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Project Management in the Automotive Industry

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    Introduction

    The automotive industry has always worked as a sector for various innovations in the management segment along with being an experimental field. Total Quality Management (TQM) and just-in-time (JIT) are the two prime management methods that are incorporated in this industry. The reasons for the addition of project management are explained in this chapter. It also describes the changes that occurred in corporate organizations as well as the connections between the Original Equipment Manufacturers (OEMs) and their suppliers. The chapter highlights the need of production strategies and the competitive market. The project management has evolved in the automotive sector through four steps so far. The first stage was the time period from the post the second world war till 1970s, when the automotive companies did not have any specific strategies for production in North America and Europe. In the second stage, i.e. from 1970s to 1980s, the global market saturation affected the overall competition between the companies. With newer mass production strategies, Japanese automakers successfully entered and captured the North American market. Thus, project management for new vehicles gained very high importance. Later, the companies drastically changed the way of managing the projects to mass produce high quality vehicles. These vehicles were also expected to be cheaper and easily produced. This was the third stage from late 1980s till early 1990s. In the fourth stage, the companies realized the limitations of the restructure performed at the start of the decade. New challenges were identified such as alliances with other companies, global market share and new innovations being made by the companies. Thus, the carmakers began a new restructure.

    First Phase: From the Postwar Period to the 1960s

    The authors point out that between 1950s and 1960s, the automotive companies in Europe and North America used a traditional method to mass produce the vehicles. The brands grew slowly and produced lesser number of vehicle models but with longer life spans up to 14 years, hardly any difference between different models and cost cutting was implemented

    through component standardization. In this phase, ‘project craft’ – an organizational structure was developed for the new product design and the companies were structured into very departmentalized groups that were strong as well as dedicated to trade sector. Product engineering department, department for process engineering, manufacturing department are a few examples of these groups. Absence of direct communication between these groups resulted into passing of the project from one to another in a step-by-step manner. The chapter also states that only the members of the senior management and the CEO of the company were the connecting links between these individual departments.

    The authors have mentioned that as each project was built around new skill development for products along with manufacturing process, it helped the companies for a clearer technical understanding required. As a result, the projects clarified the different risks related to technical factors at the corresponding steps. However, the exact nature and the severity of the risks is still unclear. The new products developed were ordinary in terms of time duration, monetary value and their quality. New product development took around five to seven years. Due to unforeseen market infeasibility, these product launches used to get obstructed. The authors also point out the fact that incompatible products were often launched into the market. But here again, they fail to specify the ramifications of these incompatible product launches.

    Second Phase: From 1970 to 1985

    At the advent of this stage, a new methodology was adapted by the companies in both Europe and North America. This resulted into the entrance of a new multi-model vehicle range along with differentiation of models in terms of their powertrains and body-work. The new strategy also increased the global presence of the companies. At this point, the ‘project craft’ structure of the previous phase was not able to solve the new complex challenges. The chapter states that this was the time when the concept of project management was professionalized. The companies created regular review systems covering the management level together with creation of early project functions. The timetables for product development were created in this phase and the use of fiscal tools for reports were incorporated with all the parameters concerning the project. The result of the new project organization structure was the refinement in upcoming vehicle projects. However, the limitations of this structure were visible at the start of 1980s. The profit control and the lead time control were missed often as well as poor quality products were produced. This was the result of the absence of the designation to account and manage the risk factor emerging with technological innovations. The authors have mentioned that domain of project management did not experience any innovations from major American or European car manufacturers. On the other hand, companies like Toyota and Honda did well in this area. The Japanese companies offered a diverse product folio which literally forced smaller and slower automobile companies out of the market. The authors refer to the article by Hout and Stalk to show that brands like Honda and Yahama became the dominators in the two-wheeler market using this strategy. Japanese automotive manufacturers used a similar method to capture the North American market. Very efficient project management methods were the reason for these successful product multiplication strategies. Referring to the scholarly article by Clark and Fujimoto, the authors point out the three criterion that were analyzed to judge the performance of Japanese companies. Those were: lead time, productivity of project teams which is the quantity of engineering hours needed for project development together with the quality of the products (vehicles) produced. It is given that this analysis was vastly studied by the auto industry experts. A result of this was that the automotive companies in Europe and North America were about to go under a drastic change in terms of project management.

    Third Phase: 1985–1995

    The chapter talks about the emergence of a new concept known as ‘concurrent engineering’ coupled with the onset of project functions and new ways of product development. Project directors were appointed by the automotive companies. This designation was already established named as ‘Susha’ in the Japanese company Toyota. This designation was meant to be an independent entity for project management from initial stages of project till production stage. The authors say that the Chrysler was the first American company to implement the concept Susha, also known as “heavyweight project manager” to overcome the bankruptcy and poor performance in the market. The company reorganized its engineering and management sources into five categories namely: “Top of the Range, Entry Range, Jeep, Truck, and Minivan”. The human workforce was divided into these segments with dedicated leaders. Individual members of the organization were encouraged to achieve the objectives and the self-regulation. The next category of concurrent engineering was developed in three stages. First, the manufacturing facilities produced prototypes to check the feasibility of the processes. Then, the interaction between the functions was given higher importance rather than maintaining the communication only via senior management. Finally, efforts were put to boost the communication between trading sectors. The authors of the text refer to the example of Chrysler to demonstrate the drastic decisions taken by the company to imbibe concurrent engineering. Previously the company had the design, engineering, production and marketing departments working independently with individual goals. Even though the decision of integrating them all under one roof was against the fiscal resource availability, it was implemented in accordance to concurrent engineering principles. The concept of outsourcing the supply of parts from various suppliers was boosted by the dedicated project managers. The companies started to involve the selected suppliers throughout the project stages. The chapter also denotes that the automotive manufacturers started adopting project management more professionally. In other sectors like construction, this professional project management approach was not developed. The evolution of a collective proficiency for project management started gaining more importance than the individual one. In this phase, specially devoted members started disseminating technical aspects for project management. Cross-practitioner edification programs were developed as a result of focusing on entrepreneurial characteristic. These modern project management concepts helped the European and the North American automakers to achieve progression regarding new product launches. Automotive companies matched up well compared to Japanese competitors with respect to different parameters defining the performance in terms of project management. The authors bolster this fact by giving examples of Chrysler and Renault. Chrysler was earning “the highest average profit per vehicle” than that of any North American car company until it merged with the Daimler in mid 1990s. Whereas, Renault in the European market excelled due to the project management and brought a novel vehicle product range to the market with brand image improvisation in terms of quality of their products.

    Even though this third phase of project management seemed to be a boon for the car companies initially, it failed to remain the same because the prowess in new product generation was not enough to be profitable. It also was not helpful for the growth of the companies on a long-term basis. For the European market, the authors say that the leading car companies faced a mismatch between the buyer expectations and the produced vehicles. The article also states that concurrent engineering approach destabilized the competence growth in engineering departments. The same is explained by the Chrysler exemplar. The company’s logic of focusing on trade was replaced by the logic of project platform. The company however, maintained the unanimity by setting up ‘expert clubs’. Nevertheless, the situation faced, and the solutions developed by other companies is not mentioned by the authors.

    Fourth Phase: 1995–2003

    The authors of the article state that the fourth phase began as the automotive industry was again facing new challenges for their project management. The forerunners in the auto industry with the deployment of these concepts started facing competition as these concepts got spread out other across other companies. To make oneself stand apart from each other, the companies explored various aspects of engineering along with the aesthetics of the products. The dedicated project management method had issues that were becoming obvious with the rise in number of projects being managed. This issue is explained by mentioning that in Toyota, the senior management was unable to supervise its all 15 project managers due to the lack of a gigantic project-based administration. These Sushas had a great decision-making authority and thus were difficult to be managed by senior management. As the quantity of projects being handled was rising, more number Susha were hired with most of them being lacking suffice experience. By the culmination of the 1990s, the companies formed different types of alliances with other car making companies. This move furthered the already existing issues of projects handling. As the competition based on innovations increased, it weakened the commercial life spans of the products. The situation supported the establishment of new designations: “series life program manager” and “program director” in the European auto companies. Even though the companies were introducing innovations, the need for the research activities was felt to gain lead in the competition. The notion of predevelopment was getting importance and thus the designation of “innovation project manager” was established. The authors also mention that in this phase, the perceptible, pragmatic nature of a new vehicle launch was absent as a focus. The automotive sector witnessed massive globalization with many mergers, alliances etc. in the 1990s. This allowed the direct platform sharing between companies to gain advantage. It is given that when a joint venture starts a new project, the teams of each company must have mutual understanding to lessen the risks involved. The involved companies also need to treat each other equally with fair distribution of powers and resources. The car companies had to face the confusion between product diversification against product standardization. If the makers decided to use a platform developed, it restricted the use of innovations and vice versa. The tier-1 suppliers started expanding the proficiency and grasp the methods previously only used by the auto companies. The authors denote that total functional sub-assemblies gained importance in 1990s. Suppliers who provide parts to multiple car companies can define the common factors their products possess and hence reduce the overall cost. The notion of modular architecture transformed the field of telecommunications. However, this concept cannot be applied directly in other fields. It is exemplified with mobile devices which have space constraints making it tough to apply modular design. In this phase, carmakers have reduced the cost of vehicle development from $5bn to $1.5bn. New products are developed in 24 months compared to 60 months at the start of the decade. Quality of the product is now a mandate instead of a feature. Assembly and production costs are reducing, and the customers can enjoy more features for a given value. Companies are now using a common architecture to produce a variety of vehicles.

    The chapter mentions about the co-operation between tier-1 suppliers and the companies, however, it doesn’t explain in detail the level of this co-operation. It also, gives no information about secondary suppliers.

    Summary

    The concept of project management has gained tremendous importance and has reformed organizational structures right from end of second world war till now in the automotive companies. Even though this concept was incorporated very late in the auto sector, now the existing sectors are changing their approach to adopt the developments generated in automotive sector after 1980s. This project management concept has resulted into a drastic research that will eventually prove to be a boon for the automotive field.

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    Project Management in the Automotive Industry. (2021, Dec 17). Retrieved from https://graduateway.com/project-management-in-the-automotive-industry/

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