Want a peek at the future of automobile development? Take a look at what Chrysler Corp. has been doing for the past ten years.
In the late 1980s, the nation's No. 3 automaker broke with the long-held belief that new-product development was exclusively an engineering process and began pairing design engineers with their cohorts in purchasing, manufacturing, and finance. The Auburn Hills, Mich.-based company also integrated key supply partners into the process when next-generation vehicles were still just visions.
This move was partly out of necessity; lacking the deep pockets of a Ford or General Motors, Chrysler was forced to rely on its suppliers for design, development, and manufacturing assistance. But the results have been impressive, to say the least.
Since adopting a cross-functional design team process, Chrysler has slashed new-vehicle development cycles by more than 40% and reduced costs dramatically. Evidence: In the late 1980s, development leadtimes for domestic automakers often spanned five years. Today, Chrysler typically gets new cars or trucks from concept to market in three years or less.
Such rapid development cycles allow Chrysler to be more responsive to changes in customer needs and have played a large role in making Chrysler the most profitable car company in the world (on a per-unit basis) for two years running.
The cross-functional development process behind such achievements has improved the quality and manufacturability of Chrysler's vehicles. It also has allowed the automaker to smooth its internal operations.
"It used to be that an engineer would do a design and hand it off to purchasing to get quotes from suppliers," says Frank Klegon, executive engineer of interior and thermal systems for Chrysler's large-car platform. "That was a very inefficient process."
Indeed, Jim Sorensen, director of exterior quality and supplier management for Chrysler's procurement and supply group, says the "throw-it-over-the-wall" mentality that once existed in Chrysler's design process (and still prevails at many companies today) created barriers and an attitude of distrust between internal functions as well as between the automaker and its supply base.
"Such functional barriers didn't provide any value and were actually having a negative impact on the time, quality, and manufacturability of our designs," says Sorensen, adding that these traditional barriers hindered early acceptance of the cross-functional development process. "People had to be convinced that they could trust the information and expertise another function was providing. This became extremely important when we brought suppliers into the process. If there was a lack of trust between Chrysler and the supplier, the process clearly would not work. We have worked very hard at eliminating the adversarial relationship that once existed between internal functions and between Chrysler and our suppliers. We now believe we work together as one team with a common objective: To provide the best possible vehicle to the customer."
A solid platform for design
Chrysler keeps design squads closely aligned with the products they develop by assigning each team to one of five vehicle platforms: small car, large car, Jeep, truck, and minivans. These cross-functional "platform teams," which often include as many as 80 members, are self-contained entities that have cradle-to-grave responsibility for each car assigned to the platform.
Each team is headed by a general manager drawn from Chrysler's engineering group. A procurement executive on each team acts as the general manager's right-hand man, overseeing sourcing decisions made by buyers and ironing out any quality, capacity, or other issues that crop up between Chrysler and suppliers. Platform team members discuss these and other issues at weekly "convergence meetings."
While engineers continue to handle the physical design of new vehicles, other team members offer valuable input and expertise on particular parts, assemblies, and processes. Example: Platform team buyers, many of whom have degrees and backgrounds in engineering, business, or manufacturing quality, often are considered the resident experts for extremely complicated systems or components, such as facias, the styled front or rear body panel that often defines a vehicle's look.
"Facias have high variable and investment costs and pose a potentially significant quality risk," says Sorensen. "By dedicating a facia buyer to the platform team we are putting experienced people in a position where they can ensure that we're making the best possible decisions and avoiding potential problems."
Klegon says purchasing, finance, and manufacturing have driven engineers to be very cost-conscious. Good thing. Chrysler says it can have an impact on 85% of the cost of a vehicle during the design phase, making accurate information on component, assembly, and process costs vital to the successful development of a new vehicle.
"From an engineering perspective, to truly do an efficient design, you need to know what your costs are," says Klegon. "Input from purchasing, finance, manufacturing, and suppliers allows us to sit down and develop business and cost targets for a particular system or component."
Once an overall budget has been set for a new vehicle, the platform team determines how much can be spent on each part and assembly. This process is crucial because Chrysler measures a platform's performance on how well the team meets or beats these targets. Team members set target prices for parts through a combination of value analysis of designs, market knowledge, and "tear-down" sessions during which Chrysler dissects a competitor's vehicle and thoroughly examines each component.
These tear-down sessions also are used to solicit design advice from the supply base. During these sessions, suppliers are asked for ideas on how to integrate the best parts or assemblies into a future Chrysler vehicle. While the platform team typically identifies the best suppliers for a new-vehicle program based on purchasing's knowledge of the supply base and a supplier's past performance, tear-down sessions are sometimes used to determine the best supplier for the job.
"Instead of having separate meetings with different weatherstrip manufacturers, for example, we would have one meeting and lay the same challenge and objective out to all the suppliers," says Sorensen. "We would ask these suppliers to examine their processes and products and determine if there is a methodology or part [in the competitor's vehicle] that would be beneficial to the two of us if we implement it in a future vehicle."
Suppliers typically submit design suggestions through Chrysler's Supplier Cost Reduction Effort (score) program, which taps the supply base for ideas on how to reduce costs or improve product or process performance. All score proposals are evaluated by a Chrysler buyer before being passed to an engineer for use in future vehicle designs. The program has been wildly successful, generating $1.23 billion in overall savings for Chrysler and increasing the company's profits by $325 million in 1997 alone. Savings from implemented proposals are usually shared equally between Chrysler and suppliers.
Suppliers join the team
Suppliers play a crucial role in Chrysler's vehicle development process, providing valuable insight on new technologies, designs, and processes. In most cases, suppliers are involved in a project from a program's inception. This allows them to direct Chrysler toward top-performing and cost-effective components and assemblies. It also ensures that the platform team designs vehicles that suppliers will be able to support.
"With suppliers involved so early in the process, we can start working on design with manufacturability in mind right out of the box," says Klegon. "That way we're not creating a design and then trying to adapt it to a specific supplier's process capability. This provides us with opportunities to improve cost efficiency and quality."
Early involvement also helps suppliers make the right investments in equipment and personnel to support the upcoming platform or vehicle. For example, Chrysler uses an automated design system called catia (computer-aided-three-dimensional-interactive application) to develop new vehicles. Suppliers are required to be catia-capable so they can electronically swap designs with the platform team. catia "drawings" also are the building blocks for virtual prototype vehicles, known as digital mock-up assemblies (DMAs), which Chrysler uses to determine how an assembly or vehicle will fit together and operate before actually building a physical model. DMAs not only save on material costs but also speed the vehicle development process.
"For the 1998 LH program, we never built a physical mock-up until we built our first complete or 'program' car," says Klegon.
Chrysler periodically gives a supplier primary responsibility for designing a component or assembly, such as a seating system. In such instances, the system or first-tier supplier--which typically has extensive design, development, and testing capabilities of its own--is asked to determine the target prices of the individual sub-components that are to be sourced from second- and third-tier suppliers.
"We manage this from a system perspective," says Klegon. "A seat includes many components, such as a power-seat mechanism and leather trim. The main supplier is responsible for these sub-components. We get a complete seat-set target price [from the supplier] and that's what we track and measure against."
Many times system suppliers also are expected to take on management responsibilities for lower-tier suppliers. Example: ITT Automotive Inc., a major brake and chassis manufacturer, designed and will manage the supply base for the brake system on the 1999 Jeep Grand Cherokee.
This process, known as the extended enterprise, keeps suppliers closely aligned with Chrysler's needs and objectives. Says Sorensen: "When it comes to developing new vehicles, it's not whose company logo is on your hat. We all have a common objective and try to function truly as a team."
While the platform concept closely aligns teams with specific vehicles, Chrysler has not simply swapped one rigid design structure for another. Platform teams are intended to be fluid organizations, expanding and contracting as products are defined and developed. In addition, Chrysler promotes the transfer of knowledge and best practices across platforms.
"If we find something that worked extremely well on a given platform, we will spread that to other platforms," says Sorensen. This process, which Chrysler calls "best-practice sharing," also helps the automaker standardize components across platforms, which can lead to quicker development cycles, lower costs, and more consistent quality levels.
Similarly, engineers share technology, process, and design knowledge across platforms through a series of "tech-clubs," which are aligned with specific product or process lines, such as interiors, vehicle development, and bodies.
"What we try to do through these tech-clubs is share our best practices and some of our strategic issues so we're not constantly re inventing the wheel," says Klegon. "The continuous improvement we've identified in one platform gets shared across all the platforms."
Continuous improvement is a major objective for Chrysler as well as its supply base. Through the score program, the automaker challenges each supplier to meet an annual savings target of 5% of its sales to Chrysler. Platform teams are striving for (and achieving) similar improvements in the vehicle development process.
Example: Chrysler debuted the LH passenger-car platform in 1993 after just 39 months of development. The LH team was able to whittle the time-to-market cycle for the 1998 platform--which includes the Concorde, Intrepid, 300-M, and LHS--to just 31 months while simultaneously shaving $75 million off development costs.
"The platform-team approach gives us a method to constantly reduce design costs, improve quality, and bring product to market faster," says Sorensen. "Working closely with our supply partners and using risk analysis assures us that we're giving the customer a vehicle that has the greatest value to him, rather than providing him with a vehicle we thought he would like."
And, when it comes to developing new vehicles, Chrysler sees pleasing the customer as its number one design specification.