This Month in News Digest

Are Chinese Automotive Suppliers Overbuilding?

Chinese automotive suppliers might be setting themselves up for a serious overcapacity problem, according to a recently released study by the Automotive Industry Action Group.

The quest to add manufacturing capacity in China is taking place at a faster rate than expected market growth, raising the concern of a possible shakeout within five years, the study reveals. It also found that information technology spending by automotive suppliers in China was generally low, with more than three-quarters of respondents investing less than $100,000 per year in IT. Respondents indicated that they have “overwhelming” problems in finding and retaining good staff, and that the lack of retention is a barrier to successful development. A lack of recognized standards was a problem for the respondents, too. Less than one-quarter indicated that they use enterprise reporting systems for automating operations.

“This study makes it clear how the standardization of business process and technology could catapult China into a crucial position in the global automotive industry,” says Andrew J. Cummins, executive director of AIAG. “Specifically, the research suggests the urgent need for suppliers in China to embrace common criteria, benchmarks and tools for business process and performance in order to achieve the cost-competitiveness they seek.”

Although the building blocks of advanced manufacturing concepts aren’t yet present in China, more than two-thirds of companies surveyed reported that they want to improve their business processes to benefit from inventory management, more accurate production planning and tracking through bar-code labeling.

More than half of respondents plan to increase annual manufacturing capacity by more than 20 percent over the next five years, though just one in five expects market demand to equal that rate of growth. Moreover, Chinese domestic automotive suppliers are focused on exports to Southeast Asia, while foreign ventures plan exports to North America and Japan as well. The study concludes that both Chinese domestic companies and joint ventures alike perceive cost-competitiveness--not quality--to be a significant barrier to increased exports. Furthermore, competition among manufacturers may be a product of production efficiency and economies of scale.

“This study reveals extraordinary developments in the region’s automotive industry, and the volume of response suggests that China’s automotive suppliers are both aggressive and ambitious in their efforts to become an engine for global industry,” says Dan Blake, global automotive industry leader at IBM Business Consulting Services. “A critical success factor will be the extent to which they invest in the infrastructure required to make the engine a cost-competitive proposition.”

The study, organized by the AIAG and IBM Business Consulting Services’ Institute for Business Value, examined how China’s automotive suppliers use process and production technology. The survey was conducted by Economist Corporate Network, and surveyed about 300 respondents serving the light-vehicle market in China. Of the suppliers surveyed, 57 percent were purely domestic Chinese companies and 43 percent were foreign joint ventures.

For more information, visit www.aiag.org.

Executives Approve of Baldrige Criteria--They Just Don’t Use Them

Knowledge about the Malcolm Baldrige National Quality Award and Baldrige criteria is widespread, though not very complete, according to a report based on an in-depth survey of top executives.

The report discusses the widespread perception of the Baldrige Award--which is found to be overwhelmingly favorable by executives--and suggests that emerging industries, especially those that are service-related, aren’t as aware of the program or criteria as one might expect. A large percentage of those surveyed (61%) also indicated that the application process is too complex.

Even so, use of the Baldrige criteria among larger companies was found to be widespread: 76 percent of manufacturing executives, 71 percent of Fortune 1,000 executives and 62 percent of service organization executives indicated that they were likely to use it. Seventy-four percent of organizations with more than 10,000 employees used the criteria compared to 68 percent of those with fewer than 10,000 employees.

The survey also found that service, health care and education have the least knowledge about the award and criteria. In those segments, 50 percent to 80 percent of executives reported varying degrees of uncertainty about the process. Among the Fortune 1,000 companies surveyed, nearly eight out of 10 (primarily service organizations) said they didn’t intend to apply for the Baldrige Award in 2004. The reasons given were a lack of familiarity with the criteria, a lack of understanding of the award, and the perceived complexity and cost of implementing the criteria and applying for the award.

Many executives reported that the feedback given to applicants after site visits was extremely valuable. Baldrige winners reported that winning the award has been wholly beneficial.

“The reward of it all has just been amazing,” said one respondent in the education field. “Being able to share and have validation of what’s been happening and being able to reach so many more organizations that have had the same experience. Having opportunities to get out to places that probably would never have considered speaking to a small school district from Alaska [has been great].”

Most Baldrige winners reported that they continued to use the criteria after their win, though several reported a drop in the attention given to continuous improvement afterward.

The study was completed in December by the National Institute of Standards and Technology’s Malcolm Baldrige National Quality Program and posted on the organization’s Web site in July. Booz Allen Hamilton Inc. conducted the survey for NIST.

To view the entire survey, visit www.baldrige.nist.gov.

CMM Users Share Knowledge

July marked the 20th anniversary of the Coordinate Measurement Systems Conference, the only conference solely devoted to the users, services and OEMs of close-tolerance coordinate measurement systems, software and peripherals.

This year’s conference and exhibition was held in San Jose, California, and included products from more than 40 vendors, including FARO Technologies Inc., Leica Geosystems, Metrologic Instruments Inc. and Romer CIMCore. Prominent at this year’s show were a number of metrology products geared toward in-place 3-D measurement of large assemblies such as aircraft, automobiles and even a Tyrannosaurus Rex. The technologies displayed included laser trackers, radar trackers, photogrammetry and articulated inspection arms.

Nearly 20 technical seminars were presented by representatives from both industry and research, including Lawrence Livermore National Laboratory, The Boeing Co., Stanford Linear Accelerator Center, Airbus and Fermi National Accelerator Laboratory.

Although the show is small compared to behemoths such as IMTS or Quality Expo, many 3-D metrology vendors and users alike consider attendance at the CMSC a necessity. This year’s attendance was about 300, allowing attendees a lot of direct interaction with vendors and each other.

“Even though conference members are competitors, they share information on innovation, standardization and education,” says Bob Clement, quality planning engineer for BMW Manufacturing Corp. and CMSC chairman. “The core of what this show does is to provide common solutions for the same problems faced by different industries,”

Many vendors report that while they are often lost in the crowd at larger shows, CMSC provides a small but highly targeted audience for their products and a chance to interact with current customers.

For more information on this year’s CMSC, visit www.cmsc.org.

Baldrige Winners to Share Winning Strategies

Representatives from last year’s Baldrige Award-winning companies will address two upcoming conferences for quality professionals.

The conferences will be held in Oak Brook, Illinois, and San Antonio, Texas, on Sept. 10 and Sept. 30, respectively. Representatives from 2003 Baldrige Award winners Medrad Inc., Boeing Aerospace Support, Caterpillar Financial Services Corp. U.S., Stoner Inc., Community Consolidated School District 15, Baptist Hospital Inc. and Saint Luke’s Hospital of Kansas City will provide insights into their companies’ Baldrige journeys. Recipients of previous years’ Baldrige Awards are also expected to attend.

Senior leaders of the award-winning companies will make presentations and answer questions about the seven Baldrige criteria categories. The conferences will also feature a combination of plenary, concurrent and town hall-style presentations where attendees can maximize learning and networking.

The Illinois conference will be held Sept. 10 at the Marriott Chicago Oak Brook, with a preconference workshop on Sept. 9. The Texas conference will be held Sept. 30 at the Crowne Plaza Riverwalk, with a preconference workshop on Sept. 29. The pre-conference workshops are designed for those just starting or investigating the Baldrige process and will provide an opportunity to learn the basics of the Baldrige criteria, how to begin self-assessments and an overview of the resources available to help organizations in their quality efforts. Preregistration is required and is available with or without regional conference registration.

In other Baldrige news, the 2004 Baldrige judges will announce this month the recipients of site visits for 2004 award applicants. According to the National Institute for Standards and Technology, 60 companies applied for Baldrige awards this year. The winners are scheduled to be announced in November.

For more information, visit www.baldrige.nist.gov.

Manufacturing Execution Systems Enhance Performance

Factories that use manufacturing execution systems perform significantly better than those that don’t, according to a recent study by Rockwell Automation and Industry Directions.

Data from 106 plants surveyed reveal that regardless of size, industry or process type, facilities using MES outperformed and improved faster than those that do not use MES in key areas such as profitability, productivity and the ability to improve on specific cost and customer service metrics.

“We’ve always believed production facilities that effectively deploy MES enjoy performance advantages over other plants, and these findings clearly indicate that they do,” says John McDermott, Rockwell Global Manufacturing Solutions senior vice president. “As many other companies implementing Six Sigma and other business initiatives have discovered, one of the keys to improvement is having accurate, real-time data to identify the root cause of problems. MES can provide access to detailed production data in a context that helps companies make sound business decisions.”

The study focused on survey data submitted by companies judged to be among the top-performing plants in North America between 1998 and 2002. The database included responses to 237 questions on which the companies were evaluated. Of the 106 companies in the study group, 58 use MES and 48 do not.

Analysis of the figures showed plants that use MES have higher productivity and were able to improve operational productivity faster than competitors. Productivity growth ranged from 70 percent to as much as 600 percent for plants using MES. In addition, plants using MES were able to reduce costs more dramatically than plants without it, including a 57 percent greater reduction in energy costs.

The study also found that plants with MES have 11 percent better process capability and 15 percent larger yield gains. Furthermore, plants using MES have greater reductions in both manufacturing and order-to-ship cycle times and are more advanced in developing a true build-to-order model to meet just-in-time demands.

Other key findings include:

New employees require less training in plants using MES, and training for all personnel relies more on practical training and less on classroom learning.

MES capabilities, including access to real-time data on product and process parameters, result in higher average machine availability and fewer maintenance problems.

For more information, visit www.interwavetech.com.

Canadian City Receives ISO 9001 Registration

A small town in Eastern Canada recently became the smallest North American city to be recognized with registration to ISO 9001.

Fredericton, the capital of New Brunswick, received the registration at a special city council meeting this month. It took about five years to complete the auditing process, which was conducted by QMI Management Systems Registration.

“This certification communicates an important message to the citizens who depend on our services,” says Fredericton Mayor Les Hull. “It clearly demonstrates that the city has passed the acid test of an independent audit of our operations. This gives our citizens added assurance that their tax dollars are being well spent.”

According to QMI, the registration was notable because Fredericton achieved registration on its first attempt and with no nonconformances--something that is rare in municipal audits.

“We are enormously proud of this accomplishment,” says Paul Stapleton, Fredericton city administrator. “The sustainability of any organization depends primarily on its ability to take into account the requirements of customers, as well as their future needs. The city of Fredericton’s commitment to continuous improvement though our registration helps us to do this.”

Fredericton has a population of approximately 50,000 and a municipal staff of about 300. The city provides more than 150 services to residents.

The city opted to register all of its operations to ISO 9001, recognizing that many of its processes are interrelated and affect the overall quality of municipal services. QMI will return to Fredericton every six months to monitor progress and the city’s continuous improvement efforts.

“The city of Fredericton’s motivation has not been any external pressure, but rather an internal drive for continuous improvement of our operation and our services,” says Sheila McParland, the city’s quality manager. “We wanted a tool to help us build upon what we were already doing to improve customer service delivery and that can help us constantly implement best practices in local government.”

For more information, visit www.city.fredericton.nb.ca.