.3.1.3 Business Mall
7.3.2 Implementation matters
7.3.2.1 Simulation
7.3.2.2 Cooperation of workers
7.3.2.3 Training

8 Analysis

9 Conclusion

10 Appendix
10.1 Pictures
10.2 Literature Overview
10.3 Endnote

1 Executive Summary

The purpose of this paper is to evaluate the decision of Adam Opel AG to restructure its production site at Rüsselsheim according to the so-called Leanfield approach. Therefore, a theoretical framework containing key principles of lean production and pointing out the importance of cooperation as a prerequisite for their implementation has been built up. Then the steps that led to the formulation of lean principles at General Motors, Opel’s mother company and the realization of the Leanfield approach in Rüsselsheim are examined. The results are that Opel succeeds in complying with lean principles in the new Rüsselsheim assembly plant but that the Leanfield approach can not be perceived as generally applicable solution as it was due to the specific circumstances Opel faced at the existing Rüsselsheim site.

2 Motivation

As the automotive industry is heavily dependant on effective manufacturing and supply processes to create advantages in an environment of intensive competition, future trends in logistics and supply chain management are likely to evolve in this industry.

Therefore, we chose the restructuring of the Opel plant at Rüsselsheim to examine a novel approach to implement lean manufacturing at a traditional production site.

3 Background

3.1 The situation of Opel

3.1.1 Opel Company Profile

Opel is as a fully owned subsidiary part of the global network of General Motors (GM), run as an independent entity. It fulfils many important functions within the GM group, e.g. the International Technical Development Center (ITDC). The ITDC is located at Rüsselsheim, Germany and it is responsible for the development of small cars. Opel has a strong connection to Vauxhall, which has its main activities in the UK, whereas Opel mainly covers the European market. The two units share and manufacture the same car models. Besides that, cooperation with Suzuki (20% owned by GM) exists in building small cars for the Eastern European, Asian and South American Market.

Main competitors in Europe are Volkswagen, Ford and Renault.^[i]

3.1.2 Numbers

Opel’s share of the new car market in Western and Central Europe has been 8.75% in 2003 (1.57 million units of a total 17.89 million units) with the Vectra model which is produced in Rüsselsheim accounting for 12.4% of the unit sales.^[ii] Opel manufactures its cars in 11 plants spread over 8 European countries. These years, the company is facing a challenge, having a loss of 384 Million Euro in 2003, with a 6,3 % decrease in revenue (from 14,8 to 13,9 Billion Euro).^[iii]

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3.1.3 Rüsselsheim

Being the birth place of Adam Opel, Rüsselsheim has always been the headquarters of Adam Opel AG. Opel car production in Rüsselsheim started in 1899 and Germany’s first car assembly line has been installed there in 1924. After having been destroyed in WWII, the production site was rebuilt in 1950. In the following decades, modernizations and restructurings were conducted to keep the traditional site competitive. In the late 1990s however, it turned out that it was not possible to fulfill the requirements of lean production anymore. Consequently, a completely new concept had to be set up as explained by Michael J. Wolf, Rüsselsheim plant director "Although we kept the traditional Rüsselsheim plant up to date by continuous modernization and restructuring, all these measures during more than a century of car manufacturing, though sensible in their respective eras, created a complex conglomerate of buildings and processes over the years that could not comply with true lean production requirements any more."^[iv] In Rüsselsheim the Vectra model, a middle class car, is manufactured. Our project focuses on the way this concept has been realized.

3.2 The development of car production

3.2.1 Lean Production

The timeline introduced by Skjøtt-Larsen, gives an impression of the occurrence of management concepts during the last years. Just-in-time (JIT) and Lean Manufacturing have been the two of these major concepts that play an important role for the Transformation of the automotive industry since that time.

illustration not visible in this excerpt

JIT become known in the late 1970s and early 1980s as a Japanese approach. The basic innovative feature of this concept was its “Pull”-orientation, meaning that all manufacturing steps are linked and controlled by the next respective down stream operation. The activities were carried out in teams which communicated with each other through the kanban-system, a card-based system. With the placement of the special cards, the down stream unit could signalize its needs for products or services to the next up stream unit.

In the late 1980s, this concept was further developed into the approach of “Lean Production” by Womack et al. (“The machine that changed the world”) that resulted in the formulation of lean principles like the minimization of waste and the continuous improvement of quality and efficiency. Their work was based on a wide-ranging empirical study done in the International Motor Vehicle Program (IMVP) at MIT.^[v]

These two production systems first created a competitive advantage for the Japanese Companies who developed it and thus applied it first. Later, as the other manufacturers had learned about these concepts and started catching up in competition, the traditional manufacturing sites faced the pressure to adapt to the new principles. Rüsselsheim too, being an old and traditional facility in GM’s global organization, faced the same pressure.^[vi]

3.2.2 Brownfield and Greenfield

When wanting to improve the production process of a plan the management usually has two possibilities:

- Brownfield - describes an area of land in a town or city that was previously used for industry and where new buildings can be built.
- Greenfield - describes land that has not yet been built on, or buildings built on land that had never been used before for building. ^[vii]

4 Purpose

In this project, we want to evaluate how Opel fulfilled the requirements of lean production by integrating a new production facility into the traditional Rüsselsheim site.

Furthermore, we will discuss the company’s reasons for that course of action. During our examinations, we will put a special focus on the empirical investigation of the new production site and the development of the General Motors Global Manufacturing System (GM-GMS).

The following questions are to be answered:

- Has Opel been capable of applying lean production at the new plant?
- What are the reasons for Opel’s approach?
- Is the Leanfield approach superior alternative to Brownfield and Greenfield?

5 Method

The theoretical framework is based on insights gained during the course at SSE and prior studies at our respective home universities; literature studies of articles provided during the course as well as complementary papers, articles and books.

General knowledge about the Opel and specific knowledge regarding the Rüsselsheim plant have been achieved through the consultation of an industry professionals’ network (AJKNET); study of articles particularly concerning both Opel the concept of the new plant and first hand information from Opel gained through an interview^[viii] and additional presentations.

During our empirical investigations, we looked at the Leanfield plant concept and evaluated its origins by examining the historical development of plant concepts at General Motors during the last 15 years. Furthermore, we examined the key elements of the Leanfield approach, especially focusing on the business mall concept.

In the analysis part, we will compare how the Opel approach fits into the theoretical framework, if it goes beyond it and how the possible tensions were handled. Finally, the conclusion will contain an evaluation of the concept’s strategic fit.

6 Theory

We will base our theoretical framework on the formulation of lean production principles and the introduction of Toyotaism and JIT as its origin. Furthermore, we will discuss possible benefits of the application of lean principles. We will look at the concepts of supply chain cooperation and integration as well as responsiveness as prerequisites for the implementation of lean principles and point on possible tensions that might appear with these prerequisites.

Jaffee refers to Toyotaism as the alternative to Fordism, putting a stress on supreme quality and productivity as its results. He identifies organization as well as the character of relationship between management and workers as key features. The higher grade of workers’ involvement is described as a result of the Toyotaist system’s structure that introduced organizational features that made it easier for the workers to contribute to the enhancement of processes.^[ix] This Toyotaist system, focusing rather on relational and social aspects is complementary to the concept of just-in-time (JIT), a concept shifting the perspective from Fordist “push”-logic (pushing production into the market) to a market demand-controlled “pull”-logic (demand pulling production into the market)^[x]. The concept of lean production as introduced by Womack et al. (The machine that changed the world, Womack, Jones and Roos, 1990) contains the elements of both, and Shield extracts from their model six key lean principles, i.e. perfect first-time quality, waste minimization by removing all activities that do not add value, continuous improvement, flexibility, and long-term relationships^[xi]. The main benefits an organization can earn from the application of those principles are the use of fewer resources, rapid and efficient product development cycle, higher quality at lower cost, and greater flexibility.^[xii] However, though the origin of “leanness” can be found in the automotive industry, Womack and Jones established the idea of “lean thinking” after having observed parallels to Toyota in other industries, i.e. seeing lean not only as a management theory but as a way of perceiving an organization’s approach to create value for the customer by avoiding waste.^[xiii] By taking this perspective, the combination of a Toyotaist “philosophy” and a responsive approach to uncertainties in the form of changes in demand as introduced in Susanne Hertz’s strategy lecture becomes clear.^[xiv]

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^[i] http://www.hoovers.com/opel/--ID__93251--/free-co-factsheet.xhtml

^[ii] http://www.opel.com/corporate/1/14.html

^[iii] http://www.welt.de/data/2004/01/31/230720.html

^[iv] Vasilash, G. S; Opel approach in Russelsheim; Automotive Design & Production; Sep. 2001.Vol.113, Iss. 9

^[v] Harland, C.M.; Lamming, R.C.; Cousins, P.D. Developing the concept of supply strategy, 1999, p.657

^[vi] Vasilash, G. S; Opel approach in Russelsheim; Automotive Design & Production; Sep. 2001.Vol.113, Iss. 9

^[vii] www.freesearch.co.uk/dictionary/

^[viii] Informal contact, no structured interview

^[ix] Jaffee, D.; Organization Theory - Tension and Change; 2001;p.132

^[x] Ibid.; p135

^[xi] http://www.dau.mil/educdept/mm_dept_resources/navbar/lean/01rdg-lean.htm

^[xii] Ibid.

^[xiii] Harland, C.M.; Lamming, R.C.; Cousins, P.D. Developing the concept of supply strategy, 1999; p.654 ,658

^[xiv] Hertz, S.; Strategy- ASCM; lecture given at SSE; Sep 29 2004