03/28/2005 – MISSISSAUGA, Ontario, Canada

As published by:
autoMOTIVE
'from concept to consumer' Magazine

It is over 50 metres long, nearly three metres wide and not so much sprays as lightly coats every Audi A6 steel body panel destined for shipment to Changchun, China. But this ‘oiling machine’ sits not at Neckarsulm, home of the A6, but three kilometres away at the nearby town of Heilbronn. Further, it is not under Audi’s control but that of TDS, the Canadian-based CKD specialist responsible for preparing, assembling and packing European parts for Audi’s A6 China manufacturing programme.

China and the A6 is an enterprise that is the envy of every premium carmaker. The story can be traced back to 1988 when Audi first began manufacturing the third generation of the A6’s predecessor, the Audi 100, at FAW’s plant in Changchun, China. The A6 model introduced in Europe in 1997 replaced the China manufactured Audi 100 in January 2000 and since its market launch over 100,000 units of the ‘made in Changchun’ A6 have been sold. Following the success of the 100 / A6 programme, Audi also began to build its A4 model at Changchun in 2003.

The China version of the A6 differs in one major respect from its European sibling, a 90 mm longer wheelbase. Enhancing the Audi100 programme, Audi added the extra length to provide additional rear seat room to increase passenger comfort.

The current A6 (the C5 series) will cease production at Changchun next year with the C6 replacement scheduled for local launch in 2005. Like the existing model, it too will be a combination of locally made and European sourced parts.

Although some pressings are also produced locally, a number of body panels for the China A6 originate from Neckarsulm (just as numerous panels for the A4 come from Ingolstadt), thus demanding an effective CKD operation to provide the safe and timely flow of material to Changchun. Which brings us back to Heilbronn,TDS and the ‘oiling machine’.

TDS’s involvement with Audi, as its agent in charge of CKD packaging for China, coincided with the succession of the A6 over the Audi100 in 2000. TDS executive vice president of business development, Michael Neumann, freely admits that to meet the expectations of Audi, it had to raise its game and take on some responsibilities not normally entrusted to subcontractors.

“One of Audi’s requirements,” says Neumann, “was for all metal body parts to be pre-oiled before packing, to avoid any possibility of corrosion.” Practicalities dictated that this process had to be carried out as close as possible to the space-starved Neckarsulm plant, and nearby Heilbronn provided the ideal location for TDS and its ‘oiling machine’.

The result is that the first stage of the panels’ eventual transit one-third of the way around the world is a short three kilometre hop from Neckarsulm’s press shop to Heilbronn and onto the ‘oiling machine’s 50 metre conveyor belt. In a fully automated process, protective oil is not sprayed directly onto the body panels, as might be expected, but rather applied through an atmospheric ‘fogging’, that provides a coating of between 5 and 8 gr per m2. “Not only is this sufficient to guarantee a perfect surface,” explains Neumann, “but it also delivers an additional benefit as it enables the production line in China to weld these panels, and any parts sourced locally, together without the need to first de-oil. Only when body-in-white is complete does the body go through the cleaning bath before being forwarded to the paintshop.”

Once oiled and pre-packed, body panels are railed from Heilbronn to TDS’s purpose built consolidation centre at Emden,where they meet up with the myriad of other parts delivered direct into the centre by Audi suppliers. The inevitable question is, why use a second location rather than carrying out the whole operation at just one point? Neumann explains that working out the best solution is never easy. “There are numerous factors that all have to be considered when doing the total cost analysis.”When conducting this exercise, one relevant point in Emden’s favour, he records, was that Volkswagen also had a plant in the vicinity, where the Passat is made. “This is five minutes away from our facility. Many of the suppliers to the China A6 programme are also suppliers to the Emden factory and this brought opportunities to combine the inbound supply of parts for both centres, thus producing some economies of scale in logistics costs.”

Some 250 people are employed at Emden, receiving, consolidating and packing over 5,000 different part numbers, including engines and transmissions, from over 550 suppliers.Controlling the ordering and flow of these parts is down to a key team of TDS individuals, as, and somewhat unusually for a CKD operation,TDS also has complete charge of the inbound supply chain feeding parts into the facility. “Supply chain management is fully our responsibility,” says Neumann. “When the A6 programme began this aspect of the business was a pilot project, to see if we could make it work. Have we? Well, we’re still doing it and that we were awarded the A4 programme on a similar basis, I believe, means that we’ve proved our capabilities.”

And Neumann is adamant that, unlike some situations where a service provider might claim supply chain management responsibility, for these programmes TDS really is in charge.“In normal circumstances you see the OEM sending out the forecasts and orders to the supplier base and advising their logistics service provider in parallel or shortly afterwards. In such situations the role of the provider is restricted to merely advising of shortages or, if the OEM has confidence in them, possibly also chasing up suppliers directly.

“With both the A6 and A4 CKD programmes we have a totally different situation. TDS does the complete material requirement planning, calculating how many parts are needed, from which suppliers, for which vehicles.We receive Audi’s forecasts six months ahead, together with weekly updates, and in turn release these in our format to more than 550 suppliers, which includes Audi’s own plants, to enable them to carry out their capacity and material planning.”

Neumann also mentions that some suppliers providing parts for the China build A6 are not supplying those parts to the main production facility in Germany. “We even have a situation where some suppliers do not have a direct EDI connection with Audi - the connection is via TDS.”

One of the well-recorded bugbears of managing a CKD operation is that when demand for a part is high (or the supplier has fouled up) and there is a resultant shortage, the prevailing mindset of the supplier (and perhaps also the customer) is to prioritise the requirements of the main production centre, followed by the OEM’s aftermarket arm, with the needs of the CKD operation trailing a poor third. “The belief is,” says Neumann, “that if the CKD people don’t get the part in time they can always fly it over, that they have a time cushion! But that’s not how CKD works - CKD is just-in-time halfway around the world.” This is where the supply chain management team at Emden plays a pivotal role, according to Neumann. “They have the pain of pushing suppliers to get the right material, in the right quantities, at the right time, and sometimes they really have to push hard, because our performance is directly linked to and dependent upon the performance of the suppliers.”

When shipping CKD parts there are basically two approaches. To bulk ship parts and leave storage and picking to the destination plant or, alternatively, the lot principle. Each has its strengths and weaknesses, and one of the potential downsides of shipping lots is that nemesis of any packaging operation - paying the price of shipping empty space. Audi and TDS, however, aided by the high volumes involved, have been able to adopt what is a middle ground and at the same time more flexible approach.

Known as optimum lot size (OLS), the concept allows any spare space available to be used to pack an added quantity of parts. Neumann explains the realities: “Although a lot may consist of, say, 96 of a particular part, if space in the carton allows for 120 of those parts, then 120 will be packed and shipped.Audi has adapted the order management system to enable us to over-ship volumes of a specific part until a complete lot has been over-shipped and then hold back on one complete lot. Then the cycle starts again. Although this demands greater effort in order management, the net result of the optimum lot approach is far better pack and container utilisation than we would achieve if sticking rigidly to the lot principle.”

During 2004 TDS will prepare,bring together,pack and send on their way sufficient parts for Audi’s plant in Changchun to build up vehicles for the China market. Its activities at Heilbronn, Ingolstadt and Emden provide a perfect illustration that CKD is more than just stuffing parts in boxes. The term ‘well oiled machine’ is figuratively, as well as literally, appropriate.

On the back of the A6 programme, TDS was awarded the export packing contract for Audi’s A4 China build programme. Although space restrictions dictated an off-site facility at Neckarsulm, at Ingolstadt (where the A4 is built) it was able to command space within Audi’s on-site supplier park. Here, in 2003, a duplicate of the Heilbronn facility was established - including a second ‘oiling machine’ - to prepare A4 panels for their trip to China. The only major difference between the two operations is that whereas A6 panels are container packed at TDS’s Emden consolidation centre, at Ingolstadt A4 panels are packed into their containers on site.