Strategic Supply Chain Management - Supply Chain Online

40 Strategic Supply Chain Management
By 1998, Autoliv
realized that it had to
cut costs without
eroding the quality of
its products.
grew with that trend, but it was growth that came with significant price
erosion in its core products as airbags moved from a specialty item that
could command a premium to near-commodity status.
By 1998 it was clear that Autoliv was under stress. It faced annual
price reductions for its products, mandated by the clout of the big automotive
makers. Autoliv’s supply chain, which ran through numerous independently
operating business units with disparate systems and processes,
was having trouble meeting customer requirements for production and
delivery. Then the economic slowdown at the end of the decade hit the
automotive industry, and demand for Autoliv’s products softened.
With price and demand trending down, Autoliv needed to find major
cost savings to remain profitable and generate enough margin to fund
innovation and maintain shareholder value. Most important, it had to cut
costs without eroding the quality of its products.
Mindful of the magnitude of the challenge,
the company saw its supply chain as
the key strategic asset that it could use to
achieve its business objectives. “One of the
major drivers in our business, and really
the thing that differentiates us, is our high
standard for quality and performance,” says
Norm Markert, president of Autoliv North
America. “We’re not making a cosmetic
element of the vehicle. This is about life
and death. So we need to have an extremely
high level of performance, and we understand that the robustness of our
supply chain is vital to that performance.”
Beginning in 1998, Autoliv embarked on a strategic supply chain initiative
that would change the way the company does business. The change
began at Autoliv’s operations in Utah. The results were so stunning that
the new operating paradigm, dubbed the Autoliv Production System
(APS), is now being rolled out around the globe. “The way we are building
equipment today is different [from] the way we built it a year ago, and
that change is giving us competitive advantage,” Markert says.
ACTUALLY, IT IS ROCKET SCIENCE
Autoliv’s largest airbag assembly plant is in Ogden, Utah. The plant produces
more than 13 million airbag modules a year, supplying automotive
makers in North America and Asia. The Ogden plant sits at the end of a