Customer/supplier relationship in innovative system development
in the automotive industry
By
Dr. Johannes Hartick
BARKER
Dr.-Ing. Maschinenbau
Technische Universitat Darmstadt, 1996
MASSACHUSETTS INSTITUTE
OF TECHNOLOGY
Dipl.-Ing Maschinenbau
Technische Universitat Darmstadt, 1990
LIBRARIES
Submitted to the System Design and Management Program
In Partial Fulfillment of the Requirements for the Degree of
MASTER OF SCIENCE IN ENGINEERING & MANAGEMENT
at the
MASSACHUSETTS INSTITUTE OF TECHNOLOGY
February, 2003
2003 Dr. Johannes Hartick. All Rights Reserved
The author hereby grants to MIT permission to reproduce and to distribute publicly paper and
electronic copies of this thesis document in whole or in part
Signature of author.................
Dr. Johannes Hartick
System Design & Management Program
December 9, 2002
C ertified by..............................
Prof. Kent Hansen
Professor of Nuclear Engineering
Thesis Supervisor
Certified by.................................................
Senior Research
..
..............
Dr. Daniel Whitney
st and Co-Director of the Fast and Flexible Manufacturing Projects at MIT
Thesis Supervisor
Accepted by...................................
Prof. Paul Lagace
Professor of Aeronautics, Astronautics and Engineering Systems
Co-Director, LFM/SDM
Accepted by...................................
..............
......
Prof. Steven Eppinger
GM LFM Professor of Management Science and Engineering Systems
Co-Director, LFM/SDM
Abstract
Customer/supplier relationship in innovative system development in the automotive
industry
by Dr. Johannes Hartick
This thesis is analyzing the introduction of new components and sub-systems into massproduced passenger cars. The quality, cost and productivity benefits to the customer, of a high
level of collaboration between the customer and supplier in vehicle development are well
documented and researched. However, the nature of vehicle manufacturer involvement in new
product development by the supplier and how it impacts the supplier's profitability is not that
well researched. Based on the analysis of nine case studies concerning the development of
automotive components and subsystems, a system dynamics model is developed describing the
economics of new product development from a supplier viewpoint. The model allows the user
to understand the effect of strategic decisions concerned with the relationship between
customer and supplier. The thesis concludes with recommendations derived from model
application and case analyses on when the supplier should involve a vehicle manufacturer into
new product development, what characteristics are important for a suitable development
partner and when the new product price should be released to the customer. Specifically at the
very beginning of the new product development the requirement profile of the desired new
product should be analyzed in detail. Based on this analysis the supplier should decide, whether
to involve a vehicle manufacturer or not. If the supplier has sufficient understanding of the
new product requirements early involvement of a vehicle manufacturer can increase the risk of
early price erosion and diffusion of product information to competitors without providing
substantial benefits to the new product development. If the supplier's understanding of the
requirements is limited, it is essential to involve a vehicle manufacturer to prevent delays in the
new product development or low product design quality. If a vehicle manufacturer is involved
in the new product development, the partner should be chosen consciously aiming for a high
level of technical expertise, sufficient commitment to provide an "enduring" product
specification and a history of not inviting competitors during the pre-development phase.
Thesis Supervisor:
Prof. Kent Hansen
Professor of Nuclear Engineering
Thesis Supervisor:
Dr. Daniel Whitney
Senior Research Scientist and Co-Director of the Fast and Flexible
Manufacturing Projects at MIT
1
Acknowledgement
I would like to thank Kent Hansen and Daniel Whitney for their encouragement and the
enlightening discussions we had on the subject of this work.
I would like to thank John Grace for his advice and support throughout the SDM program and
especially for making me aware of a number of interesting new product development cases and
bringing me in contact with appropriate interviewees to research them.
The interviewees deserve my thanks for sacrificing some of their time to share their experience
with me.
Last and most importantly I would like to thank my family, my wife Stephanie, and children
Emma and Benjamin for their patience and support during my studies at MIT.
2
TABLE OF CONTENTS
A B STRA CTA ..............................................................................................................
1
AC K N O WLEDG EM ENT ......................................................................................
2
1. INTRO D U CTIO N ...............................................................................................
8
1.1. Thesis Statement & Primary Research Objectives: .................................................................................
9
1.2. Engineering and M anagement Content:..............................................................................................
10
2. BAC KG RO U N D .............................................................................................
12
3. CA SE STU D IES .............................................................................................
22
3.1. Case 1 - Introduction of automotive catalysts in Europe...................................................................
3.1.1. Product Function...................................................................................................................................23
3.1.2. Pre-development of automotive catalyst .........................................................................................
3.1.3. Serial introduction Europe....................................................................................................................28
23
3.2. Case 2 - Exhaust gas temperature control system ...............................................................................
3.2.1. The Product ...........................................................................................................................................
3.2.2. Pre-development ...................................................................................................................................
31
32
33
3.3. Case 3 - Keiretsu supplier of exhaust systems to Toyota ...................................................................
36
3.4. Case 4 - Electric motor for automotive window regulator ................................................................
38
28
3.4.1. The Product...........................................................................................................................................38
3.4.2. New Generation M otor Pre-development .........................................................................................
40
3.5. Case 5 - Reduced Door module ............................................................................................................
3.5.1. The Product...........................................................................................................................................44
3.5.2. Development/M arketing .......................................................................................................................
3.5.3. Intellectual property ..............................................................................................................................
44
46
47
3.6. Case 6 - Advanced programme for the Low Variety Door.................................................................48
3.7. Case 7 - slide/tilt sunroof............................................................................................................................50
3.7.1. The Product...........................................................................................................................................50
3.7.2. Pre-development ...................................................................................................................................
3.7.3. Development/M arketing .......................................................................................................................
3
53
54
3.8. C ase 8 - Spoiler plus sunroof.....................................................................................................................56
3.8.1. The Product ...........................................................................................................................................
3.8.2. Pre-developm ent ...................................................................................................................................
3.8.3. D evelopm ent/M arketing .......................................................................................................................
56
57
58
3.9. C ase 9 - Large roof m odule with m ultiple openings ..........................................................................
3.9.1. The Product...........................................................................................................................................
3.9.2. Pre-developm ent ...................................................................................................................................
3.4.3. Developm ent/M arketing .......................................................................................................................
59
59
61
62
4. CONCLUSIONS FROM CASE STUDIES.....................................................63
4.1. A ppropriability ...........................................................................................................................................
64
4.2. C om petitive structure.................................................................................................................................68
4.3. Sources for com petitive advantage .......................................................................................................
5. SYSTEM DYNAMICS MODEL OF NEW PRODUCT DEVELOPMENT .....
69
71
5.1. Developm ent M odel....................................................................................................................................71
5.2. M arketing Model ........................................................................................................................................
76
5.3. Serial im plementation m odel.....................................................................................................................81
5.4. C om petition m odel......................................................................................................................................83
5.5. The comm ercial m odel...............................................................................................................................87
6. RESULTS FROM SYSTEM DYNAMICS MODEL........................................89
6.1. Level of O EM involvem ent in product pre-developm ent ......................................................................
89
6.2. Level of O EM confidentiality ....................................................................................................................
96
6.3. Suppliers effort to develop vehicle integration knowledge ..................................................................
100
6.4. Tim e of price disclosure to OEM ............................................................................................................
102
7. RECOMM ENDATIONS................................................................................
105
7.1. OEM involvem ent.....................................................................................................................................105
7.2. OEM selection for pre-developm ent.......................................................................................................107
7.3. Tim ing of price release .............................................................................................................................
109
4
7.4. System vs component supply ...................................................................................................................
109
7.5. Niche Markets ...........................................................................................................................................
111
BIBLIOGRAPHY ...............................................................................................
113
APPENDIX A - PROJECT QUESTIONNAIRE...............................................
115
APPENDIX B -
117
.......................................................................
5
LIST OF FIGURES
Number
Page
Figure 1: Fine's double helix ..............................................................................................................
13
Figure 2: Customer/supplier dependency framework after Fine [Fine].....................................17
Figure 3: adoption curve after Rogers [Rogers] ............................................................................
20
Figure 4: O PM of catalytic converter....................................................................................................24
Figure 5: diagram of energy, mass and signal flows to and from catalytic converter....... 25
Figure 6: sketch of catalytic converter.............................................................................................
27
Figure 7: development of OEM component knowledge as perceived by interviewee......30
Figure 8: exhaust gas temperature control system........................................................................
32
Figure 9: new generation motor.......................................................................................................
38
Figure 10: OPM of new generation motor ..........................................................................................
39
Figure 11: energy, mass, and signal flows for new generation motor ..................
40
Figure 12: the reduced door module...............................................................................................
44
Figure 13: OPM of reduced door module ...........................................................................................
45
Figure 14: O PM of slide/tilt sunroof....................................................................................................51
Figure 15: slide/tilt sunroof..............................................................................................................
Figure
Figure
Figure
Figure
Figure
Figure
Figure
Figure
52
16: de-composition diagram of slide/tilt sunroof..................................................................52
17: spoiler plus sunroof..........................................................................................................
56
18: de-composition diagram of spoiler plus sunroof............................................................57
19: large roof module...............................................................................................................
60
20: graphic representation of development model...........................................................
72
21: model for the proportion of residual unidentified needs..........................................
74
22: m arketing m odel..............................................................................................................
77
23: OEM's willingness to adopt product in dependence of proportion of requirements
fulfilled ..........................................................................................................................................
79
Figure
Figure
Figure
Figure
Figure
Figure
24: OEM's willingness to adopt product in dependence of price/value ratio ............ 80
25: serial application model....................................................................................................
81
26: com petition m odel............................................................................................................
84
27: model of competitive pressure.......................................................................................
86
28: com m ercial m odel...........................................................................................................
88
29: Profit/loss per year for varying levels of OEM involvement, low level of vehicle
integration knowledge by Tieri supplier...........................................................................
92
Figure 30: product design quality over time for varying levels of OEM involvement, low level
of vehicle integration knowledge by Tieri supplier .........................................................
93
Figure 31: profit/loss per year for varying levels of OEM involvement, high level of vehicle
integration knowledge by Tieri supplier...........................................................................
95
Figure 32: product design quality over time for varying levels of OEM involvement, high level
of vehicle integration knowledge by Tieri supplier .........................................................
96
6
Figure 33: profit/loss per year for varying levels of OEM involvement, low level of vehicle
97
integration knowledge by Tieri supplier, no OEM confidentiality ..............
vehicle
high
level
of
involvement,
of
OEM
varying
levels
per
year
for
Figure 34: profit/loss
98
integration knowledge by Tieri supplier, no OEM confidentiality ..............
Figure 35: product design quality of Tieri supplier and competitor for perfect OEM
confidentiality and no O EM confidentiality..........................................................................99
Figure 36: development cost contribution of Tieri effort to gain integration knowledge in
dependence of level of effort..................................................................................................100
Figure 37: profit/loss per year over time for different levels of Tieri effort to develop vehicle
integration knowledge..............................................................................................................102
Figure 38: profit/loss per year over time for different levels times of price disclosure of the
Tieri supplier to the O E M .....................................................................................................
104
Figure 39: recomm endation sum m ary chart......................................................................................112
7
1. Introduction
This thesis is analyzing the introduction of new components and subsystems into massproduced passenger cars. The quality, cost and productivity benefits to the vehicle
manufacturer (OEM
=
Original Equipment Manufacturer) of a high level of collaboration
between customer and supplier in vehicle development are well documented and researched
[Dyer , Schrader and Goepfert]. However, the nature of OEM involvement in new product
development and how it impacts the profitability of Tieri suppliers (Tierl suppliers
= first
level supplier, who are in direct contact with the OEM. Sub-supplier to Tieri suppliers are
called Tier2 suppliers etc.) is not that well researched. The questions facing every supplier who
is engaging in new technology development include:
At which point in time and to which degree a Tieri supplier should involve the OEM in the
development of innovative vehicle components or sub-systems?
Which OEM is the right partner for a pre-development project or the pilot application
project?
Should the new technology be offered in a component or included in a vehicle subsystem?
Finding the most appropriate answers to these questions is of great economical importance to
the supplier. Deciding not to involve a vehicle manufacturer early on in the development,
carries the risk that the product development might not fulfill the requirements and the
product cannot be sold without time consuming and cost intensive re-development. Open and
early involvement of the OEM has its risks too. For example, in depth OEM involvement
may result in the OEM owning part of the intellectual property of the new product, or allow
the OEM to encourage competitors early on to develop competing products. This would limit
8
the Tieri's ability to sell the new product to other OEM's or to command a price premium for
the new product.
There are less than ten independent vehicle manufacturers and they have substantial
differences in corporate culture between them. It is helpful if there are certain characteristics
identified which can guide the supplier in the direction of the most appropriate predevelopment partner. Choosing the wrong partner might introduce competition early, or
might bias the new product towards a certain segment reducing its potential sales from the
onset.
Vehicle subsystem boundaries are typically not fixed. To some degree, in most cases, the
supplier can influence whether to supply a large complex vehicle subsystem, or focus on the
supply of components. If the supplier chooses to supply a complex subsystem, then planning,
project management and sub-supplier management requires substantially more effort than
when supplying a single component. Supplying a subsystem increases the revenue of the
supplier but often contains more value contribution from sub-suppliers than selling a single
component. This has obviously a direct implication on the supplier's revenue and profit
margin.
1.1. Thesis Statement & Primary Research Objectives:
As demonstrated the shaping of Customer/supplier relationship in innovative system
development has substantial strategic implications for the supplier. This thesis intends to
develop guidelines on how to answer these strategic questions. To achieve this objective, it has
to be analyzed how customer involvement influences the:
" development timing
" development cost
*
product value
9
0
poduct price
0
future market share
1.2. Engineering and Management Content:
The objective of the thesis cannot be achieved without detailed understanding of the systems
architecture of the vehicle and the subsystem under consideration. An educated management
decision, on the level and timing of OEM involvement in new product development can only
be made if the engineering implications are as well understood as the business implications.
Thereby the thesis contains inherently a strong combination of engineering and management
analysis.
In nine case studies new product development projects by a Tier 1 supplier are analyzed with
respect to:
*
product architecture and interfaces with other vehicle systems
*
needs profile
*
Who holds information about needs
"
Level of OEM involvement
*
Commercial and technical project success
The analysis aims at identifying critical factors for the success of pre-development projects.
Using the insight gained from the case studies together with literature research a system
dynamics model was developed, which allows simulating the effect of different OEM
involvement strategies.
10
Based on the insight gathered from case studies, simulation work and literature survey,
guidelines are developed which provide information on:
What steps to take to prepare a well-founded decision on OEM involvement and
*
Decision recommendations for a variety of characteristic scenarios
In the section 2 some industry background about the changes in the automotive industry and
the customer supplier relationship is given. In the section 3 a number of cases from different
product divisions of Marvin, a fictitious Tier 1 supplier to the automotive industry have been
analyzed. In chapter 4 conclusions are drawn aiming to identify the main factors influencing
the commercial and technical success of the projects.
Following the insight from the sections 3 and 4 a system dynamics model is developed with
the aim to quantify the commercial implications of different strategic choices the supplier
takes. Section 5 discribes this model. In section 6 the results of applying this system dynamics
model are discussed. In the final part of the thesis (section 7) recommendations are derived
on, at which level of development progress to involve the customer, which customer to
choose as pilot customer for the first application of the new product, when to release the new
product price to the customer, and what is the suitable system boundary for the supplied
product or system.
11
2. Background
In the last 30 years the automotive industry has been through a substantial consolidation
process. The most apparent result of this consolidation process is that there are worldwide
only 6-10 relevant companies producing passenger cars in high volume. These so-called
Original Equipment Manufacturers (OEMs) operating globally and have substantial buying
power over their supplier base.
Traditionally the vehicle OEMs had a substantial manufacturing depth, not only assembling
the vehicle, but also producing in house most components. In the past twenty years an
increasing proportion of the vehicle content was outsourced. Initially simple parts were
purchased from a large number of small suppliers. Initially these parts were either standardized
parts (e.g. nuts & bolts) or, OEM designed bespoke parts. The external suppliers could
produce these parts cheaper due to economies of scale, specific manufacturing expertise or
low cost non-union organized workforce.
The co-ordination of this army of suppliers
required substantial coordinative and administrative effort by the vehicle OEM [Dyer et al.]. In
response to this the number of suppliers was substantially reduced with the remaining direct
suppliers - the so-called Tieri suppliers - to the vehicle OEMs gaining more and more design
responsibility and supplying increasingly complex pre-assembled modules.
The Tieri
suppliers increased their technical expertise through the requirement of designing components
and modules.
The accumulation of technical expertise is often accelerated by the fact that the supplier
supplies multiple OEM's and can gather design and application experience from more than
one organization. The Tier 1 suppliers also increased substantially their project management
capabilities and with it their administrative overhead, since they took over from the OEM's
responsibility for lower Tier sub-suppliers.
12
Applying Fine's double helix framework (Figure 1) it can be stated that the automotive
industry moved in the last 20 years increasingly towards a modular product structure.
modular product
horizontal industry
integral product
vertical industry
competitors
technical
advances
high
supplier
dimensional
complexity
market
power
niche
organizational
pressure to
rgztol disintegrate
pressure to
integrate
rigidities
proprietary
system
profitability
Figure 1: Fine's double helix
The double helix framework describes a continuous alternation between integral product
structure and modular product structure. Product disintegration is driven by the aim to reduce
the complexity. When a highly complex product is subdivided into multiple modules, the high
complexity can be mapped by the interaction of substantially simpler modules. Modularity
helps thereby the division of labor and outsourcing of production. In the development of a
new product the modularity also allows specialization of departments within a company or
different member companies of the supply chain. With specialization and reduced complexity
levels it is easier and quicker to achieve technical progress. Modularity helps therefore
companies with limited R&D resources by focussing them on the aspect of the product where
it can distinguish its products from the competitors and where it can generate the highest
value for the customer.
13
A modular set-up of the product and the supply chain has the risks of:
*
increasing dependency on suppliers of key modules due to loss of technical
competency in key parts of the product
*
reduced ability to distinguish the product from competitors products due to the fact
that the module suppliers supply identical modules to competitors
Following Fine these risks result in pressure to integrate the product design and supply chain
organization and over time the product and supply chain architecture oscillates between
integral and modular set-up. Analyzing the automotive industry in this framework over the
time period between 1980 and 2000 it becomes obvious that the industry developed towards
strongly increasing modularity of supply chain organization. It is an open question whether the
automotive industry is still moving towards greater modularity or whether there are tendencies
towards higher product integration. Over the last decade the automotive industry became
increasingly concentrated with less than 10 substantial independent OEMs remaining globally.
The Tier 1 suppliers mirrored this in reaction to:
*
the increased purchasing power of the OEMs
"
the requirement to globally supply OEMs of global reach
"
the increasing technical content of their modules
The suppliers increased in size substantially in the second half of the 1990's through mergers
and acquisitions as well as organic growth. Driving force behind mergers and acquisitions were
often the intention to be able to supply full subsystems or modules instead of components to
the vehicle OEMs. This would aim to maintain a Tieri status between a reduced number of
Tieri suppliers, increasing revenue by supplying an increased proportion of the vehicle value
14
and finally the hope to accumulate a higher selling power by higher dependency of the OEM
with respect to engineering competence and vehicle value content.
The three basic questions every party in a supply chain has to answer for themselves is: What
should I produce in house? What should I buy from a supplier? Can I capture more of the
value of the end product by widening the boundaries of the content I supply? Dyer [Dyer]
recommends that close control should be maintained of all product features, which distinguish
your offering form the competition's offering. Close control is best maintained when these
features are developed and produced in house. For example for BMW the engine performance
is of prime importance for the brand. Therefore BMW is developing and producing all engines
in-house with one single exception.
Fine recommends that an extemal supplier should be used, if the component or subassembly
supplied does not substantially distinguish the end product from competitive products and the
supplier has either:
"
a higher capability level, or
"
lower manufacturing costs (e.g by economies of scale, or lower cost workforce), or
"
has a higher technology level
When a supplier is chosen, Dyer distinguishes from the customer perspective two different
categories of suppliers:
" Arm's length Suppliers
*
Supplier Partners
With the arm-length supplier the customer does not build up an intensive knowledge
exchange. The level of trust between customer and supplier is limited. The ultimate forms of
15
arm-length customer-supplier relationships are Internet auctions of supply contracts. Here the
specification of the desired product is made public and potential suppliers can put in a price
bid to be awarded the supply contract. There is no substantial face-to-face contact, or in-depth
knowledge exchange regarding the product preceding the award of the business.
Contrary to this approach between customers and partner suppliers there should be high levels
of trust and open information exchange. Characteristic for this type of relationship are
frequent face to face meetings between customer and supplier, personnel of the supplier
working permanently at the customers site and the supplier investing substantially in assets
dedicated to the customer.
Dyer recommends the partnership approach as the more successful for all participants in the
supply chain for a number of reasons:
"
investment in dedicated assets increase the productivity
"
intensive knowledge exchange increases the speed of progress and
*
high levels of trust reduce the transaction cost substantially by spending fewer
resources on monitoring and controlling the counterpart
He sees the arm length approach as suitable only if the product supplied is standardized or
shows insignificant differences between different suppliers and therefore price is almost the
only distinguishing aspect.
Any customer supplier relationship creates dependencies.
Fine characterizes the main
dependency scenarios of the customer from the supplier as shown in Figure 2. If the customer
is completely independent from the supplier for product knowledge and production capacity,
the OEM is producing the product internally and is completely independent. This situation is
the most undesirable for the supplier since there is no business opportunity for him. If the
customer is independent from the supplier for production capacity, but dependent for
16
knowledge, the supplier acts as consultant for the customer, developing products which the
customer is ultimately producing. This situation is threatening for the customer, if the
supplier's knowledge is important for a feature, which is decisive for the sales success of the
vehicle. Since the suppliers knowledge is available to the customers competitors as well, he will
not be able to distinguish his vehicle from the competition with this feature.
Customer
dependence
supplier
of
Independent
knowledge
for
Independent
capacity
for
No business for
supplier
Dependent
capacity
for
Supplier
extended
workbench
is
Dependent
knowledge
Supplier acts
consultant
for
as
Strongest position
supplier
for
position
Figure 2: Customer/supplier dependency framework after Fine [Fine]
An example for this type of relationship was Ricardo developing the Puma Diesel Engine for
Ford. Due to Ford's strategic concentration on petrol engines it was very weak on Diesel
engine technology. This concentration rendered it basically incapable of developing a
competitive Diesel engine for the European market alone. Ricardo, an engineering
consultancy, ran the engine development program for Ford. With increasing importance of
diesel powertrains in the European passenger car market this lack of capability became
increasingly threatening for Ford. Recognizing this weakness Ford later allied with Peugeot to
profit from their diesel engine expertise and to overcome this strategically dangerous weakness
area. By this move Ford replaced dependency from a supplier by dependency from a
competitor.
If the customer is dependent for capacity from the supplier but independent for knowledge,
the supplier acts quasi an extended workbench for the customer. In this case, if the supplier
17
asks too high a price, the customer can easily invest into new production facilities and take the
business away from the supplier.
If the customer is dependent for both capacity and knowledge from the supplier, the supplier
has a very strong negotiation position. This situation can be very profitable especially if there
are only few competitive suppliers. This situation is obviously highly desirable for the supplier
but threatening for the customer. If this level of double dependency is reached the customer
will aim to the outmost to maintain or develop a number of competitors who offer similar
product. In the case studies it becomes apparent, that the frameworks of Dyer and Fine are
not sufficient to explain the effect of differences in the customer/supplier relationships on the
economic success of new products developed by suppliers.
Within the supply chain for passenger cars, the OEM's have in the last twenty years answered
the key question: Should I produce intemally or outsource? increasingly with a decision for
outsourcing.
This resulted in strongly increasing revenues taken by independent suppliers. The higher
revenue taken by independent Tier 1 suppliers can be seen exemplary when comparing the
fortunes of Delphi and Bosch. Until the second half of the 1990's Delphi was the fully owned
component division of General Motors. Delphi was subsequently spun off from GM and is
listed on the NYSE. Bosch is a traditional independent automotive supplier, mainly supplying
electric/electronic vehicle components and engine fuel systems. When Delphi was spun off it
was by far the largest automotive supplier with $32bn revenue. Since then Delphi has shrunk
to $26bn revenue, while Bosch has increased sales from $24bn in 1997 to $34bn in FY2001.
There are some indications, that the automotive industry is steering towards the climax of
modularization. The module suppliers - especially in the field of engine/vehicle electronics
and fuel systems are already in a very powerful position. The sales of diesel-powered vehicles
in Europe were in the last years of the last millennium limited by the production of high tech
fuel injection systems rather than market limitation. This puts the few suppliers able to offer
these systems (Bosch, Siemens and Delphi) into a very strong position. This dependency of
18
the OEM's is likely to generate pressure in the OEMs to develop in house electronics and fuel
system expertise and thereby reduce dependency and increase the integral capabilities. Nick
Scheele of Ford Motor Company has recently announced in an interview, that Ford has lost
too much technical expertise by extensive outsourcing. Ford would concentrate on
maintaining and improving internal technical capabilities, thereby reducing the dependency
from suppliers.
In vehicle development the activities between OEM and supplier are highly integrated. The
majority of automotive components are commodities and the OEM's enforce an open book
pricing policy. To be able to command higher prices and margins it is in the interest of the
component supplier to provide innovative products with higher value to the customer. When
developing innovative products, a major question is to which degree one, or multiple OEMs
should be involved prior to vehicle application projects. A high level of involvement of the
OEMs has the benefits of:
*
*
"
*
*
good access to customer needs information
laying foundation of novel product application in OEM organization
early warning about vehicle technology changes, which could impact on the new product
establishing a relationship with potential customers early on
sharing of development cost
This has to be traded off against potential negative impacts of involving the OEM's including:
* potential of OEM imposing temporary exclusivity rights to new product, thereby
reducing the market size
* OEM imposing large number of changes during product development, increasing the
development time
* deep customer insight into the product structure, with the risk of:
4 OEM imposing the open book costing structure on supplier => eroding profit
margins
4 Deliberate or accidental "diffusion" of knowledge to competitors
If the supplier decides to involve a vehicle OEM into the pre-development of a product it is
important to choose the right partner of pre-development. The thesis aims to derive some
guidelines to help determine when it is sensible to involve an OEM in product pre19
development and to determine a suitable partner for pre-development projects. The correct
choice of partner can accelerate product introduction and improve product design quality.
The introduction of new automotive technologies is substantially a diffusion process, but
conventional diffusion theory is not directly applicable in all aspects. The S-curve framework
as proposed by Rogers [Rogers] and shown in Figure 3 is based on the assumption of a large
number of customers. The figure below gives Rogers categorization of adopters into
innovators, early adopters, early majority, late majority and laggards.
Adoption curve
%
100
laggards
90%
80%
a
70%
late rnajority
60%
0
50%
40%
3Q%
4
early majority
20%
10%
early adopters
0%
Innovators
time
Figure 3: adoption curve after Rogers [Rogers]
In the case of the automotive industry, there are a large number of customers for the end
product - the vehicle, but the number of direct customers to the Tier 1 suppliers is very small.
Namely there are only around 10 independent vehicle OEMs, one single customer represents
20
5-20% of the total market volume. The venturesome Innovators and respectable Early
Adopters described by Rogers are not really existing as market segments. The automobile is a
mature product and all aspects of it, even novel features, are expected to be easy to use,
durable and showing a real proven usage benefit before featured in vehicles sold to the end
customer. These requirements are characteristic for the early majority [Moore]. Automotive
suppliers therefore have to overcome the chasm between early adopters and the early majority
prior to selling the first product. This is a high barrier to entry into the market, if selling novel
products directly to the mass market revenue can be produced by selling products with some
weaknesses to innovators and early adopters. It might require substantial development effort
to bridge the chasm between the early adopters and the early majority, but this development
effort can be funded by the revenue generated from sales to innovators and early adopters.
When targeting the automotive mass market this chasm has to be overcome prior to
generating the first dollar of revenue. The closest similarities to innovators and early adapters
are the advanced technology departments of the vehicle OEM's who are assessing
technologies for their suitability and readiness for vehicle serial application projects.
21
3. Case Studies
The case studies aim at reviewing current working practice of new product development by
automotive suppliers, identifying key causes for commercial success or failure and providing
an empirical basis for the system dynamics model. [Begin by saying what is the goal of the case
studies. Also, make reference to the appendix where you list the topics of the interviews.] All
case studies investigate the development of new components or systems for passenger cars
and the subsequent introduction into serial production. The cases analyzed are:
1.
Introduction of the automotive catalyst in Europe
2.
Exhaust gas temperature control system
3.
Keiretsu supplier of exhaust systems to Toyota
4.
Electric motor for automotive window regulator
5.
Reduced door module
6.
Advanced program for low variety door
7.
Slide/tilt sunroof
8.
Spoiler plus sunroof
9.
Large roof module with multiple openings
Eight of these nine cases are concerned with products developed by Marvin in its light vehicle
systems division. The cases represent a wide range of complexity, ranging from simple
components like the electric motor to complex vehicle sub-systems like the large roof module
with multiple openings. Seven of the interviewees were working for Marvin, the eighth was an
employee of a Japanese Keiretsu supplier. The interviewees had sufficient involvement in the
22
technical development and commercial negotiations with the vehicle OEM, so that they could
answer the commercial as well as the technical questions. The interviewees, who were typically
of chief engineer or engineering director level, were supplied with the thesis outline prior to
the interview to be able to develop an understanding of the general intention of the interviews.
The interviews were informal. The interviewee was not confronted with a list of questions, the
interviewer rather had a list of questions in front of him to prompt him to cover in the
-
interview all areas of interest for the study. The list of questions is provided in Appendix A
Project Questionnaire
3.1. Case 1 - Introduction of automotive catalysts in Europe
The primary function of automotive catalysts is to remove poisonous chemical components
from the exhaust gas by promoting chemical reactions, which oxidize (Hydrocarbons and
Carbon-monoxide) or reduce (NOx) these pollutants into less harmful gases (Carbon dioxide,
water vapor and nitrogen). Catalysts were introduced in the USA for automotive emissions
reduction in the late 1970's. In Europe catalysts were first introduced as in the late 1980's,
initially on few "green" vehicle variants. 1990 with the introduction of European stage I
emissions legislation catalysts became standard equipment for all passenger cars with gasoline
power train. This resulted in a step change in the demand for automotive catalysts from
several ten thousand per year for green vehicles and vehicles exported to the US market to
millions for the all gasoline cars sold in Europe.
3.1.1. ProductFunction
The functional goal of a catalyst is as follows: To reduce the environmental impact of the
release of exhaust gas from an internal combustion engine into the atmosphere by reducing
poisonous gas emission below legislated levels, while not impairing engine power output,
having a low weight, having low cost and being durable for 10 years. A schematic picture of a
catalytic converter is shown in Figure 6.
Figure 4 shows an Object Process Methodology diagram
(OPM) after Dori [Dori] of an
automotive catalyst. The supplier interviewed is not producing the precious metal coated
23
catalyst substrate; the supplier is rather mounting the precious metal coated ceramic substrate
in a steel casing and integrates this "converter" into the exhaust system.
I
Figure 4: OPM of catalytic converter
The converter can be decomposed in casing, support mat and a coated substrate making up a
very simple component. The coated substrate consists of a ceramic honeycomb and a precious
metal coating. The precious metal coated substrates were used in the chemical process
industry and could be supplied to the vehicle OEMs by companies with a strong chemical
background like Johnson Matthey, Engelhard or Degussa (subsequently called coaters). While
these companies had in depth knowledge about heterogeneous catalysis, they lacked
knowledge about the automotive industry in general and knowledge of exhaust systems
specifically.
24
energy
MMM--
mass
-
vibrational
input
signal
exh. hat
exhaust gas di
exh.heat
Caty
r
e
a
gas clean
thermal radiation
& convection
Figure 5: diagram of energy, mass and signal flows to and from catalytic converter
Figure 5 shows the energy and mass flows to and from the catalytic converter. The energy,
mass and signal flows to and from the catalytic converter are pretty straightforward. The
exhaust gas is entering and leaving the converter. Thermal energy is being convectively
transported into and out of the converter, some heat energy is lost via thermal radiation and
convection to the ambient. Finally vibration input through the connecting pipe-work.
Nevertheless, the exhaust gas temperature and composition functional is strongly coupled
with powertrain and the remainder of the vehicle. The performance of the converter is
therefore determined by very complex interaction of engine air fuel control, pipework
connection the engine with the converter, the dynamics of the gear box and the inertia of the
vehicle. The catalytic conversion of the pollutants only works in the case of a conventional
gasoline engine if the air fuel ratio in the engine is set to the stoichimetrically required value.
How accurately the air fuel ratio of the exhaust entering the catalytic converter is controlled,
depends upon the capabilities of the fuel delivery system, the exhaust oxygen sensor, the
engine control unit/engine control software, and the leakage of the exhaust line upstream
from the catalytic converter. The amount of raw emissions emitted, which determines the
purification requirements for the converter, depends on the complete engine design, friction
of transmission and tires as well as the vehicle weight. Finally the heat input into the converter
after cold start determines how quickly the converter reaches its operational temperature. In a
25
legal emissions test during this period of warm-up typically 80-90% of the total tailpipe
emissions are emitted. The time to operational temperature is determined beside the thermal
inertia and heat transfer conditions to the exhaust components upstream of the converter, and
the temperature of the exhaust gas leaving the engine. The engine out exhaust gas temperature
is determined by a large number of factors like: spark timing, air fuel ratio, heat loss to water
jacket etc. The interface between converter and vehicle is very complex. An in-depth vehicle
architectural knowledge is essential to make a catalytic converter work properly.
26
substrate
steel casing
Ceramic or metallic
honeycomb
P
r'ie.
y-A Ospotees-
y-AA
support
Platinum
PalladiumJa
metallic honeyc
Ce-Zr mixed oxide
Figure 6: sketch of catalytic converter
27
3.1.2. Pre-development of automotive catalyst
The muffler system supplier (at this time) Marvin was approached 1975 by one of its main
customers, to develop automotive converters for Rover vehicles, which should be exported to
the North American market. Marvin was approached by Rover because it had long standing
experience of exhaust system and was therefore familiar with the requirement for mass
produced exhaust components - an experience the suppliers of coated catalyst substrates
lacked. The task of the predevelopment effort was to develop a converter, which integrates
catalytically coated ceramic substrates into the exhaust system. The pre-development was a
joint effort with the vehicle OEM providing the system integration and engine control
expertise, the coaters providing the catalytic expertise and Marvin providing the exhaust
component knowledge. In this pre-development effort the coaters funded the development of
catalytic coatings, Marvin paid for the development of a durable and cost effective mounting
of the coated substrate and the OEM funded the development of suitable engine control
electronics other vehicle integration issues and vehicle tests.
3.1.3. SerialintroductionEurope
After the initial development had concluded, Marvin started to supply converters in relatively
small numbers to Rover and Jaguar for their export vehicles to the US market. This meant,
that Marvin had already close to 15 years of experience in producing catalytic converters, when
converters became a legal requirement for the European mass market. There were only two
other competitors in Europe who had a similar level of experience with the production of
converters,
when
mainstream
vehicles programs
with
catalytic
converters
entered
development. These two competitors had supplied German premium brand car manufacturers
with converters for their North American export models. Having supplied Rover Group (a
more cost conscious brand than the other European vehicle exporters to North America)
before Marvin had focused cost optimized designs, while the other two competitors had
developed designs with high safety margin and higher costs. The next biggest six European
competitors in the exhaust market had OEMs as main customers, who did not serve the US
market and therefore had no demand for catalytic converters. This meant that these
28
competitors had no relevant experience in producing catalytic converters. The fact that Marvin
had a long-term experience with catalytic converters and already a low cost design, meant that
Marvin was in the beginning of the 1990's:
" sole supplier to Rover for two years after mainstream introduction of converters
5 0 % of
*
gained more than
*
supplied more than 30% of Ford Europe's converters.
the Renault converter business and
This made Marvin the Nol converter supplier in Europe. In the years 1987 to 1993 extremely
high profit margins of up to 50% of the selling price could be achieved. This margin was 5 to
10 times higher than the profit on mainstream muffler systems.
The profit margin began to erode 1993 and has reached by 2002 levels identical to exhaust
mufflers. There are two equally important reasons for this reduction in profit margin:
*
the other European exhaust system manufacturers gathered increasingly experience
with catalytic converters
*
the OEM's acquired detailed technical and commercial knowledge of catalytic
converters. The development of OEM component knowledge as perceived by the
interviewee from the years 1987 onwards is shown in Figure 7. Most OEM's started to
develop experts or expert teams on catalytic converters (e.g. Ford transferred staff
with catalyst knowledge from the US to Europe). The introduction of open book
costing, which became commonplace from 1990 onwards in the automotive industry,
proved especially detrimental for the profit margin.
In open book costing the OEM requests from the supplier to disclose the cost of all tooling,
raw material, labor input, development effort and profit, when quoting. With increasing
number of quotes received for a component like a catalytic converter the OEM can develop a
29
clear picture of the real cost structure of its suppliers. When the cost structure is known, it is
impossible for the supplier to hide "additional" profit in the process steps or material input
and the supplier is stuck with an openly allowed profit declared in the open book quote. The
allowed profit tends to move towards the low profit margins which are common for vehicle
OEM's.
OEM component knowledge over time
100
80
a.
60
0) 60
E "a
-
400
01987
1988
1989
1990
time [anno domini]
Figure 7: development of OEM component knowledge as perceived by interviewee
30
3.2. Case 2 - Exhaust gas temperature control system
The three-way catalyst discussed in the previous case study has a very wide operational
temperature window of between 250 Celsius and 1100 Celsius. If the temperature is below the
lower threshold, exhaust pollutants do not react over the catalyst, if the temperature is above
the upper limit, the catalyst is permanently damaged by sintering of the precious metal coating.
Under normal engine operation, the exhaust gas temperatures of a conventional port fuel
injected petrol engine are within this temperature window and now specific active
interventions into the exhaust system are required to keep the catalyst operational. With the
increasing discussion about global warming and the subsequent drive for more fuel efficient
powertrains, lean operating direct injection gasoline engines have been developed. While these
engines return a 10-25% better fuel economy [Kazutoshi et al., Ando et al., Ikeda et al.], the
conventional three way catalyst is not working any more in lean operation. The three-way
catalyst is relying on using carbon monoxide and unburned hydrocarbons to reduce the
nitrous oxide in the exhaust stream. This process works only if the engine is supplied with a
close to stoichimetric air/fuel ratio. The excess oxygen found in the exhaust gas during lean
engine operation oxidizes carbon monoxide and hydrocarbons before they can reduce the
nitrous oxide. This effect pushes the NOx conversion rates of conventional catalysts close to
zero when used for lean gasoline direct injection engines. An alternative catalytic
aftertreatment technique has been developed and patented by Toyota, which allows NOx
conversion under intermittently lean operation in a discontinuous process. When the exhaust
gas is lean, NOx is stored in the form of a metal nitrate in the catalyst washcoat. Over time
(order of 30 - 60 seconds) the absorption capacity of the coating is increasingly filled up. Then
the engine is run for a short period of time (order 1-2 seconds) fuel rich. The carbonmonoxide
in the exhaust stream leads to desorption of the nitrous oxide and subsequent conversion over
the precious metal catalyst to nitrogen and carbon dioxide. For this process to work properly
it is required that the absorption process is working as well as the desorption/conversion
process. The metal nitrates become thermodynamically unstable at higher temperatures (>450
- 550 Celsius) while the desorption and conversion process is not working at temperatures
below 250 Celsius due to activity limits of the involved catalytic precious metal coatings. This
31
leaves an operational temperature window of these so called NOx traps of around 200-250
Celsius width, which is substantially smaller than the 850 Celsius wide operational window of
three way catalysts. Since the dynamic range of exhaust gas temperatures of GDI engines is
substantially wider than 250 Celsius, it is beneficial to control the exhaust gas within this
temperature window.
3.2.1. The Product
The primary function of the exhaust gas temperature control system is to improve the
efficiency of exhaust aftertreatment devices with temperature dependent efficiency by
maintaining the exhaust gas temperature in the optimum operational temperature range while
requiring minimum packaging space. Figure 8 shows the exhaust gas temperature control
system.
Figure 8: exhaust gas temperature control system
32
The system comprises an assembly with liquid cooled shell tube heat exchanger for extracting
the heat from the exhaust flow, a second by-pass route with low exhaust gas heat loss, an
exhaust valve to control which proportion of the exhaust flow is cooled, an electrical actuator
to operate the exhaust valve, an exhaust gas temperature sensor to provide the control signal
and an electronic control unit, which allows closed loop control of the exhaust gas
temperature at the outlet of the system. The cooling liquid is provided by the engine cooling
system to the shell tube heat exchangers. More detailed discription of the EHMS can be found
in [Hartick 1998, Hartick and Hatton 1999, Hartick 2000 and Hartick 2001]. The OPM below
visualizes the functional relationships between the different components.
3.2.2. Pre-development
The motivation to work on a system for the control of the exhaust gas temperature came from
discussions with a supplier for catalytically coated substrates mentioning the thermal
limitations of lean NOx trap coatings. The coater actively encouraged Marvin to look into
product solutions to maintain the NOx trap coating within its optimum operational
temperature window.
The product specification was supplied in parts by the coater, who specified the thermal
limitations of the NOx trap coatings and in parts by Marvin itself applying existing knowledge
about exhaust system requirements.
The OEM was the first time actively approached after the thermal and emissions
improvement capabilities of the system have been proven on a concept level [H-artick 1998,
Hartick and Hatton 1999] and the results had been published. About 20 % of the total
requirements were identified through customer involvement. A further 10% of the
requirements was identified through the involvement of the supplier of the shell tube heat
exchanger. This supplier is a cooling system supplier to the automotive industry. These
requirements were mainly related to the cooling circuit impact of the system, where Marvin
33
traditionally had very little experience. The application into the vehicle itself contributed
relatively little to the identification of product requirements.
Marvin actively approached one OEM and entered a vehicle pre-development together with
the OEM. Subsequently pre-development programs with two other OEM's were entered. In
these cases the OEM actively approached Marvin to supply the system. The pre-development
cost of the system to date is $250,000.
In the first phase the product was presented to three customers. There are four competitors
with products for exhaust gas temperature control on the market. Most of them offer air
cooled devices, only one competitor offers another water-cooled device.
The interviewee rated the product knowledge of the customer with 5 out of 10 and rising over
time. While there is almost complete understanding of the manufacturing processes involved,
the customers have not fully understood the systems implications of linking the exhaust
system to the engine cooling system.
There were substantial differences in the behavior of the three OEMs. The first OEM
frequently changed the target specification and in the vehicle target platform. Altogether the
system was modified three times to fit three different target vehicle platforms, which resulted
in the waste of engineering effort and substantial re-work. Furthermore, the organizational
structure of this OEM mirrored the decomposition of a traditional vehicle with component
engineers at the bottom of the hierarchy. As a result of this structure it proved very difficult to
obtain the buy-in of coolant component engineers. Engineers focusing on exhaust gas
aftertreatment and engine development started the pre-development collaboration with
Marvin. These engineers had to go three layers up in the hierarchy for identify and commit
suitable engineers from the engine coolant and HVAC department to support the project.
After these engineers joined the pre-development project, they showed little commitment
since the project was not initiated and supported by their immediate superiors. The project
34
seemed to represent additional work with an additional, not traditional supplier promising little
reward for them.
The second OEM did invite other competitors actively at the pre-development stage. This
OEM requested quotations with ffll cost break down early on, as it is supplied typically for
standard exhaust systems in an effort to force the price down as early as possible.
The third OEM provided a very detailed target specification and had already before the predevelopment collaboration a detailed understanding of the vehicle integration needs. The
OEM therefore invited from the onset a coolant system supplier who collaborated with
Marvin and the OEM to ensure exhaust system integration of the EHMS as well as cooling
system integration. The engineering effort Marvin spent on the development project with this
OEM was only around one third of the effort spent on pre-development with the first OEM.
This was mainly due to the prevention of rework since the target specifications remained static
throughout the pre-development project. Details about the serial application are not available
at this point, since the product is not in serial production yet.
With the three OEMs there are very different levels of IP protection, ranging from operating
under a general confidentiality agreement, to a specific agreement which assigns any
intellectual property emerging from the pre-development in advance to the different
participants in the pre-development program. I.e. the exhaust system suppliers is granted
exhaust related IP, the cooling system supplier the coolant system related IP. This
arrangement helped to develop confidence in the different partners in the project and
promoted an open information exchange.
35
3.3. Case 3 - Keiretsu supplier of exhaust systems to Toyota
In this case study a technical manager of a Keiretsu supplier to Toyota was interviewed. Unlike
the other cases researched where a single product development project was analyzed, this case
aims to determine the specific similarities and differences between product development in a
American company serving all major European
OEMs and a Keiretsu supplier generating 8 0%
of its revenue supplying one single OEM - Toyota. The company is one of two exhaust
system suppliers to Toyota and has developed and sold to Toyota a number of innovative
products, like dual mode mufflers or catalytic converters with spun cases.
The initiative for the pre-development for new products has come in the past from either
Toyota or the supplier itself. In pre-development programs when Toyota is involved it
typically paid prototypes and pre-development cost to the supplier. Toyota was described by
the supplier as "most excellent in technology" and typically improved the product level
substantially when involved in pre-development programs. The in-depth involvement of
Toyota in the pre-development, while beneficial on the technical side, makes it very difficult to
use products emerging from these pre-development projects to increase the typical profit
margins. Increased margins compared to the supplier's commodity products could in the past
only be achieved, when the supplier owned the intellectual property alone. The in-depth
involvement of Toyota led to a situation, that in the past only patents on manufacturing
processes or simple components were solely owned by the supplier. All patents with a wider
scope involving vehicle systems or emissions products were jointly owned together with
Toyota and therefore could not be leveraged to increase the profit margin.
Therefore the
supplier found it easier to realize increased profit margins with simple components or
manufacturing processes rather than with complex vehicle systems.
When Toyota engages in a pre-development program with a supplier it will pay for the
prototype supplied as well as for the pre-development engineering cost. This is contrasting
with serial development programs, where Toyota is only paying for prototypes and typically
not for engineering cost. The engineering cost will be amortized over the serial production
36
piece price. Toyota is typically running a pre-development program on one technology with
one supplier only. This on the other hand, does not protect this supplier from competition in
this technology field during serial production. Instead Toyota opens up for competition in
serial production. If a competitor supplier was selected for serial production Toyota would
pay, if necessary, a license fee to the supplier who was the pre-development partner. This
approach makes it clearly difficult for one single supplier to develop and protect areas of core
expertise and gain a competitive advantage against other competitive suppliers to Toyota. This
way of "leveling the field" when serial production is started, ensures that the keiretsu supplier
are operating on a similar level of technical knowledge and prevents in the long term a
dependency on a single supplier.
On the other hand the supplier has the freedom to sell components it has developed for a
system, which is the result of a pre-development project with Toyota to other OEMs and
thereby can increase its revenue.
Beside the joint ownership of intellectual property with Toyota, Toyota's detailed knowledge
of the suppliers cost structure prevents the realization of higher margins. This key factor was
reported also in the catalyst case.
37
3.4. Case 4 - Electric motor for automotive window regulator
Focus of this case is the new generation motor or NGM, which was developed by Marvin for
electric windows.
3.4.1. The Product
The development project analyzed in this case study is the electric AC motor shown in Figure
9. The functional goal of NGM is: To provide actuation force for operating a vehicle window
by converting electrical energy in rotational mechanical energy, while emitting low noise level,
being compact, being applicable to all vehicles with minimum variation and being durable for
vehicle life.
Figure 9: new generation motor
The motor is used to drive electric windows in passenger car applications. The motor is
mounted on the reduced window module and drives the window regulator, which converts the
rotational movement of the Motor into a translatory movement of the window. The motor is
38
connected via electric connector to the vehicle-witing loom. The electric current to the motor
is controlled by a switch and an electronic module the so called anti squeeze module, which
prevents passengers being hurt by the closing windows. The electric motor is ultimately
converting electrical energy into mechanical energy as shown in the OPM (Figure 10).
stato r
ma
to
Figure 10: OPM of new generation motor
The main flows passing to and from the motor are energy flows: electrical energy input into
the motor generates a mechanical energy output from the motor. Vibrational input from
vehicle operation has an impact on the motor wear and durability. Radiated noise is an
unwanted by-product of the energy conversion. The interfaces to the vehicle are relatively
simple. There is a fixed geometric connection to the door or reduced door module, a
connection to the transmit the mechanical energy and convert it into the movement of the
window pane and a electrical connection so supply the electric energy to the motor. Figure 11
shows the energy flows to and from the motor. All interfaces except for the electrical
connectors are with components Marvin is producing for the reduced door module, or the full
door module.
39
mass
electrical
energy
vibrational
input
mechanical
enerw
signal
I radiated noise
Figure 11: energy, mass, and signal flows for new generation motor
Substantial knowledge about all interfaces of the motor with the vehicle is present in the
company. The only interface, which might be modified to customer specifications, is the
electrical connector.
3.4.2. New GenerationMotor Pre-development
The motivation for starting pre-development on a new generation motor was the
shortcomings of the existing units. The existing electric motors were produced in a large
number of variations for the different vehicle applications; they were of fairly poor quality and
had uncompetitive manufacturing cost. Being unsatisfied with this situation, the plant manager
of the manufacturing plant initiated the development of a new generation motor 1995 with the
aim of developing an electric motor, which was:
*
functionally superior
" more reliable
" inexpensive to produce.
40
In the beginning of the project a multidisciplinary team was established, with representatives
from sales, motor engineering, window regulator engineering, production (motor plant,
window regulator plant), quality, purchasing.
This team put the target specification document together. Since the product was a
new/improved version of an existing product, the main requirements were well known within
the company, which produces electric motors, window modules, and complete vehicle doors.
The specification document was presented to two lead customers to critique the target
specifications. Both customers confirmed the assumptions regarding target torque range, noise
level and price as suitable. After this the customer was only involved again after the
development of the new generation motor was complete and prototypes could be supplied to
mainstream vehicle programs. It was seen as a specific benefit, that the vast majority of the
vehicle integration issues for the electric motors were familiar to the company, since the
company produces the window module too, which contains all mechanical interfaces between
vehicle and motor. The only interface, which was directly in the responsibility of the customer,
was the electric connection to the wiring loom.
From the outset of the pre-development the variety reduction method was applied aiming at
covering the required product performance range with the minimum of variants. Very early in
the predevelopment process suppliers were identified to be involved in the motor
development. The suppliers signed in the development contract all intellectual property right
over to Marvin, provided sufficient development support, and designed, produced and funded
their own tools. In compensation they were promised 6 0% of the known production volume
of the motor component they developed for the NGM, if they met cost and performance
targets for their component. Together with the low involvement of the OEM in the predevelopment this left Marvin with sole ownership of the intellectual property of the electric
motor. After the target specification and target price was fixed, the over all function of the
motor was decomposed in sub-functions and cost targets for fulfilling these sub-functions
were set. Setting target prices for sub-functions rather than sub-components was felt to be key
41
for the strong reduction in part count (-3 0 %) purchased components (- 8 8 %). The target of
providing certain functionality for a predetermined price motivated the suppliers to provide
the most efficient solution. This drove the integration of parts, and where parts were
purchased for the previous generation of motors, subassemblies were purchased for the
NGM. By combining standardized sub-assemblies, the desired product performance range
was covered. For example, the whole torque range of all applications was covered by one
single gearbox and 3 different variations of rotor winding diameters. For the electrical
connection a standard plug was developed, which removed one plug from the wiring harness.
If the customer wants to stay with his old wiring solution an adapter can be provided for a
price premium.
The pre-development was finished by 1997 and serial production started in 1998. The first
serial applications were with the two lead customers who critiqued the motor specification at
project start. In 1999 one additional OEM started serial production using the NGM. Marvin
currently sells the NGM as part of door modules and window regulators as well as single
component.
There are 10 - 12 worldwide competitors for window motors.
The interviewee felt that the vehicle OEM had a moderate to low understanding of electric
motors. This fact was thought to be important to maintain a good profit margin.
The profit margin improved substantially with the introduction of the new product. It jumped
from 0% in the old product to 2.5 times the average corporate profit margin. The motor has
been in production for 4 years and this margin was maintained through cost reduction, while
the prices fell by 3-4% per year.
The productions numbers were 5 million motors in the first year of production (1998) and
rose to 14 million parts in 2002. It is expected that the production numbers will rise by 10%
42
per year over the next five years due to higher vehicle equipment levels and the NGM being a
technically and economically highly competitive product.
43
3.5. Case 5 - Reduced Door module
3.5.1. The Product
The reduced window module consists of the internals of a passenger car door: the support
frame, the window regulator, which converts the rotational movement of an electric motor or
a manually operated crank into a translatory movement of the window support, the electric
motor and the anti-squeeze electronics. The reduced window module discussed in this case
does not contain any glass pane (see Figure 12).
Figure 12: the reduced door module
The functional goal of the reduced window module is: To operate a vehicle window by
applying a translatory movement to a glass pane, while preventing injury to passengers, having
minimum noise emissions, and being durable for vehicle life. An OPM of the reduced door
module is shown below.
Figure 13: OPM of reduced door module
Marvin was the first to the market supplying pre-assembled reduced window modules to Fiat
and Rover in the late 1960's early 1970's. The product is by now industry standard, therefore
this case is dealing with development for serial application only. TIhe interface to the vehicle is
substantially more complex than in the case of the electric motor. There are a number of
connection points to the door frame as well as to other components like loudspeaker chassis
or the window pane. The final shape of large stamped parts, like the door panel shape, is often
only known after the first off tool parts have been produced. The amount of friction between
the rubber seal and the window pane has a substantial impact on the functionality and power
requirements of the window lift and is often only known at a late stage in the development
process, when prototype parts are available. The door seals have an impact on what
acceleration level the reduced door module is exposed to, when the vehicle door is slammed
shut. This means that a large number of design choices made out of control of the module
supplier is affecting the design of the module.
45
3.5.2. Development/Marketing
To acquire new production project there is typically a mix of the customer approaching
Marvin and Marvin receiving early warning about new customer development programs
through their sales force. Typically the customer provides a specification for the reduced
window module with the request for quotation. Some customers prescribe sub-suppliers and
specify components to be uses in the assembly. Some of these OEMs have a large number of
component engineers in their organization. The co-ordination between the component
engineers is happening at a relatively high level in the corporate organization, leaving the
system supplier with the responsibility of facilitating communication between the customer
component engineers involved in the supplied system. This organizational set-up substantially
reduces the design flexibility for Marvin and fixes the traditional decomposition of the
subsystem in components.
Functional integration
of different components is almost
impossible since the OEM's organization cannot provide readily a contact person for a
component, which emerged by integrating two or more old components. After 6-8 months
Marvin then provides a detailed proposal for the reduced window module. The interviewee
stressed that detailed vehicle architectural knowledge is essential for the successful design of
the module. The initial specification is proven wrong often and a substantial number of
specification change occur during development. The interviewee indicated that 10% - 20% of
the specification changes very late in the development process with the main problems areas
being:
*
geometric differences of the of tool body in white stampings in comparison to the
CAD models
*
changes in the window operation forces due to different than expected friction
between window gaskets and glass pane
*
differences in the motor voltage specification
0
effects of door seals on acceleration experienced by the module.
46
A significant number of these changes are only found when the vehicle door is assembled
from off tool parts i.e. very late in the development process. Marvin therefore tries as far as
possible to anticipate changes and to heavily use previous experience through a PDM system,
which contains Marvin internal engineering standards for typical applications. The typical
development cost of a reduced window module is $2.6M including tools, with $0.5M for
engineering development and test and $1M for the development of the anti-squeeze software.
This compares with total sales in of $6M/yr over 5 years.
In the market for reduced window modules Marvin has only 3 competitors. But basically all
projects are awarded after a competitive bidding process. The interviewee rated the OEM's
detailed product knowledge at 8 out of 10. The only exception being Toyota who has full
detailed knowledge of reduced window module design, development and production.
The profit margin for reduced window modules improved in the last 5 years from a negative
margin to 1.8 times the corporate margin for electric modules without anti-squeeze and 1.2.
times the corporate margin for modules with anti-squeeze electronics. Pivotal for this
development was the development of the new generation motor, which is a technically and
commercially highly competitive component.
3.5.3. Intellectualpropery
The intellectual property is protected by Marvin owned patents. There are no OEM/Marvin
joint patents, since these would allow the OEM to have the protected product feature
produced by a Marvin competitor. In a development program the OEM does not buy the
intellectual property, but only the module itself. In some cases, where the OEM traditionally
does not award the full production volume of one vehicle model to one supplier, Marvin
allows competitors to produce Marvin patented product features. In these cases Marvin will
be compensated either by a license fee, or by an increase in market share with the OEM.
47
3.6. Case 6 - Advanced programme for the Low Variety Door
In this project a road map for the design of a complete vehicle door module including external
panel, interior trim, window, window mechanics, door lock and loudspeakers is developed.
This project is still in the pre-development phase and serial production of a vehicle door
module developed based on this road map has not started yet. A generic door concept should
be determined, which can cover the large variety of vehicle through a combination of a small
number of, standardized components and subassemblies and the absolute minimum of
customized parts. Target was to reduce production costs by 10% - 20% and reduce the weight
by 5 - 8 kg per vehicle door.
This project was initiated by Marvin internal and started from the functional analysis for a
vehicle door disregarding the components currently making up vehicle doors. The OEM's
involvement in this project was up to this point low. After the project strategy and plan was
generated, Marvin approached some OEM's to cross check whether to approach the project
took was on the right track.
Solely Marvin developed the specification for the low variety door. Marvin relied here on its
historic experience in door component and sub-module design and manufacturing. The
interviewee was confident that there is sufficient vehicle integration knowledge available
within Marvin, that the customer is not needed in this respect during the pre-development of
the low variety door module.
The pre-development of the low variety door costs approximately $250k with 3-4 people
working full time on the project.
After all key common elements and customized differing elements of vehicle doors were
identified, Marvin actively approached four OEM customers, being selective which customer
to approach with this new vehicle door concept. For the full door modules the interviewee
estimated the OEM's detailed product knowledge with 8 out of 10.
48
In the vehicle door module business there are 3 potential customers, but at this point it is
unclear whether they are going down the route of offering full door modules.
In the development project Marvin is careful to protect all intellectual property.
49
3.7. Case 7 - slide/tilt sunroof
3.7.1. The Product
One of the divisions of Marvin is dedicated to roof modules. The traditional products in this
division are sunroofs. In the last five years the product content widened to provide modules
with increasing contents to the OEM customers. Starting from the traditional sunroofs over
the spoiler plus sunroof to full roof modules with multiple openings for large Sport Utility
Vehicles (SUV) were developed. In this thesis exemplary development projects for all three
products will be discussed. In the first study a development project for a traditional sunroof is
analyzed.
The functional goal of all the roof modules discussed in here is: To allow flexible ventilation
and lighting of a vehicle passenger compartment by controlled opening of a roof aperture,
while preventing air water and light ingress when closed, having low aerodynamic drag when
closed, emitting low noise levels when operated, preventing injury to passengers, generating
minimum draft when opened, and generating minimum increase in interior noise level when
opened. The OPM in Figure 14 below visualizes the functions.
50
yi
f
\
Y
:4ol
ga ae
otn
Figure 14: OPM of slide/tilt sunroof
Figure 15 shows a roof module with a slide/tilt sunroof. When retracted the sunroof panel
slides between the outer roof panel and the interior roof trim.
51
Figure 15: slide/tilt sunroof
A de-composition diagram is shown in Figure 16.
Marvin supply
content
sunroof
top
panel
interior
trim
I
I
I
support
frame
water
collector
seals
drive
mechanism
kinematics
guides
Air
deflector
I
I
I
_
Figure 16: de-composition diagram of slide/tilt sunroof
The supply content of Marvin consists of the sunroof support frame, which is carrying the
water collector, the drive mechanism, and kinematics guides for the sunroof. The water
collector is collecting water entering through the space between sunroof top panel and roof
panel. This water is ducted out of this collector through pipe-work. The seals ensure water/air
52
tightness of the closed sunroof. The drive mechanism converts the torque provided by a hand
crank or electric motor into an actuation force enabling the movement of the sunroof panel.
The kinematics guides ensure that the sunroof is moving along the correct spatial path when
the actuation force is applied. The air deflector improves the separation of the external air
stream when the sunroof is open, thereby reducing in-cabin air motion and noise.
The sunroof as described here is a traditional product, to acquire new production project
there is typically a mix of the customer approaching Marvin and Marvin getting early warning
about new customer development programs through their sales force.
3.7.2. Pre-development
The specification for a sunroof is traditionally developed in close collaboration between
Marvin and the OEM. Marvin tries to push as much as possible to apply its universally
applicable specification.
Pre-development activities on sunroofs are generally carried out without direct involvement
of the customer, since Marvin has long experience with the product. The vehicle integration
issues of the sunroof are well understood by Marvin. There is increased involvement, if the
module content increases, as in the case of the spoiler plus roof or full roof modules.
This leads to a situation where only 20% of the requirements in a sunroof development
program are found through customer involvement. The interviewee indicated that only 10%
of the requirements are found in the actual installation of the sunroof in a prototype vehicle.
The interview felt the vehicle architectural knowledge is essential to the design quality of the
sunroof, but through the longstanding experience of Marvin this architectural knowledge is
present within Marvin.
The pre-development costs of the sunroof are relatively low with 25 kE (excl. tooling).
After the pre-development was concluded Marvin approached directly all customers with the
new sunroof.
53
3.7.3. Development/Marketing
The market for sunroofs is highly concentrated. There are only two other competitors. Even
though the number of competitors is low, the sunroof market is very competitive. Basically all
serial application projects are run competitively during the pre-development phase of a
vehicle platform. The development sunroof supplier is selected in a competitive bidding
process.
The interviewee rated the detailed sunroof product knowledge of the customer 5 out of 10.
The operating profit on sunroof production matches the operating profit of Marvin
commodity products. The interviewee indicated that the very small number of competitors do
not enable Marvin to generate higher margins, since technical and commercial information
tends to find its way to competitors and the customer can spend a substantial amount of time
on analyzing each suppliers cost structure. The interviewee saw the profit margin strongly
impacted by late discovery of rumbling noise issues in the passenger cabin when the sunroof
is opened. The rumbling noise is generated by a standing wave in the passenger compartment,
which is excited by the vortices in the airflow separation area at the front edge of the sunroof
and its air deflector. The interior noise issue is typically only found, when a full prototype
vehicle is produced with from tools components. At this stage in the development process
the serial production tools are already present. To cure the noise shape changes to the wind
deflector are required. These changes result in expensive changes to the serial production
tools, which impacts strongly upon the development cost and subsequently the profit margin.
The interviewee felt that if there were no competitors at all in the market a fifty per cent
higher profit margin could be realized.
The sales figures for the sunroof project were 100,000 units/year over 6-7 years production
runs.
54
There is a range of patents covering the design features of the sunroof. The interviewee
indicated that Marvin is putting high importance on the protection of intellectual property.
OEM projects where the supply contract specifies that any intellectual property generated in
the development program is owned or shared by the OEM are unacceptable for Marvin and a
project is rather tumed down than these conditions are accepted.
55
3.8. Case 8 - Spoiler plus sunroof
3.8.1. The Product
Different to the traditional slide/tilt sunroof in the spoiler-plus sunroof (see Figure 17) the
opening in the roof is generated by moving the movable roof panels on top of the static roof
panel, rather than sliding it between the roof pane and the interior trim. This can be achieved
by one or multiple movable panels. The Spoiler plus sunroof allows larger roof apertures by
moving roof panels spanning the full width of the vehicle roof. Furthermore the spoiler plus
sunroof does not reduce the head room in the passenger cabin as much as the slide/tilt sun
roof.
Figure 17: spoiler plus sunroof
The decomposition diagram of the spoiler plus sunroof is very similar to the conventional sun
roof (Figure 18).
56
sunroof
interior
trim
I
I
top
panels
support
frame
water
collector
Marvin supply
content
seals
drive
mechanism
kinematics
guides
Air
deflector
Figure 18: de-composition diagram of spoiler plus sunroof
3.8.2. Pre-development
The product idea for the spoiler plus sunroof came from a joint workshop of Marvin and the
OEM vehicle manufacturer. The target vehicle was a 2 seat micro compact car.
The target specification was as in the case of the conventional sunroof determined in
collaboration between Marvin and the vehicle OEM, while trying to apply where possible the
Marvin's general sunroof specification. The number of requirements specified by the customer
was with 30% higher in the case of the spoiler plus roof than for the slide/tilt roof.
As the spoiler plus roof was a new product around
2 5 % of
the requirements were determined
by applying the product to prototype vehicles. This physical product application contributed
substantially to the final product design.
Vehicle architectural knowledge was more important than with the conventional sunroof,
since there is a stronger impact of the spoiler plus roof to the total structural integrity of the
full vehicle roof, than with the conventional sunroof.
The pre-development cost for the spoiler plus roof was with 40kE (excl. tooling) substantially
higher than for conventional slide tilt roofs due to the higher complexity with multiple moving
panels.
57
The remainder of the pre-development aspects were very similar to the pre-development of
the conventional slide/tilt sunroof described in the previous case study.
3.8.3. Development/Marketing
Two customers were initially approached with the spoiler plus sunroof. This sunroof solution
is suitably for special applications, where large roof apertures should be realized with
minimum infringement of interior head room.
There are the same two competitors active in the field spoiler sunroofs as with conventional
sunroofs. Again all competitors were participating in the competitive bidding process.
Different to the conventional sunroof project the OEM engineer had a in depth
understanding of the product. The interviewee rated the OEM's detailed product knowledge
with 7 out of 10. He saw the reason for this in depth knowledge in the fact that a group of
ambitious young engineers were involved on the OEM side and that the whole car itself was a
revolutionary design with plastic body requiring in depth involvement in the engineering
solutions. This level of knowledge and involvement had a positive impact when specification
changes were required to come up with an effective design. The detailed understanding
enabled greater flexibility with view on these specification changes.
The profit margin was identical to the slide/tilt sunroof project. No higher margin could be
realized by selling a novel product.
The very tight timing in the development project represented a major commercial risk and was
seen as having an impact on potential changes in margin.
The sales figures were with 30,000 units/year over 6-7 production years only 30% of the sales
figures of the slide/tilt sunroof.
The intellectual property of the spoiler plus sun roof was not protected by patents other than
the applicable patents for conventional sunroofs.
58
3.9. Case 9 - Large roof module with multiple openings
3.9.1. The Product
The large roof module (shown in Figure 19) was applied to a sport utility vehicle. It contains a
large air deflector, which is part of the external roof skin when the roof is closed. In a
conventional sunroof the external roof panel covers the air deflector, when the roof is closed.
A spoiler plus roof segment, which is followed, again by a slide tilt sunroof, follow the air
deflector and a fixed roof segment made of glass.
59
Slide/tilt
sunroof
Spoiler plus
segment
Figure 19: large roof module
60
This combination gives the driver a multitude of roof opening options. When both movable
panels are retracted a very large roof aperture is opened providing a almost convertible like
driving experience to the passengers. The decomposition of the diagram is basically the same
as for the spoiler plus sunroof. The flexibility of operating different roof segments separately
adds substantial complexity to the electronic control and mechanical drive mechanism as well
ass to the kinematics guides.
3.9.2. Pre-development
The product concept of combining a spoiler plus sunroof and a slide/tilt sunroof came from
the vehicle OEM, who wanted to equip his SUV with a novel roof solution.
The target specification was as in the other sunroof cases determined in collaboration between
Marvin and the vehicle OEM, while trying to apply where possible the Marvin's general
sunroof specification. The number of requirements specified by the customer was with 30%
higher in the case of the spoiler plus roof than for the slide/tilt roof. Due to the higher control
complexity and the high number of operational variations and the higher level of functionality
the customer had a more intense involvement in the pre-development activities than in the
two previous cases.
The pre-development of the large roof module differed from the previous two cases by the
fact that 4 0% of the product requirements were found when the module was actually applied
to prototype vehicles. The interviewee described that the projects had a large similarity to
shooting at a moving target.
Vehicle architectural knowledge was even more important than with the two previous roof
related cases due to the operational complexity level and the sheer size of the unit and its
increased importance for the vehicles structural integrity.
The high complexity level of the project led to pre-development costs of 550k, which were
an order of magnitude higher than for the previously analyzed projects. The remainder of the
61
pre-development aspects were very similar to the pre-development of the conventional
slide/tilt sunroof described in the previous case study.
3.4.3. Development/Marketing
In contrast to the other roof projects only one single customer was initially approached with
the new product. It was firstly the expressed wish of the customer to be at least for some
period of time the only OEM offering this flexible roof solution. Secondly Marvin wanted to
see this complex product with its significant technical and commercial risks through to serial
production with one single OEM. After sufficient learning was achieved in this relatively small
volume serial production project, the large roof module was actively marketed to other
customers with larger potential production volumes.
Beside the same two competitors offering sunroofs there is a third potential competitor who is
currently supplying fold-away hard tops for convertibles.
The interviewee rated the OEM's detailed product knowledge with 5 out of 10, the same
rating as in the slide/tilt sunroof.
The profit margin was identical to the other two roof projects. No higher margin could be
realized by selling a novel product with high complexity and substantial development
commitment by the supplier.
Multiple changes in the target specifications during the development of the roof module had a
strong negative impact on the development cost.
The target sales figures for the roof module are 5,000 units/year over 6-7 production years.
These low figures enabled the supplier to use more challenging complex technology, since the
commercial risks were not as high as in a large volume project.
Patents protected the intellectual property of the large roof module. Marvin holds the patent
rights.
62
4. Conclusions from case studies
Cases from different divisions of the company with a wide variety of automotive products
were analyzed. These products ranged from components like the new generation motor to
relatively complex vehicle sub-systems like the large roof module. In this section the cases are
analyzed regarding competitive structure, OEM involvement and system complexity.
Table 1: table of case study findings
product originator
provider of product
case 6 -full case 7 -
case 2 case 3 - Keiretsu case 4 - new case 5 generation reduced
exhaust gas
case 8 case 9
spoiler plus large roof
-
case 1 catalyst
temperature supplier
motor
door module door module slide/tilt roof roof
module
OEM
OEM/Tierl
Tier1
OEM
OEM/catalys OEM
Tier1
Tierl
OEM
OEM
OEM
OEM/Tierl
Tier1
Tier1
OEM/Tier1
Tier1
OEM/Tierl
OEM/Tierl
t coater
specification
OEM involvement level (0
OEM requirement
contribution (0 low 10 high)
vehicle interface complexity
(0 low, 10 high)
proportion of requirements
10
10
5
3
10
10
0
1
3
4
1
0
1
0
2
0
4
4
10
8
8
2
4
3
2
4
6
10%
20%
0%
10%
25%
40%
10%
10%
0%
20%
30%
30%
30%
20% N/A
found through physical
OEM interface knowledge
90%
20% OEM,
10%
50%
OEM/30%
coater /20% subsupplier,
contribution
OEM
Tierl/OEM OEM
supply initiative
N/A
250k$
Tier pre-development cost 300k$
3
2
No. of OEM's involved in
Tier1
1
OEM&Tierl
$3000k
2 all
the first step
0
OEM&Tierl OEM&Tierl
$550k
$40k
1
2
3
OEM&Tierl
$25k
Tieri
$250k
I
No. of competitors before
the product is on the
2
4
0
12
3
0
2
2
number of competitors
7
4
1
12
3
3
2
2
Did OEM invite competitors yes
OEM1 yes,
OEM2 no,
OEM3 for
to supply
serial
Time delay before OEM
12yrs, delay
between US
and
European
invited competitors
introduction
2 months for 0 yrs, OEM pays no delay
required
if
OEM1,
OEM3
18 license fee
months
5
OEM detailled component rising from 2
- 10
knowledge
Profit
margin/commodity 5 - 8
profit margin
1 3.5
TBA
yes
yes
yes
no delay
no delay
no delay
no delay
no delay
Toyota(10)
improved
TBA
N/A
for next 5
introduction
yrs
$140M
ofNGM
$6M/yr
patents on patents
process
patent
on product
design
design
patents on concept and (Tierl/OEM
details
owend), concept solutions
some
canning,
(OEM owned),
cannng,& detailed
patents & design
manufacturing
secrecy on solutions
processes (Tieri
coating
owned)
Tier1
OEM, OEM/Tierl Tier1
Marvin
Tier1,
coatings
coaters,
OEM
8
N/A
5
7
5
1
1
1
be constant 1.2 with
1993-2002
IP ownership
No
expected to from loss to
1 between
IP protection
3
yes
3 8 all OEMs
except
10
dropping to
sales
yes
yes
3
N/A
100000
on patents
design
details
on patents
design
details
Tier1
Tier1
30000
on No
N/A
5000
patents
design
details
on
Tier1
shared
63
Table 1 gives a condensed comparison of the main findings of all the case studies.
4.1. Appropriability
Appropriability is of key importance when trying to maximize the commercial benefit
from new technology. If a new product can be copied easily the ability to command a high
price with a large profit margin is impaired immediately. A supplier in a monopoly
position offering a product without a readily available substitute has high power position
in price negotiation.
Appropriability can be achieved in three principal ways [Henderson, Teece]: intellectual
property protection,
secrecy and speed. The prime source for appropriability in the
automotive industry is patenting. Patents typically protect significant new developments.
Marvin has a process, which supports employees in gaining protection for innovative ideas.
Marvin rewards inventors after submitting a patent application and after a patent has been
granted by the patent office. Proprietary information, which has to be exchanged in a
development program with an OEM is typically protected within a development contract or
by a separate confidentiality agreement. Below are paragraphs from development contracts
cited, which represent the bandwidth of intellectual property protection between Marvin and
its customers:
*
Any intellectualproper rght resultingfrom such developments shall be the propery of Marvin or its
affiliates unless othenise speaically agreed between OEM and Mavin pror to the commencement of
such development activity
*
Drawings, data, designs and other technicalinformation supplied by Marin to OEMfor its use shall
remain Marin'sproperty and shall be held in confidence by OEM for so long as such is treated
confidential by Mamin. Any information which OEM may disclose to Mentor with rspect too the
design, manufacture, sale or use of OEMproducts shall remain OEM'spmpery and shall be held in
confidence by Meritorforso long as such is treated confidential by OEM.
64
*
Main agrees to provide ongoing support of serice requirements for ten years after production
requirements cease. If Mamin determines that it no longer desires to produce OEM's sermice parts
requirement, then Marvin agrees, for a reasonableperiod of time, but in no event longer than 12
months after Main provides notice to OEM of its intent to cease such production, to continue to
support internationalssemice parts requirements until an alternative source has been qua/fied andput
into production.
In the event, that Main modifes the product exclusively for OEM and OEM pays all of the costs
incurred in creating any unique designs or tooling necessay to implement such change, then Main
agrees, during the term of this agreement, that it will sell such modifed products in the aftermarket
exclusivey through the OEM parts distribution network; provided, however, that, in orderfor the
foregoingprovision to apply, the parties mustfirst agree in writing that the modification in question is
being made exclusively for, and the sole expense of OEM
The first type of agreement is typical for cases, where a internally by Marvin developed
product is tested or integrated into an OEM's vehicle. This agreement gives obviously the
strongest protection for the supplier and has the beneficial effect that IP rights emerging from
vehicle integration of the product belong to Marvin.
The second type of agreement is more typical for joint development project; both supplier and
OEM keep IP rights of ideas and contributions they bring to the project.
Even in the third type of agreement, Marvin does not sign away its intellectual property rights,
but rather commits to exclusive supply of the OEM with the specialized product.
It is company policy that Marvins intellectual property should be retained. Some interviewees
reported cases, where the OEM requested the supplier to sign over all intellectual property
emerging from a development program. In most of these cases Marvin refused to supply the
OEM. In some rare cases, where the sold product was a commodity with little IP scope, such
65
clauses were signed after negotiating commitment from the OEM for additional supply
contracts for future business.
If intellectual property of Marvin is handed on to competitors then typically Marvin will try to
settle the dispute with the OEM out of court, by agreeing payment of a license fee or
commitment of the OEM to award future supply contracts. These cases are rarely dealt with in
a confrontational manner since you do not want impair the relationship with the customer.
In none of the cases analyzed in this thesis was the intellectual property protection for Marvin
so tight, that competitors could not offer products with similar functionality.
Secrecy is very difficult to maintain in the automotive industry. This is due to mobility of the
workforce between suppliers and the deep interaction and communication between suppliers,
OEMs and sub-suppliers. In some cases OEMs deliberately leak information to competitors
to achieve higher product quality and encourage competition. Knowledge transfer between
competitors seems to be quite detrimental for the maintenance of a high profit margin. By
forcing their keiretsu suppliers to license new product technology to their supply competitors
Toyota makes sure that single suppliers cannot gain a sustained technological advantage over
their competitors. The competitor can absorb a large proportion of product knowledge during
license production. In the development cycle for the next product generation, the licensee has
almost the same probability as the owner of the IP to come up with the more competitive
design. Toyota is maintaining a small supply base with only two to three suppliers per product
category [Dyer]. To ensure limited dependence from one single supplier Toyota is actively
managing the relative strength of competing suppliers by actively supporting the weaker one.
For Toyota there are two benefits in this policy:
*
Firstly excessive dependence from one single supplier is prevented and suppliers prices
can be managed with this approach
66
*
Secondly technology improvement can be accelerated since suppliers are not reinventing
what their competitor has developed before trying to catch up with the competitor. Rather
the suppliers can spend the effort on progressing to the next technology generation.
To be successful with this policy Toyota maintains a very high level of internal technical
competence on all vehicle systems and subsystems. The close collaboration between Toyota
and its suppliers in product development leads to a situation, that most patents for vehicle
sub-systems list Toyota as IP owner beside the supplier. This makes it impossible to leverage
patents to achieve higher margins on these products.
Appropriability by speed is difficult to maintain in the automotive industry. New components
on vehicle subsystems are applied normally only if a vehicle platform is re-developed for a new
generation vehicle. The time between platform updates is typically 4-5 years, which is the
characteristic timescale of the industry. One aspect where speed plays a key role in creating
competitive advantage in the automotive supply industry is the speed of manufacturing
process improvement. Companies, which can improve their productivity quicker can reduce
their cost basis and improve their profit situation. Efficiency improvements by continuous
improvement efforts are a pre-requisite for success in the industry. When a supply contract is
awarded, typically price reductions over the duration of the project are prescribed
contractually. If the speed of productivity improvement does not match the contractual price
decline, the profit margin is reduced.
The case where speed played a role in generating a competitive advantage for Marvin was the
case of the catalytic converter. Here Marvin was able to leverage the decade of experience it
had gained in the niche market of European built vehicles for US export. When most
competitors developed their first generation catalyst with high safety margins for the
European mass market, Marvin had already two product generations of experience. The secret
in this case was to identify a product opportunity substantially sooner and use a niche market
to optimize design and production before going into mass manufacturing.
67
In this case of the catalytic converter there was strong collaboration with the vehicle OEM
and co-suppliers. This was essential for the success of the product development since there
was a whole raft of vehicle integration issues through interfaces to the engine combustion
system, the electronic control unit, the precious metal coating etc making it impossible for
Marvin to correctly determine the majority of the product requirements on its own. Trying to
develop the catalytic converter without involvement of the other parties would have created a
high risk of developing an incapable in-sellable product.
4.2. Competitive structure
It is initially surprising, that the number of competitors does not necessarily correlate well to
the achieved profit margins. Of all the cases researched Marvin was facing the largest number
of competitors (13 - a very high number for the automotive supply industry) with the new
generation motor. Despite this, a very good margin could be achieved with this component
due to its very low cost structure and highly competitive functionality. The low cost base was
achieved by applying a systems engineering approach and substantially reducing product
variety. The low cost structure of the new motor did not become obvious to the OEM, since
open book costing was not applied to a decomposition level of the new generation motor.
The motor was visible to the OEM as a single line item. The cost level of this motor was
below the cost of competitive motors. The OEM therefore had no need or desire to drill
deeper into the cost structure of the NGM.
On the other end of the spectrum in roof business there are only 2 competitors active. In this
situation the OEM is spending extra care to monitor these few suppliers and their cost
structure closely. Furthermore the competitors know each other very well and trade secrets
seem to be difficult to keep, leading to great similarity between Marvin's and their competitor's
products.
68
In both high margin products, the new generation motor and the automotive catalyst, Marvin
had a substantially lower cost structure than most of its competitors. With this lower cost
structure higher profits at competitive pricing levels could be achieved.
The conclusion from the case analysis is, that competitive pressure and the achievable profit
margin result primarily from the design quality and the cost level of competitors products. The
number of competitors is only of secondary importance, as long as there is at least one
competitor offering a product with similar capabilities.
4.3. Sources for competitive advantage
The main difference between the automotive catalyst and the new generation motor case is
how this low cost structure was achieved. In the case of the new generation motor Marvin
applied a radically new development process of variety reduction.
The application of this process was easier to apply to a single component rather than a vehicle
subsystem, since Marvin had almost perfect knowledge of the interface and vehicle integration
requirements. Since Marvin is supplying most components interfacing with the new generation
motor, it was possible to standardize these interfaces reducing the interface complexity
substantially. Marvin could run the development program for the new generation motor
basically without any OEM input, since all requirements for the motor were within Marvin's
knowledge base. This helped to keep all intellectual property rights for the motor within
Marvin and minimized "information diffusion" prior to start of serial production to
competitors.
In the case of the automotive catalyst Marvin could improve its design and productions
process over several product generations, when producing automotive catalysts for a relatively
small number of European export vehicles to the American market. The experience
accumulated when serving this niche market gave Marvin a substantial competitive advantage.
69
Other opportunities following this example could be developing and supplying a product first
for the after-market and later trying to float it to the original equipment market. A variation
frequently used is to initially offer a vehicle component as optional equipment with an on-cost
to the end customer. When the cost profile of the product has come down sufficiently to
reflect value for money to the majority of car buyers, the product is offered as standard
equipment. Examples for this strategy are numerous: The anti skid braking system in Europe
was offered initially as optional equipment on larger vehicles of premium brands like
Mercedes, BMW and Audi. Main stream introduction was rapid across all brands once Ford
decided to offer the system as standard equipment in the Scorpio D-class vehicle in the mid
1980's. Similar introduction histories can be found with car radios, CD players, electric
windows, air conditioning units in the European market.
The case studies revealed certain characteristic of the customer/supplier relationship, which
have an impact on the economic success of new products. In the subsequent chapter these
characteristics are translated into a system dynamics model, which allows to quantify the
economic effect of strategic managerial decisions with respect to the customer/supplier
relationship.
70
5. System Dynamics Model of new product development
In this section a unique system dynamics model representing the product live from predevelopment to serial application is developed. The model simulates the effect of different
strategic approaches to customer involvement on the expected commercial success of a new
product.
The application of the model allows to derive strategic guidance on how a supplier should
manage the relationship to the vehicle OEM in a new product development project in
dependence of product complexity and the complexity of the interfaces with the remainder of
the vehicle. It gives the management an ideal tool to test different strategic approaches to
customer relationship and assess their economic effects.
The model is split in five sub-models capturing the main areas of concem:
"
Development model
"
Marketing model
*
Serial implementation model
"
Competition model
*
Financial model
5.1. Development Model
The development model describes the generic product development translating unfulfiled
customer needs into a product design, which addresses these needs. The model is shown in
Figure 20.
71
neste
time for need
identification
customer needs
total
<Tierl developmnen
effort>
need identification
specified
unfulf need..
<pruportio) of residua
unideied neds'
tdev
verification rate
<TIME STEP>
design rejectio
needs
Wunfulfilled
crate concept
failcure
wrrae
<proportion of' residual
unidentified needs>
success ratt I
product
design quality
concept dev.
quality
eds
fulfilled in
concept
Idesign
confirmation
perceived development
<TIME STEP>
eed fulfille d b
accepted .confirmation
concept feature
,
p ssn
re
<'proportion of residual
unildentified nieeds>;
7
~
time
Figure 20: graphic representation of development model
The starting point of the development model is the level of customer needs. At the beginning
of each simulation run this level contains customer needs total number of needs. These needs
have to be identified and translated into a product specification to flow into the level of
specified unfulfilled needs. The specified unfulfilled needs are a representation of the product
requirements. The need identification is determined in dependence of the time required for
need identification and the proportion of residual unidentified needs. Residual needs are
representing needs, addressing vehicle integration and vehicle architectural issues, which are
not known within the supplier's area of expertise. The residual unidentified needs represent
the number of needs, which cannot easily be identified by the supplier itself; rather input of
72
the vehicle OEM, other sources (e.g. other suppliers) or in house vehicle applications are prerequisite to identify these needs.
The residual unidentified needs depend therefore, on the suppliers' effort (model variable:
Tieri effort on developing vehicle integration knowledge) on developing vehicle integration knowledge,
the level of OEM involvement and experience level of the supplier in the production and
integration of similar products. With increasing Tieri effort on developing vehicle integration
knowledge the cost of the product development increases. Tieri effort on developing vehicle
integration knowledge is a variable varying between 0 and 1 with 0.2 representing literature
research, 0.7 representing rig testing of the new product and 1.0 full vehicle testing on the
expense of the Tieri supplier. OEM involvement can be achieved either by involving the
OEM in the product pre-development or through a serial production project, which inevitably
provides information flow from the OEM to the supplier. The sub-model for the proportion
of residual unidentified needs is given in Figure 21
73
flow of platform
projects
p t<RFQ success
rate>
OEM involvement through
platform application
projects
OEM involvement
in pre-development
projects
accumulated
aplatform
application
projects
prjet
Leve I of OEM
invc Ilvement
Tier 1 effort on developing
vehicle integration
knowledge
proportion of residual
unidentified needs
maximum need
identification through
Tierl effort
table proportion of unidentified
needs in dependence of vehicle
component integration knowledge
Figure 21: model for the proportion of residual unidentified needs
In the above case studies the two extremes could be represented by the case of the new
generation motor and the development of automotive catalysts. For the new generation motor
Marvin basically knew all functional requirements. The vast majority of vehicle integration
issues were known since the door module containing the motor is produced by Marvin too.
Therefore Marvin controls most of the interfaces. This case could be represented by setting
the model variable maximum need identificationby Tieri effort to 0.8.
In the catalyst case the product performance in exhaust after-treatment depends strongly on
the engine calibration, the in cylinder combustion system, the sensor performance for air fuel
ratio control, and the catalytic coating. Other suppliers or the OEM control all of them. This
leads to a situation, where the residual unidentified needs remain on a high level if the supplier
is relying solely on internal resources without involving other parties into need identification in
the development program. This catalyst case could be represented by setting the model
74
variable maximum need identification by Tieri effort to 0.2. The proportion of residual unidentified
needs can therefore be reduced by OEM involvement in pre-development programs or
through platform application project or with substantial financial effort by the supplier
through vehicle integration and system performance studies.
Once the needs have been specified the development process yields design concepts which
either fulfill the needs, adding to the level needs fulfilled in concepts or concept failures which
add to the level needs unfulfilled in concept. Needs accumulated in this level will flow back
into the level specfied unfulfiled needs through the design verification process. This split between
the levels needs fulfilled in concept and needs unfulfilled in concept is analogous to the
modeling of the development activities by distinguishing between initial completion and
rework as first proposed by Cooper [Cooper] and subsequently applied by several other
researchers [ Kim, Abdel-Hamid, Richardson and Pugh]. The design review process yield a
flow into the needs fulfilled by accepted concept feature level for needs which are successfully
addressed by the design concept. The flows between the different level are influenced by the
concept development quality, the work rate and the Tieri development effort. The variable
perceived development pogress indicates the Tieri suppliers perception of how close the concept
design is to fulfilling the customer needs, this perception might deviate substantially if there is
a substantial level of unidentified residual needs. The perceived development progress is used as a variable
indicating what proportion of the development work is finished by the perception of the Tier
1 supplier. The perceived development progress is used to trigger technology disclosure
(technology disclosure rate in Marketing Model) to potential OEM customers, which kicks off the
marketing process. The external process concurrence between the Development process and
the marketing process therefore can be characterized as a delayed Start Inter-Phase
Relationship following Ford and Sterman's [Ford and Sterman] characterization of extemal
process concurrence.
The variable componentperformance is defined as the ratio of needs fulfilled by accepted concept
features to the total number of customer needs. It is an indicator of the achieved technical
75
capability or design quality of the product, which obviously determines how attractive the
product is to the customer.
5.2. Marketing Model
In the marketing model (see Figure 22: marketing model) technology-disclosure to potential
customers and technology acceptance by potential customers (OEMs) is described. The
marketing model does not express the sales of the product to customers for specific vehicle
platform applications, but rather the sale of the technology proposal. For a Tier 1 supplier to
be able to sell a new product to the OEM it is essential for the supplier to convince the
customer that the product offered by a supplier is generally applicable, adds value to the
vehicle and has benefits compared to existing products offered. This step is especially
important, if the new product is not replacing a single existing product, but requires:
"
Changes to vehicle architecture (e.g. electrical wheel mounted motors replacing IC
powertrain)
"
Changes to interfaces (e.g. connecting the exhaust system to the engine cooling
system)
*
Changes in packaging space or product location (e.g. moving from an underfloor
catalyst to an closed catalyst)
These changes require considering the new product very early on in the vehicle concept
development. At this point in time, suppliers are traditionally not already involved. If the
required changes are not put in place at this early stage in the vehicle development process, it
is typically very difficult, if not impossible, to sell the new product. Without early preparation
the product will not fit in the vehicle architecture and project team structure. There would be
the risk of having product interfaces which nobody in the vehicle development team takes
responsibility for. Packaging space may not be available were the new product could be
76
placed or it could be unclear which purchaser takes responsibility to source the product for
instance.
The marketing model is shown below in Figure 22.
<perceived
development progress>
introduction
performance
threshold
total number of
OEM
number
M
<customer needs
total>
effect of price on OEM
convincing probability
value to 0 EM of needs
fulfilled b y component
tejnology
disclosure rate,
OEM convincing
<TIME STEP>
probability
OEM new
product
and undecided
effect of needs fulfilment on
OEM convinc ing
probability
<price>
sales failiure
sales success
MylE
EP>
<need fulfilled by
accepted concept
feature>
interested
new product
OEMchange
stance
of
interested in
new product
Figure 22: marketing model
The marketing model contains four levels:
*
The number of OEM's, giving the total number of OEM's the technology has not
been presented to
77
"
The OEM new product presented to and undecided. This level is filled by the
technology disclosure rate. From this level the OEM's flow into:
"
OEM interested in new product if the generic sale was successful or into
"
OEM not interested in new product if the sale was unsuccessful.
The total number of relevant OEM's is very small in the highly concentrated passenger car
market. Globally there are only around 10 relevant OEM's. Due to this fact the supplier has
relatively few opportunities to convince customers of the new product, failing to interest one
OEM of the new product reduces the potential market size by around 10%.
The product disclosure rate was modeled as being dependent on the perceived development
progress and the introduction performance threshold, giving choice of the supplier at what
level of product maturity the product is presented to the first customers. This choice is
typically very difficult, since early disclosure might generate the impression of presenting an
unfinished immature product reducing the probability of a successful sell of the technology,
while late disclosure increases the risk of competitors entering the market earlier and impairing
the profit opportunities.
The probability of convincing the OEM of the new product is modeled in dependence of the
ratio between requirements fulfilled and total number of customer requirements.
78
OEM willingness to adopt new product in mainstream vehicle
development program
1.2
0
1'
10
0.8
S0.6
a.0.4
0.2
0
CL0.42.
0
060.
p
Figure 23: OEM's willingness to adopt product in dependence of
proportion of requirements fulfilled
Furthermore, the effect of the product price is taken into account by the following factor,
which is modeled in dependence of the ratio between the price asked by the supplier, and
the value of the needs the products fulfills to the customer.
79
OEM willingness to adopt new product in mainstream vehicle
development program
1.2
0.
o
0.6
0
*j 0.4
W
o
0.2
0
0
0.2
0.4
0.6
0.8
1
price/value ratio[-
Figure 24: OEM's willingness to adopt product in dependence of
price/value ratio
One further flow is allowed between the levels of OEM's interested and not interested in the
new product offered. This flow (model variable OEM change of stance) represents an effect,
which can be widely observed in the automotive industry. Typically, new vehicle features are
initially offered as optional equipment at extra cost. In the next step, one or more OEM's
offer this equipment at no extra cost in their standard equipment list for some models and as
soon as more than 50% of the OEMs offer the equipment as standard, all remaining vehicle
OEMs apply the new equipment to their vehicles too with this new component due to market
pressures. Examples for this market behavior are plentiful, one example was anti skid braking
systems, which were introduced initially as optional equipment in the higher end cars. Then
Ford offered the Scorpio in Europe with anti skid brake as standard equipment and all other
manufacturers followed suit within the next three years.
80
After an OEM shows interest in the new product, the serial implementation model is entered,
which describes how the product is sold for serial production vehicle platforms, the serial
application development takes place and finally serial production commences.
5.3. Serial implementation model
The serial implementation model is shown in Figure 25
platform RF Q per
OEM per mionth
<perceived
development progress>
introduction
performance
threshold
rate of platform
H3 development programs
Tierl quotes for
decision time
number of life vehicle
platform RFQ's
[1
Lost RFQ's
RFQ failiure rate
<competitive
-I RFQ success rate
~ piessure>
RFQ sucess
probabili
platform application
OEM
interested in
new product
projects t
platform life time
<product design
project
maturation ratbe
product serial
production
7
vehicle platform
phase-out
price s ensitivity
<price>
of compefitors
entering similar product
develoment>
qlit>
serial application
time
projects
Figure 25: serial application model
81
The serial implementation model consists of three levels:
" level of life vehicle platform Requests For Quotation (RFQ)
"
platform application projects
" product serial production projects
After an OEM is interested in applying the new product developed by the supplier the OEM
takes the following actions:
"
vehicle architecture adjusted to accommodate the new product
*
packaging space is reserved
*
a proportion of the budget for the new vehicle program is allocated to the new
product
" technical and purchasing staff has been made responsible to investigate the possibility
of applying the new product to a new vehicle platform
After these actions have taken place the supplier can expect to be receive requests to quote
(RFQ's) the new product for new vehicle platforms. Each manufacturer has only a very small
number of vehicle platforms. For example VW has only 5 vehicle platforms but is producing
around 20 different vehicles on these platforms. A large number of components and
subsystems is identical across all vehicle variants of a single platform. The development time
for one platform is in the order of 4-5 years. This means that per OEM there is only one RFQ
per year to supply a subsystem or component.
The rate of platform development programs the supplier is quoting for is obviously increasing
the level of life vehicle platform RFQ's. The level of life vehicle platform RFQ's is drained
82
when the OEM makes a decision on whether the product should be sourced from the supplier
or not. The RFQ failure rate, as well as the RFQ success rate depends on the required decision
time and the RFQ success probability. The RFQ success probability is modeled in dependence
of the number of competitors offering similar products, the price quoted by the supplier and
the product performance. If the supply to a vehicle platform is awarded, the level of platform
application projects increases. In a vehicle application project the product is developed for a
specific platform, the mass production process is developed, tooling and machinery is
purchased and industrialization takes place. After the time required for the serial application
development the product goes into serial production. This is typically the first time the
supplier sees money for the time, effort and investment spent in pre-development marketing
and application development. The serial production projects cease with the production end of
the vehicle platform. The platform lifetime is typically in the order of 4-5 years.
5.4. Competition model
The number of competitors offering similar products has obviously an effect on the
probability of success when submitting a quote. The model for the emergence of competitors
is shown in Figure 26.
83
OEM
interested in
new product
OEM competition
sensitivity of competition
encouragement to profit
margin
encouragement -
<cost>
<Level of OEM
involvement>
<price>
product serial
production
projects
<industry comodity
profit margin>
number of
potentialcompetitors
price released to
OEM
competiti n
developmen rat
<sif motivated
competitor debopmen
rate_>
<platforn application
projects>
<1
pq
competition
profit sensitivity
number of
competitors
entering simila
conidetiaitOEM
confidentiality
ost
RFQ's>
<Level of OEM
involvenment>
price release time in OEM
predevelopment program
cost
Figure 26: competition model
There are several ways considered whereby competitors could emerge:
"
the OEM actively encourages competitors to offer similar products e.g. by asking in at
the pre-development stage for competitive quotes for a product with target
specification similar to the offered new product. This would artificially accelerate the
emergence for competition to the supplier and reduce the achievable price. OEM's
motivation of encouraging competitors would increase if the product price was
released to the OEM and the OEM knows through open book pricing or industry
experience that the suppliers profit margin is well above the commodity profit margin.
*
the competitor finds out about a new product, because it is applied to production
vehicles,
through publications or industry intelligence and expects the product to
84
provide interesting returns and invests into developing a competitive product or
simply copying the existing product
the competitor identifies the product opportunity himself through industry knowledge.
The probability of this happening obviously increases over time.
Dependent on the development time there is a time delay between a potential competitor
deciding to offer a competitive product and the ability to do so.
The willingness of an OEM to encourage competition depends initially on whether the OEM
is interested in the product. If the OEM is not interested there is no incentive to encourage
competition. Further more there is an increased incentive to invite competition if the price
requested by the supplier is high and the OEM perceives the supplier's profit margin as well
above the commodity profit margin. The price knowledge of the OEM can be to some extent
managed by the supplier. This is indicated by the binary variable price released to the OEM. If
the price has been released the variable is set to 1 if not to 0. The price has been released if the
supplier submitted a quote in a platform RFQ process. Furthermore if an OEM has
substantial involvement in the pre-development program, typically the price has to be released
to the OEM, since the OEM will only maintain interest in the product pre-development if he
sees the product under development as likely to be delivering value for money.
Whether the OEM encourages competition depends too on other aspects like:
"
Corporate culture of OEM
" Legal obligations due to IP protection by the supplier
*
Estimated economic importance of supplier/product
85
Whether potential competitors actually engage into developing a competitive product depends
on how attractive the product is, i.e. which returns it is expected to generate and whether not
developing a competitive product has strategic implications for the company.
As soon there is a competitive product on the market the probability to be successful in an
RFQ will be substantially reduced. Furthermore, customers will become more price and
performance aware than in a non-competitive situation for the product. As found in the case
studies, the price profit margin achievable is less dependent on the number of competitors
than on the relative cost level and design quality of the competitive product. This effect is
captured in the variable competitive pressue which rates the competitions cost level and product
design quality. The competitive pressure impacts the price achievable. The model for
competitive pressure is shown below (Figure 27).
number of
entern simila
develment
OEM
confidentiality
cost
competitors design
time to copy
quali
technical
capability of
competition
inw
competitiv
pressure
capability gain
competitors cost
<-tdev>
<product design
quality>
<product design
quali ty>
competitors peak
strengyth
competitors cost
over time
Figure 27: model of competitive pressure
If the number of competitors entering similar product development is above one, the
competitors design quality of a competing product will start to rise due to its development
86
efforts. The gain in technical capability can be achieved by internal development efforts, in this
case the improvement in design quality over time is assumed to behave similar as in the Tier 1
suppliers' efforts. If the competitor is starting his efforts later than the initial Tieri suppliers,
an allowance is made for accelerating the improvement in design quality by either:
"
Benchmarking and copying the product if it is in serial production or
"
Information passed on by the OEM, if he is keeping information gathered from the Tier 1
supplier not entirely confidential. The license production by competitors could be
modeled in this way even though licensing is obviously not a breach of confidentiality.
The competition's cost level is modeled in a look up table dependent on the time passed since
the competition started to engage in the development of a competing product.
The competitive pressure is defined as the following ratio:
competitors _design - quality/
/competitors _ cos t
design - quality
cos t
5.5. The commercial model
The commercial model is shown below in Figure 28: commercial model below. It models the
main income and expenditure streams as inflow to and outflow from the level total profit. The
main expenditure contributors modeled are the running cost of the pre-development effort,
the cost of product application development to mainstream platforms and the cost of Tier 1
effort of developing vehicle integration knowledge. This expenditure is modeled separately
because it is a cost incurred, which could be saved if a vehicle OEM with his vehicle
integration knowledge is involved in the predevelopment program. Here expenditure by
internal development can be traded off against cost the OEM carries if the OEM is involved
in the product predevelopment. The income is solely generated by mass production for
vehicle serial applications. The two levels accumulated price weighed RFQ success and price weighed
87
serialpduction pjects are dummy variables. They are solely introduced to ensure that the
income recorded is achieved at the price level, at which the OEM awarded the serial
production project to the supplier. Beside the total profit, the total accumulated development
cost and the profit margin are calculated within the commercial model.
'titflow-succ
number of vehicles
ac
--produced per platform
inoe
dlopment
acume ted
successes
pieege
doveningcotf<irdvlpea
team
Jyc;;
RFQ
flow-prod
t margin
serial production
totpofit
development cost
pncebed
cost
production
po
planned development
projec duration
of
ncos
pr"*
"s;
p
flow-platform end
perfeot vehi
knowledge
'integration
coat of eppioetiotn
Dlexpenditure
teammomecn
~
ltm
cost of Tierl gaining veicle
product integration
knowledge
<
dev
cosflow
I
kn wled e efort
ier Ieil'oi! or. devl'p-mtq
effct of TiffrI integration
kno
dg
kcwdlates
developmrent
serial application
cost
Figure 28: commercial model
88
6. Results from system dynamics model
The full print out of the model code with all parameter settings is shown in Appendix B. The
model parameters were adjusted using expert knowledge obtained from the interviewees and
other corporate experts from Marvin. The base assumption of the case is that the new product
under development by the Tier 1 supplier is generally applicable to the whole European
vehicle production of 17.2 million vehicles. It was assumed that each of the seven main vehicle
OEM's in Europe (BMW, DaimlerChrysler, Ford, GM/Fiat, PSA, Renault and Volkswagen)
are launching on average 1.32 platform development projects per year. A yearly production
figure of 465 thousand vehicles per platform and year was assumed. The time axes shown in
all subsequent figures start with t=0 when the first product development activity begins, this is
when first needs are identified (see Figure 20: need identification). The cost and price structure
shown in the model represents a realistic not a real product case produced by Marvin. The real
data, while used for the model adjustment cannot be shown in a public document. In the
system dynamics simulations the effect on business profitability of the following main aspects
of the supplier customer relationship in new product development were assessed:
" Level of OEM involvement in product pre-development
"
Choice of OEM as pre-development partner
"
Suppliers effort to develop vehicle integration knowledge
*
Time of price disclosure to OEM
The question of supply extent and system boundaries is not assessed within the system
dynamics simulation.
6.1. Level of OEM involvement in product pre-development
To investigate the effect of different levels of OEM involvement on project success the
variable level involvement was varied from 0 over 0.5 to 1. An OEM level of zero
89
involvement indicates that all pre-development of the new product was carried out within the
Tier 1 supplier without any involvement of OEM. The OEM is only approached after
prototypes have been developed and produced to maturity, which warrants the application in a
serial production vehicle program. An OEM involvement of 0.5 during pre-development
would indicate a loose collaboration on the pre-development of the product. The product
specification might have been presented to the OEM and some early prototypes might have
been supplied to the OEM for testing and feedback. If the OEM level of involvement is 1, the
product pre-development is carried out in a cross functional team built from OEM staff as
well as Tieri supplier staff. This level of involvement would be characteristic for subsystem
development by a keiretsu supplier/Japanese OEM. In this co-development arrangement all
vehicle integration knowledge present at the OEM is available to support the product predevelopment.
Dependent on the experience level of the supplier, product requirements related to vehicle
integration issues are known to a varying degree. If the vehicle architecture interfacing with the
desired new product is completely unknown to the supplier, it is unlikely that the supplier
alone can determine a high proportion of the vehicle integration requirements. To represent
this case, the model variable: maximum requirement identification by Tieri effort was set to 0.2 in one
case. This would be representative for the case of the catalytic converter discussed above. The
new generation motor represents the other extreme, a project, where the vast majority of the
vehicle integration requirements were well known to the Tier 1 supplier from the onset. To
represent a case leaning towards this extreme, a second set of model runs were carried out
setting the model variable: maximum requirement identification by Tieri effort to 0.8. Here the
supplier knows the majority of the vehicle integration issues for the product.
The simulation runs were initially carried out under the assumption, that the OEM is perfectly
confidential and that the Tieri effort on developing vehicle integration knowledge is 0.7. This means that
neither design information is transferred deliberately to the suppliers competitors, nor, are
competitors actively encouraged by the OEM to develop a competing product. Furthermore
90
the Tieri supplier is rig testing the product during development. Competition engages only in
the development of a competitive product, if it either identifies the product opportunity out of
its own industry knowledge, or when the product is applied in serial production projects.
Figure 29 is showing the profit/loss per year with the product since start of the product predevelopment. Until serial production starts, the development cost and platform application
cost leads to a loss. With the start of serial production profits are increasing steeply. The
profits increase with the number of serial production projects. The profit declines
subsequently with the emergence of competitors and the improved design quality of
competitors, which eventually reduces the market share of the supplier and leads to reduced
profit margins.
91
Substantial differences in profit levels can be seen for different levels of OEM involvement.
Specifically if there is no OEM involvement, the profit achievable is lower than if there is
substantial OEM involvement. Furthermore the break even is delayed by one year. The main
reason for this marked difference is the difference in product design quality. If a product is
designed with insufficient knowledge of the vehicle integration requirements the design quality
will be inevitably poor. Poor design quality makes it difficult to convince potential customers,
that the proposed product is of value to them. Furthermore, the rework required to bring the
design to a quality suitable for application in serial production, grants competitors valuable
time to design competing products.
Profit/loss per year over years since project start
maximum 20% of integration needs can be identified by Tieri supplier alone, Tier1 effort to identify needs 0.7
30,000,000
27,000,000
-U-OEM involvement 1, full OEM confidentiality
24,000,000
24,000,000
,-OEM
involvement 0.5, full OEM confidentiality
21,000,000
---
OEM involvement 0, full OEM confidentiality
18,000,000
0 15,000,000
CL 12,000,000
9,000,000
6,000,000
3,000,000
01
-3,000,000
0
2
4
6
12
10
8
time since project start [yrs]
14
16
18
20
Figure 29: Profit/loss per year for varying levels of OEM involvement, low level of vehicle
integration knowledge by Tieri supplier
92
The following Figure 30 shows the development of design quality over time. Design quality is
defined here as proportion of total requirements fulfilled. The two curves with substantial
OEM involvement show a rapid rise to high design quality during the pre-development phase.
The curve without OEM involvement is flattening around 0.6; it rises later again, when the
first serial application project is secured and the vehicle integration knowledge is transferred
from the OEM to the supplier. As indicated by the arrows in Figure 30 the start of serial
production of the new product is substantially delayed if there is no OEM involvement. The
reason for this is that the product design quality is initially too low for any OEM to commit to
apply the new product in serial production vehicle platforms.
Product design quality over years since project start
maximum 20% of vehicle Integration needs can be identified by Tieri supplier alone, Tieri effort to Identify needs 0.7
1
-A
0.9
0.8
E
0.7
-
OEM involvement
1
-A-OEM nvo vement
.
-W-
-'0.6
-4- OEM involvement
0.
0.5
0.4
Serial
production
starts for first full
veh. platform
0.3
.
0.2
0.1
0
0
1
2
3
6
5
4
time since project start [yrs]
7
8
9
10
Figure 30: product design quality over time for varying levels of OEM involvement, low level
of vehicle integration knowledge by Tieri supplier
93
Considering these results OEM involvement in pre-development of a product seems to be a
good idea.
Subsequently the case is considered, where the supplier has thorough experience or by
supplying the surrounding subsystem (as in the case with the new generation motor) almost
complete
understanding of the product
requirements
including
vehicle integration
requirements. In this case there is very little difference in the profits generated with the
product. By involving the OEM in the product development, very little knowledge about the
product requirements is added since the supplier already has an in-depth knowledge. Figure 31
shows less than five percent difference in peak profits between the different OEM
involvement levels.
94
Profit/loss per year over years since project start
maximum 80% of total needs can be identified by Tieri supplier alone, Tieri effort to identify needs 0.7
30,000,000
-U-OEM involvement 1, full OEM confidentiality
27,000,000
-*-OEM involvement 0.5, full OEM confidentiality
24,000,000
-U-OEM involvement 0, full OEM confidentiality
21,000,000
18,000,000
I
15,000,000
0
a. 12,000,000
9,000,000
6,000,000
I
3,000,000
0
-3,000,000
0
2
4
6
12
10
8
time since project start [yrs]
14
16
20
18
Figure 31: profit/loss per year for varying levels of OEM involvement, high level of vehicle
integration knowledge by Tieri supplier
Figure 32 shows a comparison of the design quality for the different levels of OEM
involvement.
95
Product design quality over years since project start
maximum 80% of total needs can be Identified by Tier1 supplier alone, TIeri effort to identify needs 0.7
1
0.9
0.8
E
2 0.7
.5
0.
0
0.6
% 0.5
E
~2
-O-OEM
invotvement
-r-OEM
involvement 0.5
1
-4-OEM involvement 0.
0.4
Serial production
.M 0.3
starts
for first
full vehicle platform for all three
C
variants after 35 months
RM 0.2
0.1
0
0
1
2
3
4
5
6
7
8
9
10
time since project start [yrs]
Figure 32: product design quality over time for varying levels of OEM involvement, high level
of vehicle integration knowledge by Tieri supplier
In the case of no OEM involvement in the product pre-development, again an increase in
design quality can be seen when the first serial application project is acquired. But even in this
case more than 85% of the requirements are already fulfilled in pre-development, giving a very
good basis to convince the OEM's of the products performance and value.
6.2. Level of OEM confidentiality
In reality perfect confidentiality of the OEM is very rare. In some cases products are opened
up for competitive tender by OEM's even at the pre-development stage. If a request for
quotation is sent out at the pre-development stage, the competition is encouraged to enter the
market leading to competitive pressure from the onset. Figure 33 shows the profit for
96
different levels of OEM involvement comparable to Figure 29 above, but with the difference
that the OEM encourages competition as early as possible.
Profit/loss per year over years since project start
maximum 20% of total needs can be identified by Tieri supplier alone, Tieri effort to
identify needs 0.7
30,000,000
27,000,000
-*-OEM involvement 1, no OEM confidentiality
24,000,000
---
OEM involvement 0.5, no OEM confidentiality
--$-OEM involvement 0., no OEM confidentiality
21,000,000
18,000,000
Serial production starts for first
full vehicle platform:
OEM involvement 1: 47 months
OEM involvement 0.5: 47 months
15,000,000
LU
12,000,000
-
OEM involvement 0:
9,000,000
87 months
6,000,000
3,000,000
0
-3,000,000
0
2
4
6
8
10
12
14
16
18
20
time since project start [yrs]
Figure 33: profit/loss per year for varying levels of OEM involvement, low level of vehicle
integration knowledge by Tieri supplier, no OEM confidentiality
It can be seen that the expected peak profits are substantially reduced by more than
6 0 %,
when compared to dealing with perfectly confidential customers. The case without any OEM
involvement in predevelopment, is again due to poor design quality, the case returning the
lowest profits. Contrary to the previous case maximum OEM involvement is showing lower
profitability levels than medium OEM involvement. This effect can be seen again when
97
considering the case where the supplier is knowledgeable about the majority of vehicle
integration requirements (see Figure 34).
Profit/loss per year over years since project start
maximum 80% of total vehicle Integration needs can be identified by Tieri supplier alone, Tieri effort to identify
needs 0.7
30,000,000
--A-OEM involvement 1, no OEM confidentiality
27,000,000
-*-OEM involvement 0.5, no OEM confidentiality
24,000,000
--
OEM involvement 0., no OEM confidentiality
21,000,000
Serial production starts for first
ful vehicle platform:
OEM involvement 1: 47 months
OEM involvement 0.5: 47 months
OEM involvement 0: 50 months
18,000,000
15,000,000
12,000,000
C.
9,000,000
6,000,000
3,000,000
I
0
-3,000,000
0
2
4
6
8
10
12
14
16
18
20
time since project start [yrs]
Figure 34: profit/loss per year for varying levels of OEM involvement, high level of vehicle
integration knowledge by Tieri supplier, no OEM confidentiality
The main reason of deteriorating profits when collaborating with OEM's, which are leaking
information to competitors, is that the design quality of competitive products becomes very
similar quickly, therefore business is awarded on price and the price is eroding under the
competitive pressure. Figure 35 is showing the design quality of the supplier and its
competitors. If the OEM encourages competition as early as possible, the time of being the
only vendor in the market is reduced by one year. This substantially reduces the time period
allowing charging a price premium for being the sole supplier.
98
Product design quality over years since project start
maximum 80% of total needs can be Identified by Tieri supplier alone, Tieri effort to Identify needs 0.7 OEM involvement In
predevelopment 1.
1
Tier 1
design
quality
0.9
00.
E
.5I0
-U-Supplier design quality
0.7
-competitors
design quality - no confidentiality
of OEM
0.6
-X-competitors design quality - perfect OEM
confidentiality
6 0.5
E
.20.4
1! 0.3
-competitors
esign
quality
.00.2
i
0.1
0
0
1
2
3
4
5
6
time since project start [yrs]
Figure 35: product design quality of Tieri
confidentiality and no OEM confidentiality
7
8
9
10
supplier and competitor for perfect OEM
Beside the negative effect on the supplier, there are potential drawbacks for the OEM in
releasing information to the supplier's competitors. Firstly the supplier's trust in the OEM is
impaired and he might not approach this specific OEM with future new product ideas.
Secondly involving competitive suppliers increases the risk of another OEM offering a vehicle
containing similar technology at the same time or earlier, thereby reducing the OEM's ability
to distinguish himself from the competition.
99
6.3. Suppliers effort to develop vehicle integration knowledge
In the following set of simulations the effort of the supplier to gain vehicle integration
knowledge was varied. Ultimately OEM involvement in the pre-development phase can be
traded off against internally funded effort to generate the required vehicle integration
knowledge. This knowledge could be generated by building and testing a prototype vehicle
using the new product, or by employing an engineering consultancy to provide the required
knowledge. For the purpose of the simulations, it was assumed that with the cost of
developing vehicle integration knowledge varied over the effort as shown in Figure 36. The
cost of
developing vehicle integration knowledge will obviously vary for every specific
product and will typically be higher for products with more complex vehicle interfaces
Cost of developing vehicle integration knowledge
300000
250000
200000
9 150000
0
100000
50000
0
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
Tier1 effort to gain vehicle integration knowledge
Figure 36: development cost contribution of Tier
dependence of level of effort
effort to gain integration knowledge in
100
A level of effort of 0.2 would represent a thorough literature search, 0.7 vehicle subsystem
tests, and 1 full prototype vehicle built and test. It is assumed, that even with full effort the
vehicle integration knowledge, which can be gathered is limited at the level of maximum vehicle
need identifcation by supplier.
In Figure 37 the yearly Profit/Loss is shown for varying supplier effort to develop vehicle
integration knowledge. For all of these cases it was assumed, that no vehicle OEM was
involved during product pre-development. The calculations were carried out for three levels of
Tier 1 effort. Beside this a group of cases with complex vehicle interface, where the maximum
level of vehicle integration requirements by supplier effort is limited to 20%, and simple
vehicle interfaces, where this limit was set to 80%, were simulated. The results show
substantial differences in expected profits. If substantial effort is spent in the case of the
simple vehicle interface, the peak yearly profits can be increased fivefold. This is mainly due to
the ability to achieve high levels of design quality early on, which allows the supplier to
convince a potential customer to use the product in serial vehicle production. In the case of
the complex product/vehicle interface, the overall design quality achievable without OEM
involvement is limited. Even full effort of the supplier to develop vehicle integration
knowledge will return the highest profit with a peak value of Euro 14 M. This is almost three
times higher, than if only moderate effort to identify vehicle integration requirements (0.7) is
exerted.
101
Profit/loss per year over years since project start
no OEM Involvement in pre-development, complex interface Tieri can Identify 20% of vehicle Integration
requirement, simple Interface Tieri can identify 80% of vehicle Integration requirements
30000000
-+<-complex interf., Tier 1 effort = 1
production
Serial
27000000
-+(-complex interf., Tier 1 effort = 0.7
-4-complex interf., Tier 1 effort = 0.2
starts for first full
vehicle platform
24000000
--E_-simple interf., Tier 1 effort = 1
21000000
simple interf., Tier 1 effort = 0.7
18 0 00 00 0
simple interf., Tier 1 effort = 0.2
0
Lu
15000000
12000000
0
09000000
6000000
3000000
0
-3000000
0
2
4
6
8
10
12
14
16
18
20
time since project start [yrs]
Figure 37: profit/loss per year over time for different levels of Tieri effort to develop vehicle
integration knowledge
This result shows that in the case of a complex vehicle interface, if the OEM cannot be
involved it seems to be beneficial to put maximum effort into the development of vehicle
integration knowledge. If the vehicle interface is simple, it might be advisable only to spend
moderate effort, since this reduces the spending during development while spending
maximum effort improves the expected profitability only marginally.
6.4. Time of price disclosure to OEM
In the last set of simulations it was assessed what effect changing the time, when the price is
disclosed by the supplier to the OEM. For the simulation, it was assumed that the OEM is
able to analyze the cost structure of the new product and therefore can estimate the profit the
supplier is achieving with the product. If the profit is higher than the industry commodity
102
profit margin, the OEM has an incentive to promote competition by inviting other suppliers
to develop a product to fulfill similar needs. It is assumed, that if the vehicle OEM is
completely confidential, the OEM will not disclose the product specification or actively invite
competitors into the market. If confidentiality by the OEM is not given, the OEM will ask
after analyzing the price, immediately competitors to quote for a product that fulfills the new
products specification. Figure 38 below shows the expected profit/loss per year since project
start for different times of price disclosure to the OEM after project start. While for the case
of perfect OEM confidentiality, the timing of price release is irrelevant to the achievable
profit, there are obviously distinct changes in expected profit when working with an OEM not
maintaining confidentiality. The later the price is released, the later competition is encouraged,
the later competitive pressure emerges and the longer premium prices can be achieved.
103
Profit/loss per year over years since project start
full OEM Involvement In pro-development, complex Interface Tieri can Identify 20% of requirement
30000000
,h-OEM confidentiality 0 price disclosure 40 months
-+-OEM confidentiality 0 price disclosure 20 months
-I-OEM confidentiality 0 price disclosure 10 months
-E-perfect OEM conf. price disclosure 10,20&40 months
27000000
24000000
21000000
18000000
0 15000000
212000000
90
9000000
6000000
3000000
0
-3000000
0
2
4
6
10
12
8
time since project start [yrs]
14
16
18
20
Figure 38: profit/loss per year over time for different levels times of price disclosure of the
Tieri supplier to the OEM
The simulation results shown reflect assessments of the main areas of concerns of this thesis.
The system dynamics model presented in this thesis is sufficiently flexible to allow the analysis
of a wide range of other variations in the strategic approach towards the customer/supplier
relationship. The model is a useful tool to evaluate the effect on profit of these strategic
approaches concerning new product introduction.
After concluding the simulation work in this chapter the next is using the insight gained from
the simulation work and case studies to derive recommendation on how to manage the
customer/supplier relation ship in new product development.
104
7. Recommendations
The analysis of the cases was used to develop a system dynamics model of new product
development, the disclosure and marketing of the new product, serial production and revenue
generation. In the case studies, the main influence factors were identified which provided the
logical structure of the system dynamics model. The application of the system dynamics model
provided insight into the economic consequences of different strategic decisions during new
product development and marketing. The recommendations discussed in the remainder of this
section are summarized in condensed form in the summary chart Figure 39.
7.1. OEM involvement
One of the key decisions a supplier has to make is whether to involve an OEM in the predevelopment of a new vehicle component or subsystem. In the case studies there were two
commercially highly successful cases, which answered this question very differently. In the
case of the catalytic converter there was full collaboration not only with the vehicle OEM, but
too with other suppliers to the vehicle OEM, like coaters for the catalytic substrate and the
engine control system supplier. The flow of intellectual property of the parties involved was
protected only by general non-disclosure agreements.
In the case of the new generation motor on the other hand there was almost no contact with
the vehicle OEM before the motor was developed to a marketable level. The only extemal
involvement was with sub-suppliers, which were tied in by strict confidentiality arrangements,
which signed over all intellectual property rights during the development to Marvin, the Tieri
supplier. Why were these very different approaches successful in both cases? In the case of the
catalytic converter the vehicle integration interfaces of the component "catalytic converter" are
extremely complex. Only a small proportion of the total vehicle integration requirements to
ensure good exhaust aftertreatment performance was known to Marvin at development start.
Without involvement of OEM's and co-suppliers in the pre-development Marvin would not
have been able to develop a functional catalytic converter. OEM involvement was in this case
essential for the product technical and subsequently commercial success.
105
In the case of the new generation electric motor basically all requirements including vehicle
integration requirements were know to the Tieri supplier. Not involving vehicle OEMs was
sensible for several reasons: The requirements for the motor were well known to Marvin and
involvement of an OEM would have provided a minimal contribution to identify the product
requirements. Involvement of an OEM's would have increased the risk of introducing
customer specific requirements, which would have been counterproductive for the aim of
providing a product with minimum variety for all applications. The risk of diffusion of
information to competitors was substantially reduced. By not involving the customer in the
pre-development, Marvins cost structure was not disclosed to the customer and therefore
prevented the price = cost + allowedpmfit pricing prevalent in the automotive industry.
From these observations it can be concluded, that at the very beginning of a new product
development program the requirement profile of the new product should be analyzed in detail.
Analysis of the requirement profile means that Tieri supplier has find answers to the
following question:
What is the knowledge level about the requirements for the desired product?
If there is a high level of confidence that all technical requirements can be identified without
an OEM, the OEM should be approached only after achieving a development level, sufficient
for application to serial vehicle production projects. This way the risk of information diffusion
and early competition is minimized.
If it becomes apparent that the interface to the vehicle is very complex and it is unlikely that a
sufficiently complete set of requirements can identified without involving the vehicle OEM,
the supplier should not attempt to develop the product alone. The supplier should instead
focus on finding a suitable OEM to involve in the pre-development of the product.
The question what makes a suitable OEM pre-development partner is discussed in the next
subsection.
106
7.2. OEM selection for pre-development
To find the right pre-development partner is rather difficult but very important. As there are
less than ten independent vehicle OEM's, this reduces the possibility to select. There are
distinct differences in the culture between the different OEMs reported in the literature. Dyer
[Dyer] reports a distinct difference in the trustworthiness and reputation for fairness of
different OEMs. He reports Toyota as the OEM seen the most trustworthy and fair by North
American suppliers and GM being at the opposite end of the scale. Dyer looks at the
trustworthiness mainly in terms of knowledge management and information exchange
concerning process and productivity improvements rather than new product development.
The case study of the Keiretsu supplier showed, that Toyota might not be the ideal OEM
partner regarding new product development. Toyota ensures through in depth involvement of
its technical experts in development of suppliers products, that it is owning or co-owning a
large proportion of the product IP.
Furthermore Toyota ensures by promoting mutual
licensing agreements between competing suppliers that no supplier achieves a sustainable
technical advantage over its co-supplier
The distinct cultural differences between suppliers reported by Dyer for North America were
found also in Europe. The case of the exhaust heat management system, where predevelopment programs were run in collaboration with three different OEM's, shows clearly
the importance of the right OEM as partner in pre-development. The following criteria make
the ideal partner for the pre-development of new products:
" The OEM is technically strong and has a tradition of distinguishing its products from its
competitors by applying new technology to its vehicles. This increases the probability, that
the OEM is prepared to pay a price premium for a new vehicle component or sub-system
" The OEM spends sufficient time and effort at the beginning of the pre-development
collaboration on developing a rather complete and well-justified set of vehicle integration
requirements for the target product. Sufficient effort on behalf of the OEM at the early
107
stages of the project reduces requirement changes during development and thereby
reduces expensive re-design.
*
The OEM does specify only requirements, which affect the external interfaces of the new
product with the vehicle, end user and environment. This gives the Tieri supplier the
maximum of design freedom and allows the supplier to provide the best compromise of
cost and delivered value.
does not change requirements' frequently and unnecessarily. This prevents
OEM
The
expensive and time-consuming re-engineering.
*
The OEM is trustworthy. Trust between the OEM and the Tieri supplier is important as
basis of open information exchange. If the information is not openly exchanged
development progress is delayed since some requirements are only captured later in the
design process.
*
The OEM allows the supplier to keep ownership of intellectual property developed by the
supplier within the pre-development project. This might in some cases be difficult to
achieve, especially with OEM's with a high level of technical expertise in their
organizations. One way to address this issue might be to negotiate beforehand that
intellectual property for different aspects is assigned to the different parties: e.g. IP
concerning the product itself is assigned to the supplier, while IP concerning the
integration in the vehicle might be assigned to the OEM. It might also be helpful if
discussions with the customer are concentrating on the external interfaces and
requirements of the product rather than the product internals. Thereby the opportunity of
generating IP contained in the product with the OEM is reduced.
*
The OEM does not invite competition during the pre-development phase by putting the
product specification out for competitive tender while the pre-development project is
running. If the OEM agrees not to invite competition early on, it is easier to maintain a
108
price premium for the new product. This is on the first sight counterproductive for the
OEM. In the long term it might pay off for the OEM to commit to such a policy. Firstly,
the OEM could ask for supply exclusivity for the same period of time, which would
ensure that the OEM can distinguish its vehicles from competitors. Secondly, fair terms
with suppliers might lead to a preference of suppliers providing this OEM with their
innovative products, first leading to a sustainable competitive advantage for the OEM.
7.3. Timing of price release
It is advantageous for the supplier to release the price as late as possible to the potential
customer. After releasing the price, price negotiation starts and price negotiations tend to go
only in one direction in the automotive industry: down. So-called open book pricing should be
avoided at all cost. Open book pricing reveals the cost structure and profit of the supplier to
the OEM. Typically the OEM will try to force the profit margin down to industry commodity
level or will try to use OEM profit margins as benchmark for the profit allowance in the
quote. OEM profit margins are chronically low for most of the OEM since suppliers
contribute most of the value to a vehicle (Dyer quotes value contributions of over 70% by
suppliers). The OEM's profit margin is therefore a rather undesirable profit margin
benchmark with the exception of Toyota, BMW and Porsche. If open book pricing reveals to
the customer that the profit margin contains a substantial premium for offering a new
product, the OEM has a strong incentive to ask for competitive quotes for products with
identical specification. By revealing the price late this invitation of competition can be
potentially delayed. Revealing the price early definitely has the risk of encouraging the OEM to
invite competition early on.
7.4. System vs component supply
In the case studies the highest profit margins were achieved with components rather than
vehicle sub-systems. This could lead to the conclusion, that if Marvin aims for margin
improvement, it should concentrate on the development of high margin components, rather
than the sales of vehicle subsystems. If, on the other hand revenue growth is the corporate
109
goal, there is some attraction in concentrating on delivering larger and larger subsystems to the
vehicle OEM's with some sacrifice to the achievable profit margin. If subsystem supply
provides to the OEM as only advantage reduction in administration, project management
effort and parts logistics, the supplier can only increase its margin, if he is more efficient in
administration, project management and logistics than the OEM. This is typically the fact if
the system supplier supplies a system built up of the same component in the same way as the
OEM previously assembled them. Since project management, administration and logistics
contribute only a limited proportion of the total subsystem price, efficiency improvements in
these areas can only lead to limited improvements in the profit margin. This conclusion might
not be accurate in all circumstances. The supplier might be able to achieve higher margins
when delivering a vehicle sub-system, if:
*
A really good component being exclusively sold as part of a vehicle sub-system makes
the whole sub-system more attractive
*
The offered sub-system makes the OEM's vehicle
more desirable than his
competitor's products, so the supplier can command a price premium.
*
The sub-system cost is lower than competitors offers due to use of systems synergies
"
The supplier invests in vehicle-level understanding or end user understanding so early,
that OEM involvement is not necessary or is not as deep, thereby reducing the risk of
proliferation of product knowledge
"
The offered subsystem is self-contained, so low OEM involvement is required since
little external requirements knowledge is needed.
The first two approaches outlined rely on the vehicle subsystem delivering enhanced
functionality. The third aims at providing the same functionality as comparable systems at
substantially lower cost. The fourth and fifth approach aim at minimizing the proliferation of
110
product knowledge and thereby delaying the offering of similar vehicle sub-systems by
competitors as well as complete cost structure analysis by the OEM.
System synergies can often only be harvested by radical design approaches for the sub-system
design like integration of system components. Radical changes in the sub-system structure can
only be achieved if the OEM does not specify system internals and sub-system architecture,
but rather full sub-system functionality and sub-system requirements. If the OEM requests to
specify system internal requirements like the use of specific system sub-components the
supplier should refuse to take system responsibility and should request to re-arrange the
system boundaries to exclude the OEM specified component from the supplied system.
7.5. Niche Markets
Development of products for niche markets can open substantial commercial opportunities in
the mass market. The case of the automotive catalyst serving the relatively small and
unimportant market of European export vehicles to the American market, has given Marvin
the opportunity to gain an experience over several product generations before it was
introduced in the European mass market. When the catalyst was introduced to the mass
markets most competitors were unable to produce converters, of similar quality and at a
similar cost for a substantial number of years. In today's environment of slim engineering
resources it is prevalent to decide whether a development project is pursued or not on basis of
its expected financial results of the specific project alone. Benefits reaped later in changing
market conditions are often difficult to quantify and therefore inherently difficult to include in
a financial project assessment. If the decision on whether to pursue a development project is
made solely on basis of the hard financial facts of the project, neglecting potential spin-offs or
learning, then substantial commercial long-term opportunities might be missed. Had Marvin
calculated in the ninety eighties the pay-back of developing catalytic converters solely based on
the application for European export vehicles to the North American market financial
reasoning would have led to a decision against starting development activities and a huge
opportunity would have been lost.
111
Product idea
Determine system
boundary considering:
- Maximum system synergies
- Complexity of external interfaces
- Maximum impact on vehicle
desirability
Analysis of product
requirement profile
Sufficient knowledge
about requirements for
desired product?
Develop to serial
production readiness
without OEM
Identify suitable OEM
dev. partner who is:
- technically strong
- prepared to pay premium for
advanced product
- committed to contribute to
product specification
- trustworthy
- not inviting competition early
on
- honours IP contribution of
supplier
Consider niche
market introduction
Delay price release as
long as possible
Figure 39: recommendation summary chart
112
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Pricing in a Automotive High Tech SME, System Dynamics
www.systemdynamics.org/nf2002/proceedings/198Schmidt.pdf
Website of the society of German automobile manufacturers, www.vda.de
on:
cast
interview
extracts
on
news
Scheele,
Nick
,
<http://subscribers.wardsauto.com/microsites/Newsarticle.asp?newsarticleid=1700918&srid
-10088&instanceid=5205&pageid=594&magazineid=1004&sited=26>,
Oct 312002
114
Appendix A - Project Questionnaire
Pre-development:
Who was the originator of the product idea?
Who was involved in the initial product specification?
At what level of development progress got the customer (OEM) involved in the product
development?
Which proportion of requirements were found through customer involvement?
Which proportion of requirements were identified through product applications in vehicles?
Did you (supplier) approach the customer (OEM) to supply the component or did the
customer ask you to supply?
How important was the customers vehicle architectural knowledge to the design quality of the
product?
Development / Marketing:
How many customer s did you approach with the new product proposal in the first phase?
How many competitors did you have prior to the product being in vehicles on the market?
Did OEM's actively invite other competitors to supply, if yes at which stage (predevelopment, serial programms)?
How would you rate the detailed product knowledge of the customer (0 = black box, 10
customer has fill design and production capability)?
115
Commercial:
How big was the profit margin of the product compared to the typical profit margin of your
mature products?
How did the profit margin change with time and number of competitors active?
What factor had the strongest effect on the change in profit margin?
116
Appendix B - Vensim model
dummy= INTEG
dummyflow,
0)
dummyf low=
self motivated competitor development rate
self motivated competitor development rate=
IF THEN ELSE(
RANDOM UNIFORM(0,1,
10
)<=probability
of
competitor
starting development program on own initiative\
*TIME STEP:AND:number of potential competitors>=1,1,0)
~competitors/Month
expected value of self motivated competitor emerging=
72
-
Month
expected value of time the first self motivated competitor
is emerging
-
competitor probability increase=
IF THEN ELSE (probability of competitor starting development program
on own initiative\
<1-1/expected value of self motivated competitor
emerging,l/expected value of self motivated competitor emerging\
,0)
-
1/Month
flow of probability increase over time of competitors
identifying product \
opportunity and starting product development initiative.
-
maximum need identification through Tierl effort=
0.8
-
Dmnl
Which percentage of total needs can be identified by Tierl
maximum effort \
to identify vehicle integration knowledge
-
probability
of
competitor
starting
development
program
on
own
initiative=
INTEG
117
competitor probability increase,
0)
-
Dmnl
value gives the probability of a competitor emerging by
identifying the \
product opportunity on his own develices within next month
-
profit margin=
MAX(IF THEN ELSE( income>1, (income-expenditure) /income,-100) ,0)
- Euro
- "pro-forma" profit margin of the new product, assuming that
development \
revenue expenditure
costs are accounted for as
customer detailled product knowledge=
0.8
~ Dmnl
- indicates OEM product knowledge level, 0 indicates no
knowledge, 1 \
indicates perfect Tierl like knowledge of product and
production process
competitors cost=
IF THEN ELSE("t-competition-start">l, competitors cost over
time(Time-"t-competition-start"\
*cost,competitors cost over time (0) *cost)
~ Euro
competitors cost over time(
[(0,0)(100,10)], (0.458716,3), (12.5382,3), (24,3), (29.6636,2.2807), (35.1682,1
.75439) ,\
(41.2844,1.27193), (50,1), (100000,1))
~ Dmnl
- cost of competitors/cost in dependence of time\!time from
competitor \
starting to develpp competitive product\!Dmnl cost ratio
st=
IF THEN ELSE(product serial production
projects>1:AND:"t-serial-production-start"<0.1\
,Time/TIME STEP,0)
- Dmnl
- dummy variable to record time of serial production start
118
competition development rate=
IF THEN ELSE((price-cost)/price >competition profit
sensitivity:AND:(OEM competition encouragement\
>1:OR:product serial production projects
>1):AND:number of potential competitors>0,1,0)+self motivated
competitor development rate
~
competitors/Month
ct=
IF THEN ELSE(number of competitors entering similar product
develoment>l:AND: "t-competition-start"\
<0.01,Time/TIME STEP,
0)
-
Dmnl
help variable to allow generation of time when competition
starts
-
"t-serial-production-start"= INTEG
st,
0)
-
Month
-
time when serial production starts
"t-competition-start"= INTEG
ct,
0)
- Month
- time when competitions starts
capability gain=
IF THEN ELSE(number of competitors entering similar product
develoment>1,IF THEN ELSE\
(product serial production projects>l,MAX(product design
quality-competitors design quality
,0)/time to copy,0)+(l-OEM confidentiality)*MAX(product design
quality-competitors design quality\
,0)/time to copy+MAX(competitors peak strength-technical
capability of competition,\
0)/ (2*tdev) ,0)
~
1/Month
OEM involvement through platform application projects=
MIN(accumulated platform application projects/2,1)
- Dmnl
- assumes linear increas of OEM involvement with platform
119
applications. The \
assumption is, that after 2 platform applications the 100%
of needs is \
identified
accumulated
platform
application
projects=
INTEG
flow of platform projects,
0)
~
platform
OEM competition encouragement=
IF THEN ELSE(OEM interested in new product>l:OR:Level of OEM
involvement>0.8 :AND: price released to OEM\
>0,sensitivity of competition encouragement to profit margin
((price-cost)/price/industry comodity profit margin)*(1-OEM
confidentiality),0)
~ Dmnl
I
~
platform application projects= INTEG
RFQ success rate-project maturation rate,
0)
~
~
platform
I
competitors peak strength=
0.95
-
Dmnl
indicates the peak design quality the cometitor can achieve
on his own
devices
-
technical capability of competition= INTEG
capability gain,
0)
~
Dmnl
~
I
competitors design quality=
technical capability of competition
-
Dmnl
dependent on level of OEM competition encouragement, the
design quality \
will be determined by technical strength of competition
alone, or has \
input of Tierl's design quality through information leaks
-
120
project maturation rate=
platform application projects/serial application time
~ platform/Month
~
|
product serial production projects= INTEG
project maturation rate-"vehicle platform phase-out",
0)
~ platform
~
I
"vehicle platform phase-out"=
product serial production projects/platform life time
~ platform/Month
~
I
serial production cost=
cost*number of vehicles produced per platform*product serial
production projects
~ Euro/Month
OEM confidentiality=
le-005
-
Dmnl
0 indicates an OEM who transmits any information to
competitors of Tier 1, \
1 indicates an OEM who does not pass any information on to
competitors
-
"flow-platform end"=
price weighed serial production projects/platform life time
~ Euro*platform/(Month*component)
competitive pressure=
IF THEN ELSE(number of competitors entering similar product
develoment>1, ((competitors design quality\
/competitors cost)/(product design quality/cost)), 0)
-
Dmnl
dimensionless variable models the competitive pressure due
to competitors \
cost, number of competitors, competitors design quality
-
price=
cost*(industry comodity profit margin+1)*(1+effect of competitive
pressure on profit margin\
(competitive pressure))
- Euro/component
121
- maximum price to be charged is twice the price when sold at
industry \
commodity profit margin.
"flow-prod"=
accumulated price weighed RFQ successes/serial application time
~ Euro*platform/(Month*component)
~
I
accumulated price weighed RFQ successes= INTEG
"flow-succ"-"f low-prod",
0)
- platform*Euro/component
~ this level ensures, that the income from sales is calculated
based on the \
RFQ price
expenditure in kEuro=
expenditure
~ kEuro/Month
income in kEuro=
income/1000
~ kEuro/Month
profit in kEuro=
total profit/1000
-
kEuro
-
help variable to allow easy input in Excel
production projects= INTEG
price weighed serial
"flow-prod"-"flow-platform end",
0)
~ Euro*platform/component
~
I
accumulated development cost= INTEG
dev cost flow,
0)
~ Euro
development cost=
IF THEN ELSE(perceived development progress
<0.97, running cost of development team*Tierb development effort ,0
)+IF THEN ELSE(perceived development progress
122
<0.97, "OEM involvement in pre-development
application team/month and platform"\
projects", 0) *"cost of
+ IF THEN ELSE(Time<planned development project
duration,cost of Tieri gaining vehicle product integration knowledge\
/planned development project duration
,0)
~
~
Euro/Month
|
serial application cost=
platform application projects*"1cost of application team/month and
platform"
~
Euro/Month
"flow-succ" =
RFQ success rate*price
~ Euro*platform/Month/component
dev cost flow=
development cost
~
Euro/Month
"OEM involvement in pre-development projects"=
0
~
Dmnl
proportion of residual unidentified needs=
table proportion of unidentified needs in dependence of vehicle
component integration knowledge\
(MAX(Level of OEM involvement
maximum need identification through Tierl effort*Tier 1 effort on
developing vehicle integration knowledge\
~
Dmnl
~
I
Level of OEM involvement=
MIN("OEM involvement in pre-development projects"+OEM
through platform application projects\
-
involvement
,l)
Dmnl
- This variable discribes the level of OEM involvement in the
component \
development, with 0 being no involvement of OEM and 1 being
component \
developent in a fully integrated predevelopment project.
123
flow of platform projects=
RFQ success rate
~
~
platform/Month
I
cost of Tierl gaining vehicle product integration knowledge=
cost of perfect vehicle integration knowledge*effect of Tierl
integration knowledge effort on cost\
(Tier 1 effort on developing vehicle integration knowledge
~ Euro
~
I
expenditure=
serial production cost+development cost+serial application cost
~ Euro/Month
~
I
cost=
9*(1+0*"t-serial-production-start"+0*Time)
~
~
Euro/component
I
income=
(price weighed serial production projects*number
produced per platform)
~ Euro/Month
~
of vehicles
I
tdev=
7
-
-
Month
I
confirmation time=
2
~
Month
OEM convincing probability=
effect of needs fulfilment on OEM convincing probability(need
fulfilled by accepted concept feature\
/customer needs total)*effect of price on OEM convincing
probability(price/value to OEM of needs fulfilled by component\
~ Dmnl
~
I
price released to OEM=
IF THEN ELSE((Level of OEM involvement>0.6:AND:Time>price release
124
time in OEM predevelopment program\
:OR: Lost RFQ's >1:OR:platform application projects>1,1,0)
~ Dmnl
~ variable set to 0 if price has not been released to OEM and
set to 1 if \
price released to OEM
price release time in OEM predevelopment program=
20
-
Month
~ time into component predevelopment program with OEM, when
price is \
released to OEM
sensitivity of competition encouragement to profit margin(
-
[(0,0)
(100,10)1, (0,0), (3.66972,0.105263),
(6.23853,0.622807)
(10,2), (100,10)
~ \!ratio of profit margin to industry commodity margin\!level
of competitor \
encouragement
total number of OEM=
7
cost of perfect vehicle integration knowledge=
300000
-
Euro
300000 Euro calculated from prototype vehicle set-up for 3
vehicles \
(E90000), 1 Engineer year for analysis / calculations
(E100000), vehicle \
test work (110000)
number of OEM=
INTEG
(
-
-technology disclosure rate,
total number of OEM)
planned development project duration=
24
Month
125
I
-
effect of needs fulfilment on OEM convincing probability(
[(0,0)-(1,1)], (0,0),(0.25,0.2), (0.5,0.6),(0.75,1),(1,1))
Dmnl
\!percentage of customer needs addressed\!willingness to
enter mainstream \
development program
-
value to OEM of needs fulfilled by component=
30
Euro/component
-
~
I
need identification=
(customer needs-proportion of residual unidentified needs*customer
needs total)/time for need identification\
*Tierl development effort
~ needs/Month
~
I
effect of Tierl integration knowledge effort on cost(
[(0,0)(l,l)],(0,0),(0.198777,0.0394737),(0.425076,0.118421),(0.715596,0.407
895), (1,\
1))
- Dmnl
- \!effort to gatherTier 1 knowledge\!proportion of cost spent
required for \
perfect knowledge
effect of price on OEM convincing probability(
[(0,0)(10,1)], (0,1), (0.336391,0.925439),(0.5,0.8), (0.75,0.3), (1,0), (10,0))
- Dmnl
- \!price charged by Tier 1/benefit to OEM\!willingness to buy
component
OEM change of stance=
IF THEN ELSE(OEM interested in new product>0.5*total number of
OEM,OEM not interested in new product\
/TIME STEP,0)
~
~
OEM/Month
c
running cost of development team=
126
15000
-
Euro/Month
-
cost of development team durning component development
Tieri development effort=
MIN(MAX( ((price-cost) /price-industry comodity profit
margin)/industry comodity profit margin\
-
/3,0.3) ,1.5)
Dmnl
- The willingness to in vest is linked linearly to the profit
margin. If the \
profit margin is the same as the one for commodity products,
the \
willingness to invest is 0.3 The willingness to invest
reaches 1 if the \
expectet margine is 3*the commodity margin.
industry comodity profit margin=
0.05
~
I
total profit= INTEG
+income-expenditure,
0)
~ Euro
platform life time=
48
-
Month
"cost of application team/month and platform"=
2000
-
Euro/platformt/Month
time to copy=
24
- Month
serial application time=
24
-
Month
~
o
effect
of competitive pressure on profit margin(
127
-
[(0,0)
(1,1)], (0,1), (0.189602,0.951754), (0.400612,0.842105), (0.525994,0.6228
07), (0.626911\
,0.333333), (0.733945,0.166667), (0.831804,0.0921053), (1,0), (13.2263,0),(
18.88
38,0),
22.1713,0),(24.8471,0))
Dmnl
\!competitive pressure\!margin/maximum margin commanded
number of vehicles produced per platform=
465000/12
- component/Month/platform
on average each platform is produced 410000
-
times per year
competition profit sensitivity=
0.1
-
Dmnl
-
I
product design quality=
need fulfilled by accepted concept feature/customer needs total
- Dmnl
discribes the proportion to total customer needs fulfilled
at any point in \
time
OEM not interested in new product= INTEG
sales failiure-OEM change of stance,
0)
~
OEM
I
~
customer needs=
INTEG
-need identification,
~
customer needs total)
needs
~
I
customer needs total=
100
decision time=
1.5
128
~ Month
rate of platform development programs Tierl quotes for=
IF THEN ELSE(perceived development progress>introduction performance
threshold,OEM interested in new product\
*platform RFQ per OEM per month
,0)
- platform/Month
~
I
RFQ failiure rate=
(1-RFQ sucess probability)*number of life vehicle platform
RFQ's/decision time
~ platform/Month
introduction performance threshold=
0.9
-
Dmnl
Lost RFQ's= INTEG
RFQ failiure rate,
0)
~ platform
sales success=
IF THEN ELSE(OEM new product presented to and undecided>=0.999999,IF
THEN ELSE (RANDOM UNIFORM\
(0,1,1234)<=OEM convincing probability,l/TIME STEP,0),O)
OEM/Month
number of potential competitors= INTEG
-competition development rate,
5)
~ competitors
(
~
perceived development progress=
MIN(need fulfilled by accepted concept feature/customer needs
total/(l-proportion of residual unidentified needs\
),1)
-
Dmnl
-
Tier 1 perceived development progress
table
proportion
component
of
unidentified
needs
in
dependence
of
vehicle
129
integration knowledge\
[(0,0)(1,0.5)], (0,0.5), (0.250765,0.254386), (0.498471,0.135965), (0.752294,0.
0789474)\
,(1,0.05))
- Dmnl
- \!vehicle component integration knowledge\!proportion of
need unidentified
number of competitors entering similar product develoment= INTEG
competition development rate,
0)
~
competitors
number of life vehicle platform RFQ's= INTEG
rate of platform development programs Tierl quotes for-RFQ failiure
rate-RFQ success rate\
0)
~ platform
~
I
OEM interested in new product= INTEG
sales success+OEM change of stance,
0)
~
OEM
~
I
OEM new product presented to and undecided= INTEG
+technology disclosure rate-sales failiure-sales success,
0)
~
~
OEM
I
price sensitivity(
[(0,0)(100,1)],(0,1),(0.149847,0.982456),(0.24159,0.938596),(0.330275,0.811
404), (0.425076\
,0.684211), (0.504587,0.539474), (0.562691,0.442982),
0.697
248,0.153509\
(0.64526,0.285088),(
),(0.792049,0.0614035), (0.892966,0.0263158), (0.996942,0.0175439), (99.38
84,0)
130
-
Dmnl
-
\!component price/customer value\!willingness to buy
platform RFQ per OEM per month=
1.75/12*48/platform life time
- platform/OEM/Month
-
in Europe 1.75 platforms per customer per year are tendered
for quotation
RFQ sucess probability=
IF THEN ELSE(product design quality>O,MIN(1/(number of competitors
entering similar product develoment\
+1)*price sensitivity(price/product design quality/value to
OEM of needs fulfilled by component\
)/MAX(competitive pressure,0.0001),l),0)
~ Dmnl
~
I
sales failiure=
IF THEN ELSE(OEM new product presented to and undecided>0.99,IF THEN
ELSE (RANDOM UNIFORM\
(0,1,1234)>OEM convincing probability,l/TIME STEP,0),0)
~
~
OEM/Month
I
RFQ success rate=
RFQ sucess probability*number of life vehicle platform
RFQ's/decision time
~ platform/Month
technology disclosure rate=
IF THEN ELSE(perceived development progress>introduction performance
threshold , MIN\
(7/12,number of OEM/TIME STEP),0)
~
OEM/Month
Tier 1 effort on developing vehicle integration knowledge=
0.7
-
Dmnl
discribes suppliers effort in acquiring vehicle integration
knowledge by \
(literature search 0.2, industry intelligence
0.4,
subsystem testing 0.7, \
vehicle prototype testing 1.)
-
"concept dev. quality"=
131
0.8
-
Dmnl
-
I
design confirmation=
MIN(needs fulfilled in concept/TIME STEP,needs fulfilled in
concept/confirmation time\
~
needs/Month
I
~
design rejection=
MIN(needs unfulfilled in concept/TIME STEP,verification rate)
~
needs/Month
I
~
failiure rate=
(1-"concept dev. quality")/tdev*(customer needs total*(1-proportion
of residual unidentified needs\
)-specified unfulf needs)*specified unfulf needs*work
rate/customer needs total
~
needs/Month
need fulfilled by accepted concept feature= INTEG
design confirmation,
0)
~
needs
I
~
needs fulfilled in concept= INTEG
-design confirmation+success rate,
0)
~ needs
~
I
needs unfulfilled in concept= INTEG
+failiure rate-design rejection,
0)
~
needs
=
INTEG
(
specified unfulf needs
design rejection+need identification-success rate-failiure rate,
0)
~
needs
success rate=
"concept dev. quality"/tdev*(customer needs total*(1-proportion of
132
residual unidentified needs\
)-specified unfulf needs)*specified unfulf needs*work
rate/customer needs total
~ needs/Month
time for need identification=
3
- Month
I
-
verification rate=
1
- needs/Month
I
-
**********
***
****
****
**
**
**********
***
*****
* *****
**
****
*
work rate=
Tierl development effort*2
~ needs/Month
.Control
**********************************************
**********~
Simulation Control Parameters
FINAL TIME
- Month
-
250
The final time for the simulation.
INITIAL TIME
- Month
-
=
=
0
The initial time for the simulation.
= 1
Month [0,?]
The frequency with which output is stored.
SAVEPER
-
= 0.125
Month [0,?]
The time step for the simulation.
TIME STEP
-
\\\---///
Sketch information - do not modify anything except names
V300 Do not put anything below this section - it will be ignored
*development view
$192-192-192,0,Times New
133
Romanl2lIO-0-0I0-0-0l0-0-2551-1--l--1-1--l--1196,96
10,1,customer needs,484,57,40,20,3,3,0,0,0,0,0,0
10,2,specified unfulf needs,485,180,40,20,3,3,0,0,0,0,0,0
10,3,needs fulfilled in concept,471,393,42,25,3,3,0,0,0,0,0,0
10,4,needs unfulfilled in concept,715,264,40,25,3,3,0,0,0,0,0,0
10,5,need fulfilled by accepted concept
feature,477,552,54,33,3,3,0,0,0,0,0,0
1,6,8,2,4,0,0,22,0,0,0,-l--l--l,,l|(484,142)|
(484,94) 1
1,7,8,1,100,0,0,22,0,0,0,-1--l--1,,ll
11,8,1660,484,118,8,6,33,3,0,0,4,0,0,0
10,9,need identification,548,118,56,11,40,3,0,0,-1,0,0,0
1,10,12,5,4,0,0,22,0,0,0,-1--1--1,,1I(474,491)|
1,11,12,3,100,0,0,22,0,0,0,-l--1--l,,lI
(474,434)|
11,12,1804,474,457,8,7,33,3,0,0,4,0,0,0
10,13,design confirmation,522,457,40,19,40,3,0,0,-1,0,0,0
1,14,16,2,4,0,0,22,0,0,0,-1--i--1,,lI (583,182) |
1,15,16,4,100,0,0,22,0,0,0,-1--1--1,,lI (715,182)|
11,16,2124,647,182,6,8,34,3,0,0,1,0,0,0
10,17,design rejection,647,201,49,11,40,3,0,0,-1,0,0,0
10,18,work rate,330,314,32,11,8,3,1,0,-1,0,0,0
1,19,21,4,4,0,0,22,0,0,0,-1--1--1,,1I(608,260)|
1,20,21,2,100,0,0,22,0,0,0,-l--1--l,,lI (485,260)|
11,21,2236,535,260,6,8,34,3,0,0,1,0,0,0
10,22,failiure rate,535,279,39,11,40,3,0,0,-1,0,0,0
1,23,2,22,1,1,0,0,2,64,0,-l--l--1,11211128-128-128,1
(529,219)1
1,24,25,2,100,0,0,22,0,0,0,-1--1--l, ,1 (474,247)1
11,25,2204,474,300,8,6,33,3,0,0,2,0,0,0
10,26,success rate,427,300,39,11,40,3,1,0,-1,0,0,0
1,27,18,26,1,1,0,0,2,64,0,-1--l--1,11211128-128-128,11(384,322)|
1,28,18,22,1,1,0,0,2,64,0,-l--l--1,I1211128-128-128,11(491,350)1
10,29,1"concept dev. quality",643,361,42,19,8,3,1,0,0,0,0,0
1,30,29,22,1,1,0,0,2,64,0,-l--l--1,11211128-128-128,11(598,300)1
1,31,29,26,1,1,0,0,2,64,0,-l--l--1,11211128-128-128,11(524,379)1
1,32,2,26,1,1,0,0,2,0,0,-1--1--1,11211128-128-128,11(450,229)|
(474,337) 1
1,33,25,3,4,0,0,22,0,0,0,-1--1--1,,ll
1,34,4,17,1,1,0,0,2,0,0,-1--l--1,11211128-128-128,1(662,242)I
10,35,TIME
STEP,812,231,50,11,8,2,1,3,-1,0,0,0,128-128-128,0-0-0,11211128-128-128
(736,227) 1
1,36,35,17,1,1,0,0,0,0,0,-l--l--l,,ll
10,37,verification rate,806,205,48,11,8,3,1,0, -1,0,0,0
1,38,37,17,1,1,0,0,2,0,0,-1--1--1,11211128-128-128,11(731,208)1
,,lI (536,64)1
1,39,1,9,1,0,0,0,0,0,0,-l--1--1
1,40,3,13,1,2,0,0,2,0,0,-----1,12128-128-128,1(535,434)l
10,41,TIME
STEP,671,489,50,11,8,2,2,3,-1,0,0,0,128-128-128,0-0-0,11211128-128-128
1,42,41,13,1,2,0,0,2,0,0,-l--l--1,11211128-128-128,11(603,462)1
10,43,time for need identification, 653,70,42,19,8,3,0,0,0,0,0,0
(589,68) |
1,44,43,9,1,0,0,0,0,64,0,-l--l--1,,lI
10,45,customer needs total,163,109,50,19,8,3,0,0,-1,0,0,0
1,46,45,9,1,0,0,0,0,0,0,-l--1--1,,1(363,149)|
10,47,proportion of residual unidentified
134
needs,754,125,73,19,8,2,0,3,-1,0,0,0,128-128-128,0-0-0,I1211128-128-128
1,48,47,9,1,0,0,0,0,0,0,-1--l--1,,1|(644,137)|
10,49,perceived development progress,296,492,74,19,8,3,2,0,0,0,0,0
10,50,product design quality,246,356,46,27,8,3,2,0,0,0,0,0
1,51,5,50,1,2,0,0,2,64,0,-1--l--1,11211128-128-128,11(366,423)1
1,52,45,50,1,2,0,0,2,64,0,-1--i--1,11211128-128-128,11(153,240)1
1,53,45,49,1,2,0,0,2,64,0,-1--i--1,11211128-128-128,11(73,262)1
1,54,5,49,0,2,0,0,2,64,0,-1--i--1,11211128-128-128,11(394,525)1
10,55,proportion of residual unidentified
needs,217,586,73,19,8,2,2,3,-1,0,0,0,128-128-128,0-0-0,11211128-128-128
1,56,55,49,1,2,0,0,2,0,0,-1--i--1,|1211128-128-128,11(283,546)I
10,57,Tieri development
effort,337,108,65,19,8,2,1,3,-1,0,0,0,128-128-128,0-0-0,11211128-128128
1,58,57,18,1,1,0,0,2,0,0,-1--l--1,11211128-128-128,11(302,160)I
1,59,57,9,1,1,0,0,2,64,0,-1--1--1,11211128-128-128,1(403,91)l
1,60,45,26,1,1,0,0,2,0,0,-1--i--1,11211128-128-128,11(247,248)1
10,61,proportion of residual unidentified
needs,379,219,73,19,8,2,9,3,-1,0,0,0,128-128-128,0-0-0,11211128-128-128
1,62,61,26,1,9,0,0,0,0,0,-1--1--1,,1(377,253)l
10,63,tdev,560,219,15,11,8,3,1,0,-1,0,0,0
1,64,63,26,1,1,0,0,2,0,0,-1--i--1,11211128-128-128,11(498,239)I
10,65,confirmation time,685,545,54,11,8,3,2,0,-1,0,0,0
1,66,65,13,1,2,0,0,2,0,0,-1--i--1,11211128-128-128,11(591,517)1
1,67,45,22,1,1,0,0,2,0,0,-1--l--1,11211128-128-128,11(352,255)1
1,68,61,22,1,1,0,0,0,0,0,-1--1--l,,1|(438,259)|
1,69,63,22,1,1,0,0,2,0,0,-1--i--1,11211128-128-128,11(565,246)1
1,70,45,1,0,0,0,0,0,0,1,-1--l--1,,1|(321,83)|
\\\---///
Sketch information - do not modify anything except names
V300 Do not put anything below this section - it will be ignored
*V - proportion of residual unidentified needs
$192-192-192,0,Times New
Romanll2IlO-0-0I0-0-0I0-0-2551-1--l--1-1--1--1196,96
10,1,proportion
of
residual
needs,280,345,69,19,8,3,0,0,0,0,0,0
10,2,Level
unidentified
of OEM involvement,222,239,47,19,8,3,0,0,0,0,0,0
10,3,Tier 1 effort on developing vehicle integration
knowledge,378,272,84,28,8,3,0,0,0,0,0,0
1,4,2,1,0,0,0,0,0,64,0,-l--1--1,,1|(247,285)|
1,5,3,1,0,0,0,0,0,64,0,-1--l--1,,1(328,308)|
10,6,table proportion of unidentified needs in dependence of vehicle
component integration knowledge,502,365,107,28,8,3,0,0,0,0,0,0
1,7,6,1,0,0,0,0,0,64,0,-l--l--l,,1|(378,354)|
10,8,1"OEM involvement in pre-development
projects",141,133,63,31,8,3,0,0,0,0,0,0
10,9,OEM involvement through platform application
projects,360,133,84,28,8,3,0,0,0,0,0,0
1,10,8,2,0,0,0,0,0,64,0,-1--l--l,,1|(181,186)|
1,11,9,2,0,0,0,0,0,64,0,-1--l--l,,1|(290,186)|
12,12,48,575,-55,10,8,0,3,0,0,-1,0,0,0
1,13,14,12,100,0,0,22,0,0,0,-1--l--1,,1|(575,-22)|
135
11,14,48,575,9,8,6,33,3,0,0,4,0,0,0
10,15,flow of platform projects,634,9,51,19,40,3,0,0,-1,0,0,0
10,16,RFQ success
rate,764,47,48,19,8,2,0,3,-1,0,0,0,128-128-128,0-0-0,11211128-128-128
1,17,16,15,0,0,0,0,0,0,0,-l--l--1,,1 (707,30)1
10,18,accumulated platform application
projects,578,133,60,40,3,3,0,0,0,0,0,0
1,19,14,18,4,0,0,22,0,0,0,-l--l--l,,1|(575,54)I
(488,133)1
1,20,18,9,0,0,0,0,0,64,0,-1--l--l,,1
10,21,maximum need identification through Tierl
effort,633,256,66,28,8,3,0,0,0,0,0,0
1,22,21,1,0,0,0,0,0,0,0,-l--l--l,,1I(464,297)1
Sketch information - do not modify anything except names
\\\---///
V300 Do not put anything below this section - it will be ignored
*V-vehicle application mainstream
$192-192-192,0,Times New
Romanj|1210-0-010-0-010-0-2551-1--i--1-1--i--1196,96
platform
vehicle
life
of
10,1,number
40,79,30,3,3,0,0,0,0,0,0
10,2,price,483,570,17,11,8,3,9,0,0,0,0,0
12,3,48,312,-262,10,8,0,3,0,0,-1,0,0,0
RFQ's,309,-
1,4,6,1,4,0,0,22,0,0,0,-l--l--l,,1I(314,-125)1
1,5,6,3,100,0,0,22,0,0,0,-l--l--l,,1I
(314,-223) 1
11,6,48,314,-187,8,6,33,3,0,0,4,0,0,0
10,7,rate of platform development programs Tierl quotes
for,398,-187,76,26,40,3,0,0,-1,0,0,0
10,8,platform application projects,308,136,73,24,3,3,0,0,0,0,0,0
1,9,11,8,4,0,0,22,0,0,0,-l--l--l,,1|(301,80)|
1,10,11,1,100,0,0,22,0,0,0,-l--1--l,,1|(301,13)1
11,11,1020,301,41,8,6,33,3,0,0,4,0,0,0
10,12,RFQ success rate,377,41,68,20,40,3,0,0,-1,0,0,0
10,13,Lost RFQ's,574,-31,40,20,3,3,0,0,0,0,0,0
1,14,16,13,4,0,0,22,2,0,0,-1--l--1,112110-0-0,1|(500,-20)|
1,15,16,1,100,0,0,22,2,0,0,-l--1--1,112110-0-0,1|(420,-20)I
11,16,1740,459,-20,7,9,34,3,0,0,1,0,0,0
rate,459,0,53,11,40,3,0,0,-1,0,0,0
10,17,RFQ failiure
10,18,number of OEM,736,-185,40,20,3,3,0,0,0,0,0,0
10,19,OEM new product presented to and
undecided,742,-47,50,29,3,3,0,0,0,0,0,0
10,20,OEM interested
in new product,735,85,49,34,3,3,0,0,0,0,0,0
10,21,OEM not interested in new product,1056,85,50,30,3,3,0,0,0,0,0,0
1,22,24,19,4,0,0,22,0,0,0,-l--l--l,,lI (736,-95) |
1,23,24,18,100,0,0,22,0,0,0,-l--l--l,,lI (736,-146) |
11,24,1884,736,-121,8,6,33,3,0,0,4,0,0,0
10,25,technology disclosure rate,791,-121,47,23,40,3,0,0,-1,0,0,0
1,26,18,25,1,0,0,0,0,0,0,-l--l--l,,ll
(723,-150)
|
10,27,TIME
STEP,869,-86,50,11,8,2,0,3,-1,0,0,0,128-128-128,0-0-0,11211128-128-128
1,28,27,25,1,0,0,0,2,0,0,-l--l--1,11211128-128-128,11(810,-118)1
1,29,31,20,4,0,0,22,0,0,0,-1--l--l,,1|(738,37)|
1,30,31,19,100,0,0,22,0,0,0,-1--l--l,,lI
(738,-3)
136
11,31,156,738,17,8,6,33,3,0,0,4,0,0,0
10,32,sales success,788,17,42,11,40,3,0,0,-1,0,0,0
1,33,35,21,4,0,0,22,0,0,0,-l--l--l,,1|(1056,-47)|
1,34,35,19,100,0,0,22,0,0,0,-l--1--l,,1|(818,-47)|
11,35,2060,850,-47,6,8,34,3,0,0,1,0,0,0
10,36,sales failiure,850,-28,38,11,40,3,0,0,-1,0,0,0
1,37,39,21,4,0,0,22,0,0,0,-1--l--l,,1|(941,89)I
1,38,39,20,68,0,0,22,2,0,0,-l--1--1,11211128-128-128,1(824,89)
11,39,1932,871,89,6,8,34,3,0,0,1,0,0,0
10,40,OEM change of stance,871,116,52,19,40,3,0,0, -1,0,0,0
10,41,number of potential competitors,651, 352,47,30,3,3,9,0,0,0,0,0
10,42,number of competitors entering similar product
develoment,648,491,53,36,3,3,0,0,0,0,0,0
1,43,45,42,4,9,0,22,0,0,0,-1--l--l,,l1(645,440)|
1,44,45,41,100,9,0,22,0,0,0,-1--l--l,,1|(645,397)|
11,45,716,645,418,8,6,33,3,9,0,4,0,0,0
10,46,competition development rate,708,418,55,19,40,3,9,0,-1,0,0,0
10,47,decision time,485,-103,41,11,8,3,0,0,-1,0,0,0
1,48,19,36,1,0,0,0,0,0,0,-1--l--l,,1(784,-7)|
1,49,47,17,1,0,0,0,0,64,0,-1--l--l,,1|(508,-60)|
1,50,47,12,1,0,0,0,0,64,0,-l--1--l,,1|(418,-40)|
1,51,19,32,0,0,0,0,0,0,0,-1--1--l,,1(766,-11)
10,52,OEM convincing probability,999,-98,54,19,8,3,0,0,0,0,0,0
1,53,52,36,1,0,0,0,0,64,0,-1--l--1,,1|(946,-33)1
1,54,52,32,1,0,0,0,0,64,0,-1--l--l,,1|(984,3)
10,55,platform RFQ per OEM per month,431,-331,58,19,8,3,0,0,0,0,0,0
1,56,55,7,1,0,0,0,0,64,0,-1--l--1,,1|(383,-272)1
1,57,20,7,1,0,0,0,0,64,0,-1--1--1,,1|(636,-92)|
10,58,RFQ sucess probability,476,99,40,19,8,3,0,0,0,0,0,0
1,59,58,12,1,0,0,0,2,64,0,-1--l--1,11211128-128-128,11(422,79)1
1,60,58,17,1,0,0,0,2,64,0,-1--l--1,11211128-128-128,11(500,45)1
10,61,price sensitivity,622,185,48,11,8,3,0,0,-1,0,0,0
1,62,61,58,0,0,0,0,0,0,0,-l--1--1,,1|(562,150)|
1,63,1,12,1,0,0,0,0,0,0,-1--1--l,,1|(364,40)I
1,64,1,17,1,0,0,0,0,0,0,-1--1--l,,1|(369,13)I
10,65,product design
quality,425,188,52,25,8,2,0,3,-1,0,0,0,128-128-128,0-0-0,1121128-128128
1,66,65,58,1,0,0,0,0,0,0,-l--1--1,,1|(448,142)|
10,67, competition profit
sensitivity,
859,465,55,19,8,3,9,0,-1,0,0,0
1,68,67,46,1,9,0,0,0,0,0,-1--1--1,,1|(787,438)|
10,69,OEM competition encouragement,807,214,58,19,8,3,0,0,-1,0,0,0
10,70,cost,528,630,15,11,8,3,0,0,-1,0,0,0
1,71,70,46,1,9,0,0,0,0,0,-1--1--l,,11(685,556)|
1,72,2,46,1,9,0,0,0,0,0,-1--1--1,,11(530,503)
1,73,20,69,0,0,0,0,0,64,0,-1--1--1,,1l(771,151)1
10,74,introduction
performance
threshold,594,-185,46,33,8,3,0,0,-
1,0,0,0
1,75,74,7,1,0,0,0,2,0,0,-1--l--1,11211128-128-128,11(483,-201)1
10,76,perceived development
137
progress,627,-307,75,19,8,2,0,3,-1,0,0,0,128-128-128,0-0-0,|1211128128-128
1,77,76,7,1,0,0,0,0,0,0,-l--l--l,,11(507,-237)l
1,78,76,25,1,0,0,0,0,64,0,-l--1--1,,1|(743,-231)1
1,79,74,25,1,0,0,0,0,64,0,-l--1-- ,,1 (677,-143)1
10,80,TIME
STEP,940,35,50,11,8,2,0,3,-1,0,0,0,128-128-128,0-0-0,11211128-128-128
1,81,80,32,1,0,0,0,2,0,0,-1--l--1,11211128-128-128,1(843,4)
1,82,27,36,1,0,0,0,2,0,0,-1--l--1,11211128-128-128,11(849,-57)1
10,83,serial
application time,462,306,53,19,8,3,9,0,0,0,0,0
10,84,platform life time,120,151,52,11,8,3,0,0,0,0,0,0
10,85,effect of competitive pressure on profit
margin,391,645,67,28,8,3,9,0,0,0,0,0
1,86,85,2,1,9,0,0,0,64,0,-1--i--i,,11(414,589)|
10,87, industry
comodity profit
margin, 445,500,57,19,8,3,9,0,0,0,0,0
1,88,87,2,0,9,0,0,0,64,0,-1--i--i,,11(462,533)|
1,89,70,2,1,9,0,0,0,64,0,- -- -- ,,1i (509,597)1
10,90,time to copy,1054,633,40,11,8,3,0,0,-1,0,0,0
10,91,Tieri development effort,255,600,68,19,8,3,9,0,0,0,0,0
1,92,87,91,1,9,0,0,0,64,0,-1--l--i,,1j(330,501)1
1,93,2,91,1,9,0,0,0,64,0,-----,,11(352,521)
1
1,94,70,91,1,9,0,0,0,64,0,-1--i--i,,11(310,655)1
10,95,cost,979,227,24,11,8,2,0,3,-1,0,0,0,128-128-128,0-0-0,11211128128-128
10,96,price,955,298,26,11,8,2,0,3,-1,0,0,0,128-128-128,0-0-0,11211128128-12
8
10,97,industry comodity profit
margin,1061,324,61,19,8,2,0,3,-1,0,0,0,128-128-128,0-0-0,11211128-128128
10,98,sensitivity of competition encouragement to profit
margin,991,173,78,28,8,3,0,0,0,0,0,0
1,99,98,69,1,0,0,0,0,64,0,-1--1--l,,1|(844,175)1
1,100,95,69,1,0,0,0,0,64,0,-1--1--1,,1I(899,232)|
1,101,96,69,1,9,0,0,0,64,0,-1--l--1,,1|(867,270)1
1,102,97,69,1,9,0,0,0,64,0,-1--l--1,,1I(843,295)1
1,103,69,46,1,9,0,0,0,64,0,-1--l--1,,1
(721,314)1
10,104,total number of OEM,868,-221,48,19,8,3,0,0,0,0,0,0
1,105,20,40,0,0,0,0,0,0,0,-1--1--l,,1|(794,99)I
1,106,21,40,0,0,0,0,0,0,0,-l--1--l,,1|(971,100)1
1,107,80,40,1,0,0,0,2,0,0,-1--1--1,11211128-128-128,11(932,74)1
1,108,104,40,1,0,0,0,0,64,0,-l--1--1,,1|(923,-49)|
10,109,effect of price on OEM convincing
probability,1012,-201,74,19,8,3,0,0,0,0,0,0
10,110,effect of needs fulfilment on OEM convincing
probability,1162,-55,86,28,8,3,0,0,0,0,0,0
1,111,109,52,1,0,0,0,0,64,0,-l--l--l,,1I(1035,-153)1
1,112,110,52,1,0,0,0,0,64,0,-l--l--l,,1l(1079,-85)1
10,113,price,1140,-7,26,11,8,2,0,3,-1,0,0,0,128-128-128,0-0-0,11211128128-1
28
138
10,114,need fulfilled by accepted concept
feature,1138,51,57,28,8,2,0,3,-1,0,0,0,128-128-128,0-0-0,11211128-128128
1,115,113,52,1,0,0,0,0,64,0,-l--1--1,,1I(1078,-35)1
1,116,114,52,1,0,0,0,0,64,0,-l--l--1,,1 (1054,-19)1
10,117,value to OEM of needs fulfilled by
component,1207,-143,79,19,8,3,0,0,0,0,0,0
1,118,117,52,1,0,0,0,0,64,0,-l--l--1,,1I(1118,-97)1
10,119,customer needs
total,1178,-244,55,19,8,2,0,3,-1,0,0,0,128-128-128,0-0-0,11211128-128128
1,120,119,52,1,0,0,0,0,0,0,-1--l--1,,1I(1101,-163)1
1,121,117,58,1,0,0,0,0,0,0,-l--l--l,,1 (771,-329)1
10,122,Level of OEM
involvement,1025,265,52,19,8,2,0,3,-1,0,0,0,128-128-128,0-0-0,11211128128-1
28
1,123,122,69,1,9,0,0,0,0,0,-1--l--1,,1 (909,262)1
10,124,price released to OEM,903,391,53,19,8,3,9,0,0,0,0,0
10,125,platform application
projects,1139,387,73,19,8,2,9,3,-1,0,0,0,128-128-128,0-0-0,11211128128-128
10,126,Lost
RFQ's,1133,428,47,11,8,2,9,3,-1,0,0,0,128-128-128,0-0-0,1121128-128128
10,127,Level of OEM
involvement,1128,485,52,19,8,2,9,3,-1,0,0,0,128-128-128,0-0-0,11211128128-1
28
10,128,price release time in OEM predevelopment
program,1071,549,83,19,8,3,9,0,0,0,0,0
1,129,125,124,1,9,0,0,0,64,0,-l--l--l,,1I(1028,367)1
1,130,126,124,1,9,0,0,0,64,0,-l--l--l,,1 (1037,423)1
1,131,127,124,1,9,0,0,0,64,0,-l--l--l,,1I(1024,451)|
1,132,128,124,1,9,0,0,0,64,0,-l--l--l,,1I(984,483)I
1,133,124,69,1,9,0,0,0,64,0,-1--l--l,,1I(809,327)I
10,134,Time,970,596,26,11,8,2,9,3,-1,0,0,0,128-128-128,0-0-0,11211128128-12
8
1,135,134,124,1,9,0,0,0,0,0,-l--1--1,,1 (921,500)1
10,136,competitors cost,757,795,52,11,8,3,0,0,0,0,0,0
10,137,customer
detailled
product
knowledge,979,912,62,19,8,3,9,0,0,0,0,0
10,138,competitors design quality,757,644,60,19,8,3,0,0,0,0,0,0
10,139,competitive pressure,406,782,37,19,8,3,0,0,0,0,0,0
1,140,42,139,1,0,0,0,0,64,0,-l--1--l,,l1(594,686)|
1,141,138,139,1,0,0,0,0,64,0,-l--l--l,,1I(550,756)1
1,142,136,139,1,0,0,0,0,64,0,-l--1--l,,1I(628,832)I
1,143,70,139,1,0,0,0,0,64,0,-l--1--1,,1I(453,742)I
10,144,product design
139
quality,428,879,52,19,8,2,0,3,-1,0,0,0,128-128-128,0-0-0,11211128-128128
1,145,144,139,1,,0,0,0,0,0,,-1--1--1,
,1
1,146,70,136,1,0,0,0,0,64,0,-1--1--1, ,1
(426,828)|
(642,692)|
1,147,139,2,1,9,0,0,0,64,0,-1--1--1,
,1| (504,691)|
10,148,product design
quality,1167,643,52,19,8,2,0,3,-1,0,0,0,128-128-128,0-0-0,11211128-128128
10,149,OEM confidentiality,776,539,44,19,8,3,0,0,-1,0,0,0
1,150,149,69,1,9,0,0,0,64,0,-l--l--1,,1 (749,307)1
10,151,product
serial
production projects,323,330,48,31,3,3,9,0,0,0,0,0
1,152,154,151,4,9,0,22,0,0,0,-l----1,,1I
1,153,154,8,100,0,0,22,0,0,0,-l--l--l,,lI
11,154,604,301,214,8,6,33,3,0,0,2,0,0,0
(301,260) 1
(301,184) 1
10,155,project maturation rate,245,214,48,19,40,3,0,0,-1,0,0,0
1,156,83,155,0,9,0,0,0,64,0,-l--l--1,,1|(361,263)|
(247,176)1
1,157,8,155,1,0,0,0,0,0,0,-1--l--l,,1I
12,158,48,57,316,10,8,0,3,0,0,-1,0,0,0
1,159,161,158,4,0,0,22,0,0,0,-l--l--1,,1I(126,323)1
1,160,161,151,100,9,0,22,0,0,0,-l--l--1,,1|(236,323)1
11,161,48,191,323,6,8,34,3,0,0,1,0,0,0
10,162, "vehicle
platform phase-out",191,353,59,22,40,3,0,0,0,0,0,0
1,163,84,162,1,0,0,0,0,64,0,-l--l--l,,1|(146,218)1
1,164,151,162,1,9,0,0,0,64,0,-1--l--1,,1I(257,398)I
1
1,165,151,46,1,9,0,0,0,0,0,-1--l--l,,lI(477,402)
capability
10,166,technical
competition,896,756,51,33,3,3,0,0,0,0,0,0
1,167,166,138,1,0,0,0,0,64,0,-l--l--l,,1I(798,717)1
12,168,48,1095,758,10,8,0,3,0,0,-1,0,0,0
1,169,171,166,4,0,0,22,0,0,0,-l--l--l,,1I(978,758)1
1,170,171,168,100,0,0,22,0,0,0,-l--l--l,,1I(1053,758)I
11,171,48,1016,758,6,8,34,3,0,0,1,0,0,0
0f
10,172,capability gain,1016,777,45,11,40,3,0,0,-1,0,0,0
1,173,138,172,1,0,0,0,0,0,0,-1--l--1,,lI(900,674)1
10,174,competitors peak strength,1058,841,56,19,8,3,0,0,-1,0,0,0
1,175,174,172,1,0,0,0,0,0,0,-1--l--l,,1 (1062,801)I
1,176,42,172,1,0,0,0,0,0,0,-l--l--l,,1 (912,583)I
1,177,148,172,1,0,0,0,0,0,0,-1--l--l,,1|(1080,699)1
1,178,90,172,1,0,0,0,0,0,0,-l--l--1,,1I(1021,693)I
10,179,tdev,912,851,24,11,8,2,0,3,-1,0,0,0,128-128-128,0-0-0,11211128128-12
8
1,180,179,172,1,0,0,0,0,0,0,-l--l--l,,1I(965,821)1
1,181,166,172,0,0,0,0,0,0,0,-l--l--l,,1|(952,765)I
1,182,149,172,1,0,0,0,0,64,0,-l--l--l,,1I(929,637)1
1,183,151,172,1,9,0,0,0,0,0,-l--l--l,,1I(793,499)1
10,184,competitors cost over time,816,880,53,19,8,3,0,0,0,0,0,0
1,185,184,136,1,0,0,0,0,64,0,-l--l--l,,1|(800,829)|
10,186, "t-competition-start",675,
935,59,16,3,3,9,0,0,0,0,0
12,187,48,476, 932,10,8,0,3,9,0, -1,0,0,0
1,188,190,186,4,9,0,22,0,0,0,-1--1--l,,1|(586,932)|
140
1,189,190,187,100,9,0,22,0,0,0,-l--1--l,,1I(515,932)1
11,190,48,551,932,6,8,34,3,9,0,1,0,0,0
10,191,ct,551,951,8,11,40,3,9,0,-1,0,0,0
1,192,186,191,1,9,0,0,0,64,0,-l--l--l,,1I(592,987)1
1,193,42,191,1,9,0,0,0,64,0,-1--l--l,,1 (638,729)1
10,194,Time,547,1000,26,11,8,2,9,3,-1,0,0,0,128-128-128,0-0-0,11211128128-1
28
1,195,194,191,0,9,0,0,0,0,0,-l--1--1,,1I(547,982)1
10,196, TIME
STEP,438,984,50,11,8,2,9,3,-1,0,0,0,128-128-128,0-0-0,1121|128-128-128
1,197,196,191,0,9,0,0,0,0,0,-1--1--l,,1I(502,964)1
1,198,186,136,1,9,0,0,0,64,0,-l--l--l,,1I(729,869)1
1,199,41,46,1,9,0,0,0,64,0,-l--1--1,,1I(718,373)1
10,200, "t-serial-production-start",662,1109,78,14,3,3,9,0,0,0,0,0
12,201,48,457,1103,10,8,0,3,9,0,-1,0,0,0
1,202,204,200,4,9,0,22,0,0,0,-1--l--1, ,1| (557,1103) |
1,203,204,201,100,9,0,22,0,0,0,-l--l--1,,1I(493,1103)I
11,204,48,525,1103,6,8,34,3,9,0,1,0,0,0
10,205,st,525,1122,7,11,40,3,9,0,-1,0,0,0
1,206,196,205,1,9,0,0,0,64,0,-l--1--l,,1j(450,1047)1
1,207,194,205,1,9,0,0,0,64,0,-l--l--1,,1I(572,1061)1
1,208,200,205,1,9,0,0,0,64,0,-l--1--1,,1I(591,1161)1
1,209,151,205,1,9,0,0,0,0,0,-1--l--l,,1I(160,894)1
1,210,200,70,1,9,0,0,0,0,0,-l--l--1, ,1| (726,872)|
10,211,Time,649,764,26,11,8,2,0,3,-1,0,0,0,128-128-128,0-0-0,11211128128-12
8
1,212,211,70,1,9,0,0,0,0,0,-1--1--1,,1|(608,683)1
1,213,84,55,1,0,0,0,0,0,0,-1--1--1,,1|(207,-200)|
10,214,self motivated competitor development
rate,513,418,77,28,8,2,9,3,-1,0,0,0,128-128-128,0-0-0,11211128-128-128
1,215,214,46,0,9,0,0,0,0,0,-l--l--1,,11(614,418)I
10,216,price,549,210,26,11,8,2,0,3,-1,0,0,0,128-128-128,0-0-0,1121128128-1
28
1,217,216,58,1,0,0,0,0,64,0,-1--1--1,,1I(536,156)I
10, 218,competitive
pressure,552,41,42,19,8,2,0,3,-1,0,0,0,128-128-128,0-0-0,11211128-128128
1,219,218,58,1,0,0,0,0,64,0,-1--1--1,,1I(550,88)I
10,220,number of competitors entering similar product
develoment,498,249,77,28,8,2,0,3,-1,0,0,0,128-128-128,0-0-0,11211128128-128
1,221,220,58,1,0,0,0,0,64,0,-1--1--1,,1|(502,176)|
1,222,211,136,1,0,0,0,0,64,0,-l--l--l,,1|(680,789)|
1,223,104,18,0,0,0,0,0,0,1,-l--l--l,,1|(804,-203)|
\\\---///
Sketch information - do not modify anything except names
V300 Do not put anything below this section - it will be ignored
*V-commercial
$192-192-192,0,Times New
141
Roman 12110-0-010-0-010-0-2551-1--i--1-1--i--1196,96
10,1,total profit,388,59,40,20,3,3,0,0,0,0,0,0
12,2,48,392,-97,10,8,0,3,0,0,-1,0,0,0
1,3,5,1,4,0,0,22,0,0,0,-1--l--1,,1 (392,10) |
1,4,5,2,100,0,0,22,0,0,0,-l--1--1,,1I (392,-60) |
11,5,48,392,-25,8,6,33,3,0,0,4,0,0,0
10,6,income,429,-25,29,12,40,3,0,0,-1,0,0,0
12,7,48,392,334,10,8,0,3,0,0,-1,0,0,0
1,8,10,7,4,0,0,22,0,0,0,-1--1--1,,1|(395,281)|
1,9,10,1,100,0,0,22,0,0,0,-l--1--l,,1 (395,152)1
11,10,48,395,231,8,6,33,3,0,0,4,0,0,0
10,11,expenditure,440,231,37,11,40,3,0,0,-1,0,0,0
10,12,price,1150,-174,26,11,8,2,0,3,-1,0,0,0,128-128-128,0-00,11211128-128128
produced
of
vehicles
10,13,number
61,72,19,8,3,0,0,0,0,0,0
1,14,13,6,1,0,0,0,0,64,0,-1--l--1,,1l (361,-58)
per
platform,275,-
|
10,15,running cost of development team,544,-23,58,19,8,3,0,0,0,0,0,0
10,16,perceived development
progress,140,377,75,19,8,2,9,3,-1,0,0,0,128-128-128,0-0-0,11211128-128128
10,17,"cost of application team/month and
platform",819,239,61,28,8,3,0,0,0,0,0,0
10,18,Tierl development
effort,867,-23,65,19,8,2,0,3,-1,0,0,0,128-128-128,0-0-0,11211128-128128
10,19,cost of Tieri gaining vehicle product integration
knowledge,670,288,88,28,8,3,0,0,0,0,0,0
10,20,cost of perfect vehicle integration
knowledge,698,177,70,19,8,3,0,0,0,0,0,0
10,21,effect of Tieri integration knowledge effort on
cost,619,415,80,19,8,3,0,0,0,0,0,0
1,22,20,19,1,0,0,0,0,64,0,-1--i--i,, 11(668,222)1
1,23,21,19,1,0,0,0,0,64,0,-l--1--1,,1|(646,364)|
10,24,Tier 1 effort on developing vehicle integration
knowledge,747,368,89,28,8,2,0,3,-1,0,0,0,128-128-128,0-0-0,11211128128-128
1,25,24,19,1,0,0,0,0,64,0,-1--l--l,,1I(737,325)1
project
development
10,26,planned
duration,864,119,68,19,8,3,0,0,0,0,0,0
10,27,Time,127,-119,26,11,8,2,9,3,-1,0,0,0,128-128-128,0-0-0,11211128128-12
8
10,28,TIME
STEP,385,-146,50,11,8,2,0,3,-1,0,0,0,128-128-128,0-0-0,11211128-128-128
10,29, "OEM involvement in pre-development
projects",657,-90,70,28,8,2,0,3,-1,0,0,0,128-128-128,0-0-0,11211128128-128
10,30,development cost,594,66,55,11,8,3,0,0,0,0,0,0
1,31,30,11,1,0,0,0,0,0,0,-1--1--1,,1I(466,135)1
142
1,32,16,30,1,9,0,0,0,64,0,-1--1--1,,1|(474,228)|
1,33,18,30,0,0,0,0,0,64,0,-1--1--1,,1|(724,23)|
1,34,15,30,1,0,0,0,0,64,0,-1--1--1,,1|(570,27)|
1,35,17,30,1,0,0,0,0,64,0,-1--1--1,,11(698,109)|
1,36,29,30,1,0,0,0,0,64,0,-1--1--1,,1|(626,19)|
10,37,serial application cost,865,545,53,19,8,3,0,0,0,0,0,0
1,38,37,11,1,0,0,0,0,0,0,-l--1--1,,1(558,460)I
1,39,17,37,1,0,0,0,0,0,0,-l--1--1,,1(859,385)
10,40,platform application
projects,988,221,68,19,8,2,0,3,-1,0,0,0,128-128-128,0-0-0,11211128-128128
1,41,40,37,0,0,0,0,0,0,0,-1--1--1,,1|(928,376)
1,42,19,30,1,0,0,0,0,0,0,-l--l--1,,11(625,178)|
1,43,26,30,0,0,0,0,0,0,0,-l--1--1,,1|(729,92)
10,44,Time,530,242,26,11,8,2,1,3,-1,0,0,0,128-128-128,0-0-0,1121|128128-128
1,45,44,30,0,1,0,0,0,0,0,-1--1--l,,1|(559,160)|
10,46,serial production cost,212,71,53,19,8,3,0,0,0,0,0,0
1,47,46,11,1,0,0,0,0,0,0,-l--1--1,,1|(355,137)|
10,48,cost,121,4,24,11,8,2,0,3,-1,0,0,0,128-128-128,0-0-0,11211128-128128
1,49,48,46,0,0,0,0,0,0,0,-l--l--1,,11(154,29)|
1,50,13,46,1,0,0,0,0,0,0,-l--1--1,,11(245,-30)
10,51,accumulated development cost,212,480,50,30,3,3,0,0,0,0,0,0
12,52,48,210,339,10,8,0,3,0,0,-1,0,0,0
1,53,55,51,4,0,0,22,0,0,0,-l--1--1,,1|(210,428)|
1,54,55,52,100,0,0,22,0,0,0,-1--1--1,,1|(210,371)|
11,55,48,210,401,8,6,33,3,0,0,4,0,0,0
10,56,dev cost flow,261,401,43,11,40,3,0,0,-1,0,0,0
1,57,30,56,1,0,0,0,0,64,0,-1--1--1,,1|(421,388)|
10,58,accumulated
price
weighed
RFQ
successes,1045,-
34,53,32,3,3,0,0,0,0,0,0
12,59,48,1041,-152,10,8,0,3,0,0,-1,0,0,0
1,60,62,58,4,0,0,22,0,0,0,-1--1--1,,1|(1041,-88)|
1,61,62,59,100,0,0,22,0,0,0,-1--l--1,,1(1041,-133)1
11,62,48,1041,-117,8,6,33,3,0,0,4,0,0,0
10,63,"flow-succ",1081,-117,32,11,40,3,0,0,-1,0,0,0
10,64,RFQ success
rate,1195,-67,48,19,8,2,0,3,-1,0,0,0,128-128-128,0-0-0,11211128-128-128
1,65,64,63,0,0,0,0,0,0,0,-1--1--l,,1I(1135,-93)1
1,66,12,63,0,0,0,0,0,0,0,-1--1--l,,1|(1120,-149)|
10,67,price weighed serial production
projects,1047,100,52,30,3,3,0,0,0,0,0,0
1,68,70,67,4,0,0,22,0,0,0,-1--1--1,,1|(1047,47)|
1,69,70,58,100,0,0,22,0,0,0,-1--1--1,,1|(1047,5)|
11,70,1164,1047,19,8,6,33,3,0,0,4,0,0,0
10,71,"flow-prod",1088,19,33,11,40,3,0,0,-1,0,0,0
1,72,58,71,1,0,0,0,0,64,0,-1--1--1,,1|(1106,-31)|
12,73,48,1050,193,10,8,0,3,0,0,-1,0,0,0
1,74,76,73,4,0,0,22,0,0,0,-1--1--1,,1|(1050,174)|
1,75,76,67,100,0,0,22,0,0,0,-1--l--l,,1|(1050,140)|
143
11,76,48,1050,157,8,6,33,3,0,0,4,0,0,0
10,77, "flow-platform end",1114,157,56,11,40,3,0,0,-1,0,0,0
10,78,platform life
time,1189,212,43,19,8,2,0,3,-1,0,0,0,128-128-128,0-0-0,11211128-128-128
1,79,78,77,0,0,0,0,0,0,0,-1--1--l,,1 (1152,184)1
1,80,67,77,1,0,0,0,0,0,0,-1--1--1,,1 (1120,117)1
10,81,serial application
time,1275,5,58,19,8,2,0,3,-1,0,0,0,128-128-128,0-0-0,11211128-128-128
1,82,81,71,0,0,0,0,0,0,0,-l--1--1,,lI(1175,11)I
1,83,67,6,1,0,0,0,0,0,0,-l--1--1,,lI(752,-131)1
10,84,product serial production
projects,212,109,67,19,8,2,0,3,-1,0,0,0,128-128-128,0-0-0,11211128-128128
1,85,84,46,0,0,0,0,0,0,0,-1--l--l,,1I(212,90)|
10,86,profit margin,500,37,40,11,8,3,0,0,0,0,0,0
1,87,6,86,1,0,0,0,0,64,0,-l--l--1,,li(476,-1) |
1,88,11,86,1,0,0,0,0,64,0,-1--i--i,,1|(490,145)I
\\\---///
Sketch information - do not modify anything except names
V300 Do not put anything below this section - it will be ignored
*k-Euro accounting view
$192-192-192,0,Times New
Roman112|l0-0-00-0-0I0-0-255I-1--l--1-1--l--1196,96
10,1,profit in kEuro,157,267,60,11,8,3,0,0,0,0,0,0
10,2,total
profit,274,317,42,11,8,2,0,3,-1,0,0,0,128-128-128,0-0-0,11211128-128128
1,3,2,1,0,0,0,0,0,0,0,-1--l--l,,1|(221,294)l
10,4,income in kEuro,252,175,51,11,8,3,0,0,0,0,0,0
10,5,expenditure in kEuro,502,244,45,19,8,3,0,0,0,0,0,0
10,6,income,323,240,33,11,8,2,0,3,-1,0,0,0,128-128-128,0-0-0,11211128128-12
8
1,7,6,4,0,0,0,0,0,0,0,-l--l--l,,lI(292,212)|
10,8,expenditure,542,364,46,11,8,2,0,3,-1,0,0,0,128-128-128,0-00,11211128-1
28-128
1,9,8,5,0,0,0,0,0,0,0,-l--l-1,, 11(525,314)|
\\\---///
Sketch information - do not modify anything except names
V300 Do not put anything below this section - it will be ignored
*competitors emerging through own initiative
$192-192-192,0,Times New
Romanl2lIO-0-0I0-0-0I0-0-2551-1--l--1I-1--l--1196,96
10,1,probability of competitor starting development program on own
initiative,229,235,72,40,3,3,0,0,0,0,0,0
12,2,48,226,30,10,8,0,3,0,0,-1,0,0,0
1,3,5,1,4,0,0,22,0,0,0,-l--l--l,,ll(226,158)|
1,4,5,2,100,0,0,22,0,0,0,-l--l--l,,lI(226,74)|
11,5,48,226,116,8,6,33,3,0,0,4,0,0,0
10,6,competitor probability increase,296,116,62,19,40,3,0,0,-1,0,0,0
10,7,self motivated competitor development
rate,413,377,77,28,8,3,0,0,0,0,0,0
144
1,8,1,7,1,0,0,0,0,64,0,-1--1--1,,11(373,263)|
10,9,number of potential
competitors,618,419,66,19,8,2,0,3,-1,0,0,0,128-128-128,0-0-0,11211128128-12
8
1,10,9,7,0,0,0,0,0,0,0,-1--1--l,,1|(527,400)|
10,11,Time,268,438,26,11,8,2,0,3,-1,0,0,0,128-128-128,0-0 -0,1121128128-128
1,12,1,6,0,0,0,0,0,0,0,-1--1--1,,1|(264,171)|
10,13,TIME
STEP,410,459,50,11,8,2,0,3,-1,0,0,0,128-128-128,0-0-0,112 11128-128-128
1,14,13,7,0,0,0,0,0,0,0,-1--1--1,,1|(410,433)|
10,15,dummy,736,318,40,20,3,3,0,0,0,0,0,0
12,16,48,727,101,10,8,0,3,0,0,-1,0,0,0
1,17,19,15,4,0,0,22,0,0,0,-l--l--1,,1I(727,253)1
1,18,19,16,100,0,0,22,0,0,0,-1--1--1,,1I(727,153)1
11,19,48,727,203,8,6,33,3,0,0,4,0,0,0
10,20,dummyflow,772,203,37,11,40,3,0,0,-1,0,0,0
1,21,7,20,1,0,0,0,0,64,0,-l--l--1,,1|(560,154)|
10,22,expected value of self motivated competitor
emerging,471,42,69,28,8,3,0,0,0,0,0,0
1,23,22,6,0,0,0,0,0,64,0,-l--l--1,,11(378,80)|
145
Owner:
Filename:
Date:
Hostname:
perrigo
Hartick Thesis.pdf
April 16, 2003 6:32:34 p.m.
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