Customisation can be a simple addition of decals, or a full conversion for wheelchair access, and the degree to which manufacturers want to outsource this operation varies as much as the processes themselves, writes Malcolm Wheatley.
At Daimler and BMW, it’s seen as a manufacturing issue, not a logistics one. American Honda, meanwhile, prefers not to get directly involved at all, and instead re-assigns the responsibility to the dealer network.
Renault, on the other hand, sees it as a source of competitive edge, going so far as to develop carefully-designed in-house logistics operations to handle its normal requirements–while leaving more irregular requirements to be handled in the compounds of logistics service providers.
Yet manufacturers such as Mazda North America, Toyota Motor Europe, Peugeot and Citroen, see it firmly as a logistics process in its entirety, and moreover one that can be comfortably outsourced to logistics partners. We’re talking, of course, about post-manufacture vehicle customisation and modification–a topic about which the industry appears to diverge wildly on the question of what constitutes best practice.
Scratch half a dozen different manufacturers, in short, and you’ll likely find half a dozen different approaches. Sometimes customisation is carried out by the manufacturer, sometimes by LSPs, sometimes at ports of import, or at purpose-built facilities–or even at dealers.
But what dictates where it should be done, and who should do it? Is it a manufacturer’s core competence, or can it be outsourced? And what constitutes best practice? What, in short, is the state of pre-delivery automotive customisation and modification today?
Everything but the kitchen sink
One thing is clear at the outset: customisation and modification cover a wide range of activities, and this in turn has a huge impact on the question of where the activity should be performed, and who should do it.
To begin with, there’s an activity that perhaps shouldn’t be considered as customisation at all–except for the fact that just about all of those who undertake it immediately bracket it as such: the rectification of production faults. In an ideal world, production faults would be rectified by the manufacturer’s own personnel before the vehicle has left the assembly plant compound. But the reality of the situation, says GBA’s Bosch Virdi, is that faults aren’t always found within that timescale.
In practice, he notes, “faults can be rectified at any stage within the logistics chain, and if the vehicle is within the chain away from the manufacturer’s control then invariably it is outsourced to a logistics provider; only as a last resort will the vehicle end up at the dealer for rectification of faults.”
So the capability to at least put right simple faults is one that clearly exists within the post-manufacture supply chain–prompting the option of using it for other forms of customisation and modification. And indeed, that’s what seems to be happening, with finished vehicle logistics service providers increasingly offering customisation and modification as an added-value service.
At the simpler end of the spectrum, there’s the mass modification of identical vehicles to add specific additional features–installing a GPS, for instance, or adding decals. “We do a lot of ‘special editions’ for Peugeot and Citroen,” says Gefco’s Alan Hale. “It’s usually either a question of taking a standard model and making it special, or adding features to a mid-range model in order to make it more saleable.”
And model end-of-life does indeed tend to increase the demand for such services, adds Ernst Cooiman of Koopman Car Terminal in Amsterdam, which handles vehicles for Renault-Nissan, including Nissan and Infiniti imports from Asia, as well as some Renault models imported from Korea. “We’ll add leather seats, alloy wheels, custom striping or satnav units,” he says. “The manufacturer provides the parts through the national sales force, and we then charge the manufacturer for the labour involved in fitting them.” Customisation is also often driven by a strategic decision to tailor vehicles for particular national markets postmanufacture, rather than during the manufacturing process itself.
“Manufacturers are tending to produce simpler, more standard models, and taking the decision about customising them later,” says Cooiman. “They’re also using ‘postponement’ to give themselves greater flexibility: producing a model for Europe, or for a region of Europe, and customising for national markets closer to the point of sale.” And quite apart from the inventory management benefits of customising closer to the point of sale, when it is easier to gauge real end-customer demand, there are manufacturing advantages to the strategy, too.
Mazda North America, for instance, has a policy of customising for the American market at the port of entry, a process that the company calls ‘port accessorisation’. “Most of the product for Mazda’s world markets is manufactured in Japan, but not all markets want or need the same product features,” says Mazda’s Michael Beyer. “Having port-installed accessories or options allows us to address our unique market needs without impacting the plant’s assembly process.”
Only if the global penetration rate for a particular product feature is high enough, he adds, will installation then be driven back into the assembly plant–but otherwise the emphasis is on keeping things at the factory as simple as possible. A similar argument is put forward by Emile Benaim at Toyota Motor Europe, in respect of the post-production options that the company has carried out for it by logistics partners in dedicated vehicle logistics centres. “We try to minimise the number of special requirements which might lead to too many build combinations,” he says. “Reduced complexity and production stability contribute to the quality of the Toyota Production System.”
Mazda sells the benefits
Further along the complexity spectrum comes customisation to specfic customer requirements. Mazda North America, for instance, uses its port accessorisation process as a conscious part of the vehicle ordering process, says the company’s Beyer. “When dealers order vehicles, they have the option to add accessories such as remote start, spoilers, satellite radio, and roof racks,” he says. “When we receive the vehicles into the ports, we install the assigned accessories, typically averaging around a half hour of accessory installation time per vehicle.” And still further along the complexity scale comes customisation at fleet level. Large rental or leasing fleet operators, for instance, may have vehicles customised to their own standard specification, with a particular fit of GPS or other optional extra equipment.
Gefco UK routinely handles this sort of work, points out the company’s Hale, adding that large dealer groups may use the provider to create ‘special editions’–sometimes to fulfil a large order from a commercial operator, but also on their own account in terms of boosting sales.
And then there’s a level of vehicle alteration that is more properly described as ‘modification’, rather than the fitting of more-or-less standard accessories from a catalogue. Gefco’s operations in Holland, for example, makes quite extensive modifications to vehicles, says Wil Walraven. For German frozen food delivery business Apetito, for instance, the company adds insulation and Thermo King refrigeration units, while panel vans for Dutch infrastructure maintenance firm Strukton are regularly outfitted with internal shelves, racking and other material handling options.
All of this complexity, in short, serves only to complicate the question of where such work should best be carried out. Indeed, there’s some dispute that there might be a ‘best’ solution at all.
General Motors, for instance, adopts a case-by-case approach, says Jeff Morrison.
“Each decision is based on best total enterprise cost,” he observes. “The approach considers many factors: the complexity of the customisation involved, the manufacturing capabilities required, the amount of space involved, quality assurance and the direct costs and logistics costs that will be entailed.”
And it’s the same approach taken right across GM, adds Vicki Streukens, Michigan-based director of vehicle logistics for GM North America. “Every region of the world approaches the question in the same way,” she says–although, adds Morrison, this can lead to different regions adopting different solutions, dependent on local circumstances. Nor, he adds, does GM approach the ‘who should do it’ question with a closed mind.
“In general, while we would not consider customisation to be a core competence, we are open to undertaking it ourselves, or through an outside partner,” he says. “Every case is evaluated on its merits.”
That said, it’s clear that there are some guiding principles and cost imperatives that drive the decision process. For cross-border vehicle shipments, for instance, portbased customisation offers a number of advantages over both factory-based customisation and dealer-based customisation. “For cars that are shipped overseas, ideally the work should take place at the import terminal, so the vehicles can go directly to processing, and customisation can be batched with warranty work– promoting lower dwell times, saving the manufacturer transport costs, and minimising the quality issues that can arise from multiple movements,” says Erik Nyheim of WWL, which has an extensive customisation business including a contract with Nissan to handle a very large amount of modification work in the US and Mexico. “Ideally, customisation and PDI work should happen simultaneously, and as close to the final market as possible.”
Port-based customisation also offers a number of other advantages, adds Paul Barker of PD Ports, which operates a number of ports in the UK, including the vehicle transhipment port of Teesport on the UK’s north-eastern coast, used by GM, Renault and Groupe Cat.
“Port-based customisation eliminates double-handling, has a smaller environmental footprint, and makes use of a window of time during which the vehicle would just be sitting there,” notes Barker. “If there’s some kind of value-adding process to be undertaken, doing it at the port of entry makes a lot of sense.”
Installation costs are lower, too. Port labour costs are generally lower than dealer labour costs, notes Mazda North America’s Beyer, and can–depending on region of origin–be cheaper than factory labour costs as well.
“We’re set up for it,” says Gefco’s Hale. “We have the skills and equipment, and the space to do it. And when you’re performing an installation process again and again, technicians become very skilled at it.”
That said, dealer-based customisation can make sense at low volume levels. At Toyota Motor Europe, for instance, the strategy is to keep the company’s outsourced customisation operations working efficiently.
“Apart from instances where a particular customisation is technically complex, our vehicle logistics centres are for mass customisation,” says Toyota’s Benaim. “We prefer accessories to be fitted by retailers if volumes are limited, since our retailers have qualified technicians to fit accessories. The only reason to use our vehicle logistics centres is to take advantage of economies of scale.”
Consequently, even where overseas shipment isn’t entailed, the perceived advantages of some kind of centralised customisation operation tend to win out. “If vehicles aren’t being exported overseas, light repairs and customisation often take place on site at the factory–albeit usually by third-party specialists like us–or near rail and truck heads, and are then transported to distribution centres, storage, or dealerships,” says WWL’s Nyheim.
There’s also a more strategic question to consider. Might customisation be regarded as a manufacturer’s core competence–either genuinely so, in terms of technical and manufacturing efficiencies, or in brand management terms?
It’s certainly reasonable to suspect that in the case of premium brands, a manufacturer might want to avoid any perception that employees in port vehicle compounds were just as capable of delivering high quality customisation work as its own in-house personnel.
And sure enough, at BMW for instance, customisation is seen as something to be outsourced as little as possible, to maintain total control over the manufacturing of its vehicles. Daimlers adopt a similar approach, with the processing centres that carry out such work being not only companyowned and operated, but also seen and managed as part of the manufacturing operation, not the logistics operation. (Interestingly, the company’s processing centre in Baltimore actually carries out customisation work for BMW.) But probably the most extreme form of the ‘customisation as a core competence’ argument comes from Renault, where an entire division–complete with its own manufacturing facilities–has leveraged customisation into a genuine, and apparently very profitable, source of competitive advantage. Renault Tech, says its mission statement, ‘designs, produces, and markets transformations of vehicles and provides associated services to meet the needs of business and the private customers, while respecting the quality standards of the Renault group.’
Simpler work is undertaken in Renault Tech satellite plants attached to Renault assembly plants in locations such as Mauberge, Douai, and Flins in France; Palencia and Barcelona in Spain; and Novo Mesto in Slovenia. Here, vehicles leave the factory assembly line, and are processed during a two-day cycle time before being re-integrated with the finished vehicle logistics flow.
The kind of work involved varies widely, says Renault Tech’s Raj Mistry: swivel seats, mp3 players, decals and LPG conversion in the case of cars, for example, and the installation of kits to convert van and light truck bodies into crew vans, tippers or dropside units as appropriate. The satellite plants also handle fleet work, adds Mistry, tailoring vehicles to the needs of customers such as the French and German post offices and utility company EDF, as well as installing dual controls for vehicles to be used by driving schools.
“The extent of the required modification might not be great, but the volumes of vehicles involved can be high,” he notes. Typical modifications carried out include customer-specific internal racking, specific lighting configurations, nonstandard mirrors, and roof-mounted amber flashing lights. Such modifications can easily be accommodated in a two-day cycle time. But one particular modification is much more extreme, and takes place over a two-week cycle time at a dedicated manufacturing plant attached to Renault Tech’s headquarters in Heudebouville, France, close to the city of Rouen.
Specifically, the modification in question is the adaptation of Renault’s Kangoo crossover model and Trafic light vans into vehicles that are accessible by wheelchair users–the so-called ‘wheelchair-accessible vehicle’ conversion. “We’ve the only European manufacturer to get directly involved with this business,” says Mistry. “It’s usually undertaken by specialist third-party converters.” Dealers order wheelchair-accessible vehicles normally, through the usual channels, he explains, but must add a code to indicate that the vehicle is a Renault Tech product.
Making models accessible
Vehicles are produced as normal at their usual plant of production, but with items that won’t be required postconversion duly omitted. Then, explains Mistry, the vehicle is transported by Groupe Cat to Heudebouville, where the conversion takes place, before being once again transported by Cat to the appropriate point for re-integration into the Renault vehicle supply chain–the port of Le Havre, for instance, in the case of vehicles headed for export.
In short, Renault Tech represents a complex process made simple through appropriate investment and strategic intent, with the creation of a customisation capability that integrates with normal logistics processes yet retains a high degree of manufacturer control.
But is the Renault approach a road map for other OEMs? Most likely, the decision on whether or not to outsource will remain highly varied depending on markets and strategies.