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What it takes to serve the automotive 'transnationals.' (tips on dealing with Japanese automotive transnationals)(includes related articles)

Keep your inventories extra lean and your plant extra clean, build quality into your processing system, and be prepared to offer suggestions on designing and reducing costs.

There is a magic formula for doing business with the Japanese automotive transplants--or more currently, "transnationals."

Plastics processors looking to become suppliers to these OEMs must have the resources and determination to build strategic partnerships, world-class manufacturing capabilities, and an ISO 9000-type, front-end quality-management system. Other than that, a cordial introduction by a mutual business associate and a well-organized, extra-tidy shop floor wouldn't hurt, either.

Speaking strictly from the perspective of the bottom line, there is virtually no difference between the Japanese "Transnational Seven" and Detroit's "Big Three" regarding their expectations of suppliers. Both camps are tough customers and want the highest quality components at competitive prices delivered in a Just-in-Time manner. However, important subtle differences between the transnationals and the Big Three do exist "above" the bottom line, in terms of business relations and the criteria for qualifying plastics processors as suppliers. Understanding these subtleties could be the edge in winning a contract to supply Honda, Nissan, Toyota, AutoAlliance International (Mazda), Diamond-Star Motors (Mitsubishi), Subaru-Isuzu, or New United Motor Manufacturing Inc. (NUMMI).

There are consistent patterns among the Japanese OEMs in terms of the standards they use to qualify and select plastics parts vendors. However, it's important to note that while strong similarities can be identified, the Japanese transnationals do not operate as a monolithic unit. Each car builder has its own set of conditions for doing business here and choosing suppliers--one example being different levels of autonomous U.S.-based part design and development capabilities.

U.S. auto production for the seven transnationals in 1991 registered 1,359,042 vehicles, representing 15% of total U.S. vehicle manufacturing, which last year reached 8,805,701 units, according to Ward's Automotive Reports, Detroit. The overall market for parts and materials purchased in the U.S. by the seven transnationals is estimated by PLASTICS TECHNOLOGY to be $10 billion.


There is a perception among some industry observers that most of the plastics processing business for the Japanese transnationals is sewn up by a hidden network of "transplant" molders--a chain of suppliers imported from Japan to support the needs of the OEMs. The assumption is that such an alleged "transplant keiretsu" network (to use the Japanese term for a closely interlinked "family" of corporations) would unfairly block U.S.-owned processors in competing for business with the transnationals and eventually could undermine their business with other automotive customers.

It's true that numerous Japanese-owned processors have been established in the U.S. to support the operations of the transnationals. (We came across over 25 transplant automotive processors during the course of our news gathering. Cincinnati Milacron's U.S. Plastics Machinery Div. in Batavia, Ill., says it has identified around 55 transplant automotive custom injection molders, the great majority of them with under 50 machines apiece.) It's also true, in most cases, that the Japanese car builders maintain a partial ownership in these transplant processors, an extension of the interlocking chain of corporate keiretsu in Japan. It's also true that a number of plastics processing joint ventures have been established in recent years between Japanese and U.S. firms.

Despite all this, there is no evidence of a hidden keiretsu molder network dominating business with the transnationals. Most processors say the "fairness" rating of the transnationals in choosing processors is, at the very least, comparable with the Big Three. Economic and political pressures are keeping the playing field level, while transnational OEMs remain keenly sensitive to the issues of "domestic" content in their vehicles. The contract approval process for domestic parts vendors often is slow, and business relations are still relatively new, but many U.S.-owned processors declare they've been able to compete fairly for transnational OEM business. (Cincinnati has identified around 30 U.S.-owned processors that have won business supplying the transnationals.)

Rather than worry over competition from transnational suppliers, most U.S.-owned processors say the real threat on the automotive horizon is the uncertainty wrought by world-class, global economic competition. All automotive OEMs now find themselves compelled to shrink their supplier base to remain competitive, awarding more work to fewer, more strategically aligned vendors. Such a trend eventually will squeeze out many processors from the automotive market.

Several executives of U.S.-owned automotive processors say that years ago, when the Japanese OEMs first were establishing their U.S. manufacturing base, there was the appearance of a secret supplier network. Many suppliers in Japan did follow the OEMs to North America as a means to help ramp up the car makers' initial operations.

An executive of a U.S. resin producer who directs material development for the automotive market says this early molder migration from Japan was a predictable development, as the OEMs needed a benchmark for quality and cost in the U.S. market. "There was a chain of favorite-son plastics suppliers when the Japanese OEMs first arrived here," one U.S. processing executive recalls. "But now that's changed--the playing field really has leveled over the years." He also points out that every car builder maintains some type of "secret" strategic supplier base for certain key manufacturing sectors. "This is especially true for plastics," he says. "GM, Ford and Chrysler have always had their favorites, too."

Another executive of a U.S.-owned processor says his company doesn't see much competition these days from Japanese-owned suppliers. "There were some Japanese molders that came over to the U.S. when the transnationals were first starting out," he recalls. "Today that trend has slowed down and virtually stopped. Over time we've developed good relationships with the Japanese OEMs and established our own record of quality."


All the molders and automotive OEMs interviewed for this story noted that the molders who get business from tough customers like the Japanese car builders are those that adhere to key modern management concepts.

* Strategic partnerships: The Japanese car companies all say they seek long-term supplier relationships--processors attuned to the OEM's management philosophies and production systems, and with the ability to satisfy quality, delivery, and cost demands. This attitude embodies the "strategic partnership" concept explored earlier this year by PLASTICS TECHNOLOGY (see PT, Jan. '92, p. 48).

Bill Little, purchasing assistant manager for Honda of America Manufacturing Inc. in Marysville, Ohio, explains that the basis of the partnerships between his firm and its suppliers is the understanding that they are both trying to satisfy a common customer (car buyers). "We need a long-term commitment to work with our suppliers," he says. "We're willing to make a commitment to work with them to help improve their quality and competitiveness as long as management is giving its best effort. But we also can be very demanding."

* World-class capabilities: Identifying world-class manufacturing capabilities ranks high on the list of priorities Japanese transnationals use to pick suppliers. "World-class" is another industry buzzword defined in a recent PLASTICS TECHNOLOGY report (see PT, April '92, p. 84).

The Japanese definition of world-class suppliers includes processors that have solid, in-house engineering and part development capabilities; the ability to demonstrate consistent production of high-quality components; and the resources to provide a full range of services, such as assembly, painting and testing.

"We look for strong development and engineering capabilities when we select a supplier," explains Guy C. Wilson, director of trim, chassis and engine engineering for Nissan Motor Manufacturing Corp. USA in Smyrna, Tenn. "In Japan, car builders traditionally rely on their suppliers to provide support in part development and tool engineering and to help us find ways to reduce costs." Nissan has an engineering and development center in Farmington Hills, Mich., that interfaces with domestic suppliers.

World-class quality is a standard that applies foremost to a supplier's processing operations, rather than to any particular parts it may produce, according to Toshiyasu Iwasaki, a purchasing manager for AutoAlliance International Inc. in Flat Rock, Mich. (formerly Mazda, now a 50/50 Mazda-Ford joint venture).

"We think it's most significant that a supplier is able to keep his process under control," he states. "We judge quality by the process as well as by the part." Iwasaki's perspective concurs with one of the pillars of world-class manufacturing philosophy: Quality control must be built into a process from the front end and not just be a final inspection of finished parts.

Most Japanese OEMs say they're not necessarily impressed by the bells and whistles of a fancy automated manufacturing system. In fact, widespread automation at a processor's plant usually signals a warning for the Japanese. They're far more impressed by well-trained, well-managed employees in full command of a processing operation, assisted by limited islands of automation. And, yes, plant neatness and cleanliness are points high up on the Japanese inspection checklist.

* Verifiable quality management: In order to verify that a world-class processing system is functioning properly with quality checkpoints and plans to implement corrective actions when necessary, Japanese OEMs look to see whether a supplier has established a quality-assurance management system. Such a system must be well articulated by management and embraced by the workforce.

The screening process to verify such a system is similar to the accreditation review that companies must undergo in order to be certified under the ISO 9000/Q90 international quality standards (see PT, Jan. '91, p. 53). Much like the ISO 9000/Q90 certification, the Japanese seek to determine whether there is a quality management philosophy in place that clearly defines the goals, standards and protocol used in a supplier's daily manufacturing operations.

"We go through aspects of quality with a supplier's management, but we also look to see how it's implemented on the shop floor," states Little of Honda. "Today everyone in manufacturing is talking about quality, SPC, and JIT, but there are relatively few suppliers who actually put those things into practice."

* Controlling material-in-process: Japanese OEMs say maintaining lean inventories is a mandatory discipline that helps suppliers improve quality and quickly identify processing errors. Over-production and maintaining high inventory levels of materials or finished parts is viewed as wasteful, poor quality, and highly inefficient in terms of total cost control.

When reviewing suppliers, the transnationals judge how well processors control their material-in-process as the foundation of cost control. The goal is to continually fine-tune a process to reduce scrap, synchronize production and reduce inventories to match the exact JIT needs of the OEM. Kevin Smith, manager of parts and components purchasing for Toyota Motor Manufacturing U.S.A. Inc., Georgetown, Ky., says he judges a processor's material flow on six points:

1. The system for ordering and inspecting raw materials.

2. How inventory levels are monitored.

3. Management's communication of a production plan that optimizes labor and machine resources for each day's production.

4. How the amount of materials inventory held at a processing machine or cell is monitored.

5. How the amount of finished-parts inventory held at a processing machine or cell is monitored.

6. The final inspection, handling, packaging and storage of finished parts.

"Our thinking is that a processor must set a production schedule for what he needs to sell on a given day--no more and no less," Smith says. "Once that target has been set, he must get it out the door as close as possible to the OEM's production schedule. We always try to push a processor to drive cost out of his manufacturing system. If they tell us they keep three days of inventory on hand, we'll ask: 'Why not two days?' We don't expect perfection, but we do want to see a processor with an integrated plan for continuous process improvement."

Following his inspection, Smith raises a number of specific questions to identify redundant, wasteful tasks in a processing operation.

* How does a processor receive work orders from a customer?

* How many times is a resin container handled after it arrives on the loading dock and before it reaches the inventory storage rack?

* Is there a spot-quality check of incoming resin shipments at the loading dock?

* Are different resin types segregated in inventory storage?

* How old is the oldest lot of resin in inventory?

* How easy is it to find a specific lot of resin in storage (not just for the inventory manager, but for the fork-lift operator)?

* Is there a simple visual identification method for locating different resin types?

* How does a machine operator signal when more resin is needed?

* How long does a machine sit idle while more material is moved from inventory?

* How much inventory is held at a molding station during production?

* Where are finished parts stored in the production area?

* How long does it take before a finished part is inspected, packaged and shipped?


Speaking generally (and not for attribution), nearly all processors interviewed said the biggest distinction between the Japanese transnationals and the Big Three is the way each group interacts with suppliers in the area of pricing and cost reduction.

The strong consensus is that Japanese "business culture" shows more willingness to work cooperatively with suppliers to reduce costs. By comparison, the Big Three (GM in particular, say our sources) still tend to focus mainly on imposing their own financial guidelines for processors, with some vestiges of the traditional heavy-handed, adversarial OEM/supplier relationship apparently carrying over.

"The transnationals want to build a long-term relationship with their supplier base," one processing executive points out, explaining that the Japanese set out to attack the cost problem alongside their suppliers. The job of the supplier, he says, is to become better than the best in its class, showing that it is committed to cutting costs through continuous process improvement. "That's not always the case with the Big Three," this molder says. "They still try to reduce cost through competitive market pressures and low-price bidding."

Processors are quick to add that the Big Three "have come a long way" in terms of improving relations with suppliers and being more open to forming alliances to address manufacturing problems. Most processors say the Big Three are rapidly "closing the gap" with the Japanese in terms of supplier relations and joint technology-development programs.

Many processors also say the Japanese transnationals have far more consistent or "level" production schedules than their U.S. counterparts, which helps to smooth out the rough edges associated with lean inventories, JIT manufacturing and delivery.

Ken R. Franklin, plant manager of United Technologies Automotive in Morganfield, Ky., says the Japanese operate under a theory of "levelized" production with steady, more predictable targets for suppliers to meet. He says the Japanese tend to stay the course with their initial production strategy, having already forecasted market changes at the start of the platform build cycle.

The Morganfield plant of United Technologies Automotive produces center consoles, instrument panels, door panels and interior-trim parts for Diamond-Star Motors in Normal, Ill. (a unit of Mitsubishi Motors Corp.), Toyota, and NUMMI in Fremont, Calif., as well as the Big Three. The company paints some 80% of the parts it molds, and provides full assembly on 60%. "Levelized production offers advantages to us in terms of JIT delivery and lean inventory," he says. "We can count on a predictable volume range and then schedule our production accordingly. It would be difficult for us to manipulate our inventories and processing schedules in a JIT system if we didn't have that consistency from the OEM."

Franklin says reliable, levelized production targets are essential, given processing requirements such as tool changes. Last June the Morganfield facility made 384 mold changes with 104 active tools on 17 injection presses.


Expanding Into U.S. Car Companies

Toyoda Gosei (USA) Corp., a traditional supplier to Toyota in Japan, opened its plant in Perryville, Mo., in early 1987. However, the first U.S. customers for Toyota Gosei's steering wheels, air-bag assemblies, interior/exterior parts and plastic gears, actually were Ford and Chrysler.

President Atsunori Murata says his company had achieved a dominant market share in Japan for steering wheels and brake hoses, and decided to expand into the U.S. market to do business with all car companies, not just Toyota. He says the key for his company will be to achieve a 30% increase in productivity during the next year through worker improvement in such areas as the Toyoda Production System and the "5S" activities.

The plant has a payroll of about 520 (including 11 Japanese managers), which is expected to grow to 650 by March 1993. One goal is to transfer full management responsibilities to Americans during the next three years. The company, one of only four air-bag assemblers in the U.S., recently opened a technology and engineering center in Detroit.

The Perryville operations include 47 injection machines (up to 880 tons, mainly Toshiba and Kawaguchi units, with six specialized Graco machines for end-cap molding); four Krauss-Maffei extrusion lines with 50-mm twin-screw extruders; 44 Cannon urethane RIM molding units for steering wheels; six painting lines; three welding robots, and one metal die-casting machine.

The Toyoda Production System streamlines processing through the elimination of waste (muda in Japanese) in material inventory or over-production. It's built on two pillars: Just-in-Time and Jidoka. For Toyoda Gosei, JIT refers to manufacturing only what, when and exactly how much product is needed by the customer. Specific customer orders are "pulled through" the system, initiated by a kanban instruction card, which travels with the job as it proceeds through the various work stations.

Jidoka is the Japanese word for automation, and refers to the capability of workers or machines to stop a production line to correct malfunctions. The focus is to resolve problems at the source, prevent defects from being passed down the line, thereby building quality into the manufacturing system. Machine operators hold primary responsibility for equipment maintenance under this system.

Murata points out that the Japanese concept of automation means machines assisting, not replacing, skilled workers. "We must first establish quality in the manufacturing process with people before we can automate with machines," he says.

The "5S" activities are a production worker's personal code for maintaining an orderly workplace. "Everything starts with 5S," Murata says. The S list includes seiri (preparing or straightening up a work area); seiton (sorting of tools and materials and putting them in their proper place); seiketsu (general cleanliness of an area); seisou (maintaining the cleanliness of a work area); and shitsuke (following necessary procedures for cleanliness and safety).

The facility is driven to maintain lean inventories, with an average of only 1.5 days of finished goods on hand. As an example of its JIT capabilities, Toyoda Gosei produces 250 different components and systems for Toyota eight times a day (eight separate, daily truck shipments).

Daily activities also include morning exercise sessions and general meetings with workers and 10 plant general managers. There are weekly department engineering meetings, and the plant holds monthly "summit" planning sessions, where managers and engineers discuss quality, cost, plant safety, and production efficiency.


Engineering Support Is What Sells

Engineering support is considered to be a major item on the world-class resume of Automotive Industries Inc. in Strasburg, Va. A producer of interior parts and blow molded components, the company does business with Honda, AutoAlliance, Nissan, and Diamond-Star, as well as the Big Three. Automotive Industries initiated its relationships with the transnational car builders by sending its representatives to Japan.

Chairman William H. Clement says engineering support to deliver total systems is the special element that provides his company with the competitive edge in automotive. "We can provide engineering assistance for a total system, not just a single component," he says. "The Japanese have a management philosophy that focuses on process engineering--that's our edge." Lean inventories, JIT and statistical process control (SPC) are all standard practices needed to do business with any automotive builder today, according to Clement.

The Strasburg plant has 54 injection presses, which are monitored in real time by a Mattec central computer control system. The Mattec system monitors cycle times and process temperatures and pressures, and also tracks resin inventory and scrap rates. There are numerous robotic material handling and painting applications throughout the facility. The Strasburg installation also makes use of an extensive quality-control and testing laboratory, as well as full CAD engineering and part development capabilities.


A Full-Service Partner

Extending the long-standing supplier/vendor relationship between the two parent corporations in Japan, Kantus Corp. set up a manufacturing facility in Lewisburg, Tenn., in 1985, primarily to support the U.S. launch of Nissan. Kantus, a wholly owned subsidiary of Kansei Corp. of Japan, operates as a strategic partner with Nissan, providing full design, engineering, and assembly of instrument panels. Besides injection molding, Kantus has full production and assembly capabilities for instrument clusters, gauges and electronic control modules. Other plastic components processed by Kantus include radiator grilles, lid clusters and various interior/exterior trim parts.

Along with its processing facility in Lewisburg, Kantus also has an engineering center in Southfield, Mich., and currently is being reviewed as a Q-1 supplier for Ford. A second Kantus production facility is being built in Mexico.

Les Pendergrass, sales/marketing engineering for Kantus, says the firm is actively involved in the design of instrument panels for Nissan, as well as the full assembly and painting of the product. "To be a supplier for a company like Nissan, engineering and design capabilities are almost a necessity," he says.

Kantus is located just an hour's drive away from Nissan's plant in Smyrna, Tenn., facilitating its role as a lean-inventory, JIT strategic partner. Pendergrass says his firm usually has less than one day of inventory on hand. Nissan electronically places daily work orders with Kantus via direct computer-to-computer links, or what is known as electronic data interchange (EDI).

Because of its stringent JIT requirements, Kantus focuses its management efforts on monitoring efficient material-in-process flow throughout the plant. The firm uses a central resin control system to feed its 38 injection presses, 18 of which have hot-runner systems. The injection molding stable includes 11 Ube machines (450 to 2500 tons), 11 Cincinnati Milacrons (15 to 225 tons), six insert molders (two JSWs, four Tabatas), seven Toshibas, and three HPMs. The facility has urethane foaming machines, various robotic systems and materials-handling devices, as well as two painting lines. The 317,000-sq-ft facility has a payroll of 589.


Having a Say in Assembly

Operating as a strategic partner to Honda, London Industries Inc. in London, Ohio, is now involved in joint development and engineering of parts for the OEM's 1994 vehicle platforms.

London Industries, which began production in March 1989 and has a payroll of 300, is a joint venture of the Worthington Custom Plastics unit of Worthington Industries Inc. in Columbus, Ohio; and two Japanese firms, Nissen Chemtech and Sumitomo Corp. London produces interior components such as side linings and pillars.

Honda and London share a "BP" (best position) program, which helps refine assembly efficiency. BP begins with Honda engineers teaching London assembly operators new methods for evaluating their process, looking for potential efficiency improvements. London also participates in Honda's "guest engineer program," which enables staff members of both companies to jointly improve part design.

Keith A. Imhoff, London's general manager, says the company is evaluating a color masterbatching system to allow color changes of parts at the injection press. London has 17 injection machines ranging from 75 to 1500 tons (11 Cincinnati Milacrons, four JSWs and two HPMs), which are fed by a central pneumatic pellet-conveying system.
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Author:Gabriele, Michael C.
Publication:Plastics Technology
Date:Sep 1, 1992
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