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Sourcing model for production tooling - A case study at Volvo Car Corporation

Sandro Savarin ; Chi Wang
Göteborg : Chalmers tekniska högskola, 2016. 98 s. Master thesis. E - Department of Technology Management and Economics, Chalmers University of Technology, Göteborg, Sweden; E2016:074, 2016.
[Examensarbete på avancerad nivå]

This is a case study performed at Volvo Cars with the aim to improve decisions regarding production tooling in the sourcing process of car components within the progressively regionalized, global automotive manufacturer. As production tooling is one of the most costly element of a car project, decisions for instance, whether to own single, double or even triple sets of production tooling for a component are critical to handle properly. By analysing the sourcing of five different commodities, this thesis provides knowledge on how to create a revised decision model for production tooling decisions for when components are used for final assembly at more than one region. The analysis consist of the three following steps. Firstly an analysis of one historical sourcing case from each of the five commodities using with what the authors call the existing sourcing model to understand the decision on production tooling setup. The current model when taking single versus multiple production tooling decision is based on a TARR analysis where the investment in new production tooling and potential design and development lump sum at new location(s) are weighted and compared with the savings in landed cost over the car project’s life cycle. Since the current landed cost calculation at Volvo Cars does not take in parameters such as tied up capital from lead time and flexibility into consideration, the second step of the analysis is to analyse the same historical sourcing case from each of the five commodities with a revised sourcing model where the authors include the additional parameters into the landed cost. The additional parameter of tied up capital from lead time is quantified by the work in process multiplied by the weighted average cost of capital, which is 13 % at Volvo Cars. The work in process comes from the famous little’s law where work in process equals the lead time multiplied with the average consumption rate in units per time period. The additional parameter of tied up capital from flexibility is taking an materials planning and logistics perspective where flexibility is seen as Volvo Cars ability to consistently fulfilling a fixed service level towards the production flow, in this thesis case a service level of 98,8%. The service level can be translated to a service factor, which is used to statistically determine and generate the appropriate safety stock based on normal distribution to cover for disruptions and variance in demand using gathered data from Volvo Cars in terms of average demands, lead times and its standard deviations for the sourcing cases the authors analyse. The third and last step of the analysis consist of a meta-analysis of the first and second step to indicate the delta in landed costs and hence TARR analysis between the current and revised model to see if this delta will cause changes in the decision on production tooling setup in any of five sourcing cases and present the results. This study concludes that adding the parameters of tied up capital from lead time and flexibility has a substantial financial effect on the TARR analysis, thus can have an impact on the decisions on number of sets of production tooling even though only one of the five cases in this study showed any difference in production tooling decision when taking the added parameters into consideration.

Publikationen registrerades 2016-06-29. Den ändrades senast 2016-06-29

CPL ID: 238661

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