Holistic automation of manufacturing processes

Manufacturers forced to cut costs by competitors, technological innovation and environmental regulation

The manufacturing industry is undergoing change: low-cost competitors, new technologies, stricter environmental regulations and changing consumer behavior are challenging many industrial sectors and force producers to drastically reduce their manufacturing costs. The automotive industry in Europe is under particular pressure. In this article, we shed light on the reasons for den costs pressure and introduce cost-cutting strategies that help manufacturers to assert themselves in a highly competitive market environment.

European automotive industry enters unprecedented global price competition

The announcement by Oliver Blume, CEO of VW and Porsche, was quite something: In the space of three years, Volkswagen plans to launch a new entry-level electric car for around 20,000 euros – “Efficient and effective – with Europe Speed.” The project can be seen as a response to BYD’s announcement to bring its entry-level electric car “Seagull” to Europe next year for a price of less than 20,000 euros, and that after customs duties. This news was the latest to shake up the industry.
The price war has been on the horizon for years. Tesla has lowered prices since 2022 between 16 percent (Model 3) and 33 percent (Model X).

The customs duties in the USA and the EU’s planned tariffs on electric vehicles from China can at best delay the price war, but they cannot avert it.

Adaptation of production systems to secure margins is crucial for future success

Price competition in the VUCA world is nothing new. Most aspects have been known for years. What is new is the way they are expressed. Three factors are of particular importance, they will continue to gain influence in the coming years and will be decisive for the success of European suppliers:

Factor 1: Low margins

In the global price competition OEMs face rising costs for personnel, raw materials and energy. This is leading to further declining margins, particularly for German automotive suppliers, which, in terms of profitability, were already at the bottom of the global competition with an average EBIT of 3.9 percent.

Factor 2: Shortage of skilled personnel

A lack of skilled workers is increasingly leading to output losses and making planning and flexible personnel adjustment more difficult.

Factor 3: Great uncertainty for planning

Long-term planning security, one of the great advantages of the automotive industry to date, is becoming less and less important. Late starts, last-minute changes and daily changing call-offs, on the other hand, become the norm.

Efficient & flexible production system to ensure profitability

While the factors described above overtax traditional manufacturing systems, they also highlight the further development that is necessary to successfully assert oneself in the VUCA-world. Especially in high-wage regions, a new approach is necessary, to reduce manufacturing costs and to automate production processes. The automation should take the entire value creation system into account and not just improve sub-processes.

The automation should be flexible and scalable in order to be able to adapt to changing call-offs quickly and cost-effectively. Once defined , a standard production module can be implemented quickly (to minimize investments and depreciation during ramp-up) or scaled up within a very short time (to reach the collection line).

It is crucial to note that the automated system, the technical system, the management system and das well as the organizational culture must be harmoniously coordinated (see image). This means that if the degree of automation in a production facility is changed significantly, management system and organizational culture as social system must change accordingly.
Based on these principles, ConMoto with decades of experience in the design and optimization of production systems has developed the “ConMoto Automation”-methodology and successfully implemented it with our customers.
In the first step, the status of automation in the customer company is analyzed by applying the AutomationScoreTests©. An interdisciplinary team of employees from the departments of production, logistics and manufacturing engineering, will develop a comprehensive self-assessment of the current characteristics of the technical, management-related and social systems supported by the methodical leadership of ConMoto. We apply methods such as value stream mapping and value stream design as well as scoring based on best practices and supporting key figures.
At the next stage the customer-specific requirements for the production system are identified and the optimum degree of automation is defined. An experienced team guides client through the whole process from the analysis, via the economic evaluation and conceptualization to the successful realization.

It is important to avoid common pitfalls and to focus on the following principles:

• Further development of all three systems, in particular the corporate culture
• Structured selection process and selection of the right supplier
• Optimal technical design considering key aspects such as Intra-logistics, maintainability, etc.
• Professional risk management

Important elements, which are dealt with as part of the “ConMoto Automation”-methodology:

Furthermore, time-optimized implementation with clear milestones is always in the foreground: As the effects of the aforementioned factors mutually reinforce each other over time, speed is of crucial importance.
European manufacturers must now advance to an advantageous position to succeed in the fierce price competition over the next few years. The “ConMoto Automation” methodology can reduce manufacturing costs by up to 15 percent and contribute significantly to competitiveness in a globalized market environment.