New Product Development in the Automotive Supply Chain: challenges for SMEs and regional support frameworks

Martin Rhisiart

Cardiff Business School

The Autochain Project

Transregional Innovation Project, funded by the Innovation Programme

PartnersWalesCastilla y LeonAragon

Develop a pilot action for the improvement of the automotive supply chain

Project in Wales focused on NPD/NPI

Automotive sector trends

Modularisation Supply chain restructuring

Reduction in number of platforms Integration with client

GlobalisationTechnological

advancesConsolidation

Platform Strategies of Japanese and selected European car makers

1997Projected 2005

Manufacturer Annual volume

Models Platforms Models/ platform

Volume/ platform

Models

Platforms Models/ platform

Toyota 4.89m 45 22 2.0 222,272 40 7 5.7

Nissan 2.74m 39 24 1.6 105,385 35 5 7.0

Honda 2.3m 26 15 1.7 153,333 30 5 6.0

Mitsubishi 1.98m 21 12 1.8 94,285 19 7 2.7

Mazda 1.1m 18 14 1.3 78,571 16 4 4.0

Fiat 2.7m 30 13 2.3 207,692 31+ 5 6.2

Volkswagen 3.9m 33 11 3.0 358,503 55 4 13.7

Source: FT World Automotive Marketing

Automotive sector in Wales

No original equipment manufacturer (OEM)

Approximately 180 automotive companies

30 Tier 1 companies150 Tier 2 & 3 companies25,000 jobsTurnover of 3.2 billion euros

Difficulties for the sector in Wales

Most high level executive decisions not taken in WalesNo OEMCorporate headquarters of most Tier 1

companies not in WalesCompetition from lower wage

economies, esp. Central and Eastern Europe

Research results

Short term innovationDeveloping and introducing new products

Making improvements to production processes

Large and medium companies

Challenge fully understood by company; appropriate responses are in place/being developed

Small companies (growth)

Challenges are understood but there are barriers to implementation of appropriate responses

Small companies (non-growth)

Challenge is not fully understood and appropriate responses are not being developed

Research results

Long term strategic innovationAppreciation of long term trends in the industry and implementation of appropriate steps

Large and medium companies

Challenge fully understood by company; appropriate responses are in place/being developed

Small companies (growth)

Challenges are understood but there are barriers to implementation of appropriate responses

Small companies (non-growth)

Challenge is not fully understood and appropriate responses are not being developed

NPI/NPD Problems for SMEs

Point of entry into the development process – “customers don’t give suppliers enough time”

IT and communication, especially electronic data interchange. Problems with compatibility of CAD systems

Toolmaking – lack of appropriate level of toolmaking locally

NPI/NPD Problems for SMEs

Technological capacity: Most innovative companies – and those that

had high quality products – had invested heavily in technology

Lack of technological capacity in some companies (especially smaller companies), e.g rapid prototyping, mould flow analysis.

Technology is available (e.g in the Universities) – but has not been exploited to maximum effect

Good practice

Learning from customersLearning best practice in NPD from OEM

Strategic innovationBusiness of today <>Business of tomorrow

Support framework

Tier 2 SMETier 2 SME

Tier 2 SME

Regional Development Agency

Automotive Forum

Tier 1 co

Universities

Tier 3 SMETier 3 SME

Tier 3 SME

Implications for NPD support

Technological needsRDA’s best practice programmes & RTP

concluded that automotive companies were ahead of the game in technology

Autochain project suggests that there is a need for supporting skills and application of new technology

Implications for NPD support

Learning from other sectorsAutomotive companies can learn good

practice from other sectors:Technology upgradingSkills and trainingElectronics procurement

Implications for NPD support

Cluster approachDensity of companies in some areas

could lend itself to a cluster approach, building support facilities alongside management best practice programmes

Implications for NPD support

Strategic innovationCompanies need to be aware of

strategic as well as incremental innovation.

Analysis of trends – economic, market, technological

Foresight studies

Implications for NPD support

Smaller companiesNeed to be innovative but problem of

remoteness from OEMs and Tier 1 companies

Support framework should look at ways of assisting smaller companies – to become more engaged in the NPD process

Comparison of key support elements

Wales Castilla y Leon Aragon

Skills Mostly carried out by companies internally. Some support from FE, TECs, Waterton

Much in house by companies.

Dedicated sectoral high level training facility in place (CIDAUT)

Institute of Technology provides extensive high level technical training

Best practice programmes

Source Wales carries out a range of programmes

[Not known] [Not known]

Technical Resources

Little technology implementation upgrading support available

Many facilities in place but these are spread around, mostly in universities

Lots of technical and testing resources concentrated in CIDAUT

Some based at ITA

Quality Wales Quality Centre [Not known] [Not known]

Forum Welsh Automotive Forum is in place

A new forum is currently being developed

Currently under development

Conclusions for support framework

WelshAutomotive

Sector

Skills

Technical Resources

Best practice programmes

The essential triangle

AutomotiveForum Quality

programmes