Automotive Symposium: €145 per Car

November 4, 2010 by Frank Völkel

Volkswagen opts for the private cloud: Klaus Hardy Mühleck, CIO of Volkswagen (photo: Frank Völkel)

Volkswagen opts for the private cloud: Klaus Hardy Mühleck, CIO of Volkswagen (photo: Frank Völkel)

Cars are highly complex industrial products, manufactured by highly complex companies with networks that span the entire world. Every year, around 60 million cars are built. While, back in the 1960s, the VW Beetle comprised some 3,000 parts, today’s VW Tiguan has 60,000 components. These components come from a global network of highly specialized suppliers, and are put together just-in-time to create marketable products.

Over the past two years, the automotive industry experienced the biggest crisis in its hundred-year history. And now it is facing a paradigm shift toward electric mobility, which will transform processes beyond recognition within 10 years at the most. But at the SAP Automotive Symposium 2010, which was held in the German city of Mainz on October 27 and 28, electric mobility wasn’t high on the agenda.

What participants were more interested in was mastering the complex flows of goods and information and accomplishing central manufacturing with decentralized final assembly in global supply networks. The general atmosphere this year was considerably better than last and attendees were happy to report that business has picked up (see our article about last year’s event: Processes Keep the Auto Industry Rolling).

Here, data is exchanged electronically between the plants and the partners involved. For repetitive manufacturing, forecast delivery schedules with predicted quantities and just-in-time (JIT) delivery schedules are sent to the component suppliers electronically. The component suppliers send electronic delivery note data to the manufacturers, which has to arrive at the customer by goods receipt at the very latest. Payments are made either by invoicing or using credit memos.

A factory with no stockholding: Albert Frankenhauser talks about Porsche Leipzig (photo: Frank Völkel)

A factory with no stockholding: Albert Frankenhauser talks about Porsche Leipzig (photo: Frank Völkel)

IT at Volkswagen = IBM + SAP + MHP

Volkswagen CIO Klaus Hardy Mühleck, aroused great interest in his presentation when he explained that VW has just one SAP bill of material within the entire company. Furthermore, he outlined Volkswagen’s plans to shift a large proportion of its IT systems for car dealers to a private cloud in a bid to reduce costs and at the same time drive standardization. Currently, VW uses SAP software to manage the payroll of its 370,000 employees, Mühleck added.

Soon, the group’s two data centers at the German cities of Wolfsburg and Ingolstadt will provide the necessary computing resources. Ultimately, VW aims to become the world’s biggest automobile manufacturer by 2018, producing 300 different models and 12 brands and selling some 10 million vehicles every year. Mühleck continued by stating that VW is the world leader from an IT perspective, with information technology costs of €145 for each vehicle produced.

Porsche’s Leipzig plant: manufacturing without stockholding

The relatively small automotive manufacturer Porsche, which is set to be fully absorbed by the Volkswagen group, gave the example of its Leipzig plant to show how low vertical integration, completely new vehicle models, and efficient supplier scheduling can be achieved.

Read on: Logistic concepts for the Porsche Panamera and Cayenne

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Michael Kleinemeier from SAP advocates Sybase software und mobile devices (photo: Frank Völkel)

Michael Kleinemeier from SAP advocates Sybase software und mobile devices (photo: Frank Völkel)

Cayenne and Panamera: different degrees of vertical integration at Porsche Leipzig

Lean Porsche production in Leipzig based on SAP ERP 6.0, SAP SCM 4.1, and SAP NetWeaver BW 3.5 (photo: Frank Völkel)

Lean Porsche production in Leipzig based on SAP ERP 6.0, SAP SCM 4.1, and SAP NetWeaver BW 3.5 (photo: Frank Völkel)

Albert Frankenhauser used Porsche’s Leipzig facility to show what the manufacturing and logistics concepts look like for the Porsche Cayenne and Porsche Panamera. Work began on building the plant in 1999 and the first Porsche Cayenne rolled off the assembly line at the end of 2002. However, the Porsche Cayenne – and the VW Touareg – are preassembled at a Volkswagen plant in the Slovakian capital Bratislava, and the job is completed in Leipzig.

All the processes are mapped in the SAP software. The logistics concept for the Porsche Panamera – which has been manufactured at the same plant since 2009 – goes a step further in terms of lean production, greater vertical integration, and more flexible processes and IT systems, but without conventional stockholding.

Here, the core concept focuses on the direct flow of goods on the production line, from the supplier through goods receipt to the consumer. Frankenhauser explained how Porsche service partner Mieschke Hofmann und Partner (MHP) implemented an end-to end SAP chain in 2008. Currently, the logistics company delivers goods by truck every hour, making stockholding at the Leipzig plant superfluous.

All the data for releases, reporting, monitoring, inventory management, and picking is stored in a single system, enabling the Leipzig factory to be event-controlled. Together with MHP, Porsche installed a lean logistics concept that works using SAP ERP 6.0 Automotive, SAP SCM 4.1, SAP NetWeaver 3.5, and the modules MM, CE, SD, and TRM. There’s also an EDI system based on SAP PI 7.0.

Porsche’s next step will be to transfer all the process expertise from Leipzig to the “old” manufacturing plant in the Zuffenhausen district of Stuttgart, in southern Germany, which has greater vertical integration and mainly produces the Porsche 911.

Read on: End-to-end BOM & low IT Costs

Porsche service partner MHP specializes in SAP for Automotive (photo: Frank Völkel)

Porsche service partner MHP specializes in SAP for Automotive (photo: Frank Völkel)

The end-to-end BOM keeps Volkswagen’s IT costs down (photo: Frank Völkel)

The end-to-end BOM keeps Volkswagen’s IT costs down (photo: Frank Völkel)

Volkswagen: end-to-end BOM, low IT costs

During his presentation at the SAP Automotive Symposium 2010, Volkswagen CIO Klaus Hardy Mühleck outlined the benefits of an integrated bill of material within a large company with many brands. Only by including all brands and markets throughout the world can IT costs per car manufactured be reduced to a minimum. Mühlbeck believes that Volkswagen is top of the world league here, even compared with other premium German competitors. After all, Volkswagen has 62 production sites, all of which are linked by one and the same system.

Furthermore, Mühleck elaborated on the VW Group’s module and platform strategy, which makes an important contribution to containing costs and represents a key competitive advantage. In addition, he reveals the secrets of using common parts in very different brands such as Audi, Porsche, Skoda, and Volkswagen. In the end, customers buy completely different products that have their own emotional character.

All the assembly structures place great demands on information technology at the individual production sites, because out of 100,000 VW vehicles produced, no two cars are the same. Mühlbeck explained how customers are involved in the design of new cars at an early stage: The content of Internet blogs is evaluated and some 80 million online customer contacts are forwarded from car dealers every year.

In terms of software, Volkswagen uses SAP CRM 7.0 with enhancement package 1 for its brands Audi, Porsche, and VW within the framework of its SAP Business Suite 7 implementation, slated to be completed by the end of 2010.

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