Project Delays Put Pressure on Profit Margins in the Automotive Industry
Well-known automotive manufacturers and suppliers have become a regular part of the headlines. Restructuring measures are often the order of the day, usually triggered by declining sales figures. New mobility solutions, changing customer needs, unstable supply chains, and increasing protectionism are causing significant fluctuations and making reliable planning more difficult. According to a PwC analysis of the North American automotive market, the share of delayed projects or new vehicle launches increased from 13% in 2017 to a total of 55% in 2023. High levels of delays are also expected in the coming years.
The main causes include production and supply chain disruptions, shortages of skilled labor, capacity bottlenecks, and shifting customer preferences. New electric vehicle platforms and additional model variants further increase complexity and lead to losses during ramp-up and phase-out periods. For European suppliers, it is becoming increasingly difficult to maintain their already low margins (average EBIT margin of 3.6% in 2024).
Volume-Flexible Factory Secures Profitability Amid Fluctuating Demand
Fluctuating demand volumes and postponed production launches lead to poor capacity utilization and operational inefficiencies. In addition, quality issues result in frequent changeover and idle times.
A flexible production system safeguards profitability despite high volatility by enabling short-term and cost-efficient responses to volume fluctuations and launch delays.
To achieve these goals, Horn & Company has developed the “volume-flexible factory” methodology together with its clients. It is characterized by two key features: a scalable production system (“Flexible Manufacturing”) and an adaptable, easy-to-manage organization (“Flexible Organization”), combined with the greatest possible flexibility in cost structures. A variably scalable production system ensures high capacity utilization regardless of fluctuations in demand volumes. Flexible Manufacturing is based on three key building blocks: Standardization: Scalable Setup: Production Control: In summary, “Flexible Manufacturing” enables rapid responses to changing conditions while ensuring high capacity utilization. It also significantly shortens the launch time for new projects. However, an additional component is required to safeguard profitability: the flexible organization. Self-managing, autonomous teams and flexible capacity structures: To avoid productivity losses in workforce management during fluctuating demand situations, forward-looking capacity planning combined with the greatest possible flexibility of capacities is essential. In this context, self-managing organizational units have proven particularly effective. These highly autonomous teams, built around a central core workforce, operate independently as a “company within the company” and take full responsibility for achieving targets within their respective areas. The autonomous core teams are complemented by flexibly deployable capacities, for example through the long-term integration of external resources and strategic partnerships. By combining these building blocks, the “Volume-Flexible Factory” achieves the necessary flexibility to respond quickly to volume changes and fully capitalize on opportunities during ramp-up phases.Flexible Manufacturing
The first lever of the “Volume-Flexible Factory” systematically analyzes processes and equipment, with a strong focus on standardization and complexity reduction. The reusability and interchangeability of equipment are increased, while planning and operation are standardized. Instead of operating many different machines with low utilization rates, production volumes are consolidated onto a smaller number of standardized systems.
Based on this standardization, manufacturing cells and production lines are then defined to significantly shorten planning and implementation times while reducing installation risks. These manufacturing cells are predefined within a standardized grid, including all necessary interfaces, and also take into account logistics supply, tool changes, peripheral services, and maintainability. As a result, project lead times are reduced and both planning and implementation costs decrease significantly.
The third building block for optimally adapting to demand fluctuations lies in production control. By intelligently linking multiple production steps, it is no longer necessary to control each machine individually (process integration). This reduces control complexity and results in significantly simplified operations. A modern Sales & Operations Planning (S&OP) process with different planning horizons ensures optimal demand leveling and maintains efficient operations even during volume declines. Finally, self-regulating control loops based on the “pull” principle ensure optimal inventory levels and on-time line supply.Flexible Organization
By leveraging these building blocks, the “Volume-Flexible Factory” achieves the necessary flexibility to respond quickly to volume changes and fully capitalize on opportunities during ramp-up phases.
Case Study
At a leading automotive supplier for interior components, we simplified machine and tooling design within just a few months, defined standardized production modules, and implemented a standardized grid structure. The result: throughput times were reduced by 50–85% depending on the product group, while the implementation time for new projects was shortened by approximately two thirds.
The customer was so convinced by the new concept that they subsequently designed and realized a “lean” factory based on the new standard within just one year.
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