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After several years of standing on the sidelines and watching its competitors gobble up new vehicle sales with product offerings in the sport-utility sector, Daimler-Benz AG decided to do some gobbling of its own. It's plan for biting into this burgeoning market included an all-new design, a state-of-the-art U.S. plant, just-in-time inventory control, supplier integration and modular, in-sequence construction techniques. The end result - the Mercedes Benz M-Class All-Activity Vehicle - will hit dealer showrooms this fall.
"We are committed to developing and producing the very best sport-utility vehicle," said Andreas Renschler, president and CEO of Mercedes-Benz U.S. International. "We have a new plant, new people, a new product, and we have developed new production techniques, all with the primary emphasis on quality and safety."
This being said, the real challenge for MBUSI was how to bring such a vehicle to the market at a reasonable cost. Consider some aspects of the vehicle: gross weight in excess of two tons and a five-speed automatic transmission powered by a 2.3-liter, V-6 engine. In addition, the M-Class features new technology for traction control; four-wheel disc brakes; independent suspension; front- and side-impact air bags; front fenders designed to flare out instead of jamming into the doors in a high-speed frontal impact, so occupants can escape the vehicle without the "jaws of life" having to cut them free; and the Mercedes accordion design, engineered to make the engine collapse under the vehicle instead of back into the passenger compartment in a high-speed frontal collision.
|"But when the vehicles leave the paint plant to go to the assembly plant for the glass, radio, tires and interior, then the line-up is frozen and will not change." |
- Bob Birch, vice president, MBUSI
|When Mercedes Benz U.S. International went site-shopping three years ago for its new U.S. factory, Alabama decided it would do whatever it took to win the bid, certain that such a victory would give the state instant global visibility.|
The end result was a $253 million incentives package that included site and infrastructure improvements, tax incentives and training. The state spent almost as much as Merdedes to get the plant in Vance, Ala., up and running.
The high price of luring the plant touched off a continuing debate over the wisdom of such a large payout. But state development officials say the project has noticeably changed the world's perception of Alabama, making the investment worth every dime.
A recent study by Mac R. Holmes, Troy State University research professor of business and economics, supports that claim, according to a report in Alabama Business magazine. Holmes calculates that Alabama could receive $7.5 billion in payroll and tax benefits to state and local governments from 1,500 Mercedes jobs and another 13,500 jobs in supporting industries during the next 20 years.
Holmes modeled his report after the national study method "Inplan," which was created by the U.S. Forestry Service and further developed for use on local levels by the University of Minnesota. The Inplan method relates businesses to potential suppliers and then estimates possible earnings.
During the next five years alone, he concluded, the investment impact will exceed $500 million. More than 10,000 jobs will be created. During the next 10 years, a potential increase in jobs of 15,000 to 17,000 may well be obtainable. Potential increased retail trade because of expenditures by Mercedes-Benz and its suppliers is projected at $39 million annually.
Moreover, he said, the plant will strengthen the state's industrial base, improve opportunities for additional economic growth and enhance the state's standing as a global trading partner.
|Centralized Purchasing Reaps Dividends|
|The global operations of Daimler-Benz should reap some dividends from the logistics strategies embraced by Mercedes-Benz U.S. International in the production of the M-Class vehicle, particularly in the area of purchasing.|
"Mercedes has plants all over the world, and each plant on its own deals directly with suppliers in Germany," explained Bob Birch, vice-president of purchasing and logistics for MBUSI. For example, the same fastener supplier serves all Mercedes plants worldwide, and each plant issues its own purchase orders to this supplier, maintains its own inventory, and processes its own invoices. The same is true for other suppliers.
While this approach does keep things neat and tidy at the plant level, there is a price for local independence: administrative costs are considerable, shipping becomes very expensive because the quantities are smaller, and the individual plants do not necessarily have adequate volumes to leverage more attractive pricing.
While planning logistics operations at the Alabama plant, a solution was developed: the Mercedes-Benz Consolidation Center. Initially designed to serve the Alabama plant, the center eventually will serve Daimler-Benz's operations worldwide.
"The consolidation center is the only customer we order from in Europe," said Birch. "They go out and work with the suppliers, order the parts and receive them; we send our RANs (release authorization numbers) to them, detailing what our requirements are, when the parts or components are needed, and in what quantities."
The Mercedes plant in Brazil is the second facility to start ordering through the consolidation center, and others will follow. "That will really help pricing because we can capitalize on the economies of scale," said Birch. "We use a lot of bolts, and Brazil uses a lot of bolts, so if the consolidation center can combine our needs and issue one purchase order for the consolidation center, we can get better pricing."
According to Birch, when you spread this purchasing approach across the broad range of parts and components needed by the various factories, several things happen, including more attractive unit pricing, larger volumes being shipped inbound from suppliers to the consolidation center, and the consolidation of shipments outbound from the center to the individual plants. "That way we are more likely to fill containers and are not shipping as much air," he said. There also is a considerable reduction of paperwork.
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