Strategic Supply Chain Management - Supply Chain Online

AUTOLIV PROFILE: Applying Rocket Science to the Supply Chain 45
pliers. “Our supply base represents over 60 percent of the total manufacturing
costs for our products,” says Markert. “So we recognize [that] our
extended supply chain is vital both from a day-to-day operations sense
and for our future process and product development.”
For years, Autoliv used all the traditional
approaches to manage its extended
supply chain. Commodity teams aggregated
demand across business units and monitored
the global supply markets. Prospective suppliers
were qualified carefully, and once
engaged, their performance was monitored
closely. To support Autoliv’s transformation
to the new production system modeled after
Toyota’s, however, the company’s supply
chain strategy had to evolve.
Autoliv’s supply base
represents over 60
percent of the total
manufacturing costs
for its products.
Beyond just tracking cost and performance of each component of
the supply chain, Autoliv had to expand its focus and look at the bigger
picture—the total cost of ownership of its products and the flow of goods
and information from one end of the supply chain to the other. “What we
are finding, in many cases, is that there is not a lot of money to be saved
in individual parts. The real money to be saved is in the interfaces along
the supply chain,” Markert says. “There are trade-offs that can be made to
realize substantial savings in a system that aren’t readily apparent when
you are looking at a component level. So that has led us to increased collaboration,
both within the company and with our supply base, to identify
these interface costs and take them out of the supply chain.”
For example, Autoliv’s inflator business and its airbag design and
assembly business had always operated separately. The inflator unit
“sold” products to the airbag unit, and that was the essence of their relationship.
The units each worked to cut costs and maximize efficiency, but
their individual strategies did not align for the overall benefit of the company.
Design changes were made in the inflator technology that saved
pennies but forced the airbag designers to make changes that ultimately
increased the finished product’s cost.
As a result, in the summer of 2002 Autoliv consolidated the manufacturing
units into one structure, with all the design teams and assembly
units “incentivized” to reduce the total cost of production. “By bringing
the systems together, we can make the trade-offs that make sense for the
entire enterprise. Now we design the inflator in a way that costs pennies
more but captures savings down the line as we integrate it in the airbag,”