ITT Automotive

Global Manufacturing Strategy: 1994

Group 2
Aman Anshu
Poorva Gadre
Puneet Manot
Yogesh Sham Gupta

 Headquartered in Frankfurt, Germany

ITT Automotive manufactures 8 different product types (Brake
systems, Wiper, fluid handling.)
Anti-lock Brake Systems (ABS)

Case summary

Intensifying cost pressure and rapidly growing demand for lowercost ABS
OEMs gained leverage and margins on ABS were declining
ITT Automotive is in the process of developing a new-generation
antilock brake system (ABS), designated the MK-20
3 Manufacturing units: Frankfurt (Germany), Morganton &
Asheville (US)

Indian Institute of Management Raipur

Questions

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What are the implications for both cost and flexibility of

Question 1

automation? Do you agree with the assertion made by

one of the managers in the case : "If you automate, you

stagnate?"

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Cost
Implications of
Automation
MK20
Proposed
Automated
Process
Total
Manufacturing
Cost

High Capital investment

Quality assurance accounted for 25% equipment cost of

MK4

MK20
Mixed
Manual/Automat
ed Process

77

81

Costs as a % of
Total Cost:

Current
Process

100

High Quality

High Process control

Expected first time yields of 98%, compared against yields
of 87-88% in manual process

Materials

70%

70%

Direct Labour

10%

15%

Overhead

13%

10%

7%

5%

Depreciation

MK4G

Requires 50% fewer operator than the more labor intensive

process used for MK4-G

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Implications
of
Automation
FLEXIBILITY

Considering the completely new advancements, fully automating

MK20 will lead to a non reusable investment for further designs.
Conveyor systems with automatic routing used
Dedicated assembly lines not possible

Standardization would hugely affect Flexibility with

no customization

Kaizen will be hard to implement henceforth.

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If you
automate,
you stagnate

Automation will make the process more efficient

With the product cost and lifecycle decreasing, full
automation will reduce the scope for customization
and minor design tweaks

Standardization will reduce variety and flexibility

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What are your recommendations regarding the issue of

Question 2

standardizing process technology across all the plants?

Are there motives behind the proposal, other than those

stated in the case?

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 High Competitive pressure and decreasing propensity to pay

With cost reductions being one of the major roadblocks,
standardization followed by automation would favour production

Motives behind
Standardization

of lightest, lowest-cost, and most sophisticated automotive anti-

lock brake system

With similar processes being followed and similar quality products
being manufactured, centralized decision making can be adopted

for better control.

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 Supply qualities (% defected) differ greatly in various geographies

Market requirements and labour wages differ between US and
Europe.

Recommendations

Kaizen implementation will hit roadblocks everywhere.

The Frankfurt plant which faces high order quantity and low cost
expectations should continue their process of standardization.

Follow geographic Standardization

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As Juergen Geissinger, how would you go about implementing your

recommendations? How would you overcome resistance from the

Question 3

plants?
As Dickerson, the plant manager at Asheville, North Carolina, what
line of reasoning would you use to convince senior management
that full automation is the less desirable alternative?

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 Phase wise implementation of the standardization process.

For each plant transformation, proper execution plan should be prepared before
hand.
Morganton plant to be standardized first MK4-Gi employed high level of

Juergen
Geissinger
IMPLEMENTATION

automation and workers are ok with it.

Show the results achieved at Morganton due to full automation to Ashville.

Work with suppliers to provide input materials with high quality similar to that of
Europe.
It is very important for proper knowledge transfer about successful transformation

and to facilitate this the overlooking team can be sent to overlook the process at
Ashville.

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 Automation will reduce cost but also cause low customer allegiance as
customization will be offset.
Considering small product life, automation equipment may soon become

Line of
reasoning Not going for
full
Automation

obsolete.
Kaizen remains a no go with automation as it leads to standardization and
also offsets flexibility.
Training of workers for automated processes will add to the additional cost
implications.

Relatively cheap labor is available at Asheville, hence no need to invest

heavily in automation equipment.

High set up costs with automation and lesser flexibility for changes to
product specifications.

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Question 4

As Klaus Lederer, what options would you

like to see pursued? How do various
options fit into the broader corporate
strategy of ITT Automotive?

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 Corporate Strategy COST LEADER.

Achieving Economies of scale (Cost Reduction).

Increase negotiating power with suppliers for better

Strategy of ITT

quality supplies and with the OEMs due to the low cost
on offer.
Complete Automation at Frankfurt and Morganton
plant since purchase of equipment is already complete

and phased automation at Ashveille plant.

Indian Institute of Management Raipur

Indian Institute of Management Raipur