As British luxury car brand Jaguar sought to enter the lower range of the premium car market in the late '90s, its parent company, Ford, considered several locations around the world for its first volume model, the so-called "baby" X-400 range. As the Henry Ford Chaired Professor of Manufacturing Luk Van Wassenhove details in this award-winning case, Ford's choice of the Halewood plant in north western England may have struck many as a risky decision. Known as the "home" of the very popular Ford Escort, Halewood had endured a decades-long reputation for poor quality, productivity and management /labour relations strained even by the standards of the British car industry.
The author describes the rationale behind Ford's decision, involving the benefits sought from Halewood's extensive experience in high-volume manufacturing. The first and foremost challenge once eventual X-400 production was approved in 1998 was reversing the poor discipline and demoralisation among the workforce at large. But an even more pressing problem for longer-term planning was the plant's obsolete supply chain processes. High inventories, poor build plan stability, and geographically too-wide supplier distribution had often been a problem for Halewood's soon to be discontinued Escort production.
Van Wassenhove reveals the opportunity taken by Ford to use the wholesale restructuring at Halewood as a test case for reassessing its supply chain architecture as a whole. A new concept, Nirvana, was initiated; wherein only a single person employed directly by Jaguar managed the entire supply chain. To make this possible, processes were modularised, defined and outlined precisely, then outsourced to experienced third-part service providers whenever necessary.
The very high level of modularity to be introduced in the X-400's design would force Jaguar and its suppliers to identify programme requirements earlier and more precisely than in similar situations, hopefully resulting in fewer late changes and higher overall quality in the finished vehicles. Moreover, as the author explains, Halewood workers were to play a key role in preparing the X-400 for production.
The case illustrates the dynamics of the lean supply chain model increasingly favoured by some MNC manufacturers with highly complex logistics considerations. The Intelligent Collection System was to be the key feature of the external logistics system that Jaguar created for its Halewood operations. This would be based on collecting "exact requirements" on a shift basis from British-based suppliers, and daily from those based elsewhere in Europe.
Internal logistics at Halewood were another area in which the Nirvana concept became central to Ford's wider supply chain rethinking. The head-count for workers in the internal logistics area, around 95 in the Escort-making days, was to be reduced to around five. Under the new process, no Jaguar employee would physically handle any manufactured part until it was fitted onto a car chassis, or otherwise used in the assembly line.
New quality assurances and a radical reversal of priorities to make Halewood far more customer- focussed would become the first prong of the operations manager's strategy for radically overhauling Halewood - a major departure from previous considerations of cost and productivity being top priorities. The second prong, "Centres of Excellence" were to be established to promote and institutionalise the newly introduced lean manufacturing concepts throughout the plant. Finally, Halewood management sought to change the factory's culture form one of general suspicion and pessimism to one of positivity, trust and mutual respect.
The case concludes with production about to start in February 2001. Some of the new processes to be used in the X-400 had been tested on the last of the Escorts built at Halewood. Quality and productivity had improved dramatically from previous years. But how would Ford-Jaguar's bold new logistics and other experiments translate in its first foray into mass-volume luxury car-making?
(NOTE: Also see companion case by the same author, "Jaguar Comes to Halewood: the Story of a Turnaround" INSEAD case 02/2002-4938)