A methodology for economic analysis and cost modeling of assembly ramp-up strategies for the automotive industry

Abstract

Mass production affords economies of scale only when capital is highly utilized. However, when manufacturing processes are initiated or new products are launched capital in the facilities is underutilized. This phase has been referred to as the ramp-up period which marks the beginning of commercial sales. The huge investments found in assembly plants make this period of particular concern to the automakers. In spite of the importance of managing this ramp-up period analytical methods do not exist which allow the critical issues during a ramp-up to be simultaneously addressed. This thesis describes a methodology which links and quantifies the impact of production rate choice, product quality, manufacturing capability and process performance into an easily measurable metric - 'cost' using the Process Based Cost Modeling framework. The results of the case study for ramp-up in the body plant of a mid-size sedan steel body in white are presented. They reveal that building cumulative volume as fast as possible during this phase is not the cost-optimized solution, but it is also important to follow a certain production schedule for different investment and process strategies. It is also shown how the methodology developed in this thesis is an effective means for aligning the interests of the stakeholders involved in the process with that of the organization. It is also recommended that the accounting practices of automakers be changed to incorporate capacity utilization and rework costs for cost-minimization during assembly ramp-up.