Industry 4.0 is the foundation for managing increasing complexity with new manufacturing models

On the lengthy list of challenges that automakers must deal with in 2021 and beyond, one of the most important is how to profitably build the increasingly complex and customized vehicles that their customers want.

For many automakers, one solution to that issue lies in Industry 4.0 manufacturing practices, and in particular, embracing a modular, nonlinear approach. Henning Löser, who heads production-related innovation programs at Audi, recently explained the rationale behind the company’s motivation to invest in modular production and other Industry 4.0 practices in a Q&A posted on the company’s website: “Because this is the only way we can reduce costs and at the same time become more flexible and improve quality. We need a smart factory that reacts quickly to fluctuations in demand. This also applies when switching to new products — during ongoing production. This can only work if you have intelligent solutions and a smart production.”

With modular assembly, as part of a smart factory, vehicles and components are built at self-contained workstations (cells) designed for efficiency and flexibility. There is digital connectivity among the assets of a cell, as well as between cells, and also from each cell to the broader enterprise.

This is a major shift for auto manufacturers, as for nearly a century, tact-based lines have dominated the automotive assembly process, producing a range of vehicle types on one line in a pre-defined sequence, following the principle of the pearl chain. However, demand for increasingly complex vehicles exposed shortcomings with this approach. In particular, the time required at each processing step depends on the complexity of the vehicle specification, so building more complex vehicles as part of a variant mix would increase the average cycle time, ultimately resulting in unproductive time at certain steps involving simpler car configurations, leading in turn to less than optimal vehicle production output.

Rather than following a standardized linear direction of movement within the factory, vehicle manufacturers are moving to modular production layouts, where each vehicle passes only through workstations that are relevant to its specifications, and each is assembled according to an optimized process sequence. Automated guided vehicles transport the coachwork and components needed for production to the assembly cells, where workers, supported by and working in tandem with connected, “intelligent” machines, execute the specific activities outside of a preset tact time.

Although modular production concepts have existed for some time, only recently have intelligent technologies and Industry 4.0 capabilities developed to the point where they can cost-effectively provide the production flexibility that automakers now require. For example, automated guided vehicles (AGVs) have been part of the production floor for decades, but their need to operate over Wi-Fi networks has limited their use. The advent of 5G cellular networks within manufacturing operations has provided the reliability, bandwidth and security needed to safely extend the use of AGVs. The new breed of AGV is much more autonomous, able to react to situations (and workers) on their own using artificial intelligence and sensor data to move more freely throughout large factories. These advances, along with the rise of edge computing, and advanced analytics, are helping to reduce latency on the shop floor, so assets and workers can make decisions in real time, based on current situations.

However, none of this would be possible without the ability to collect, store and analyze huge amounts of data. Using data lakes, Big Data platforms and advanced analytics to make connections between different parts of the value chain, both internal and external, will become the norm for auto manufacturers. Removing silos will help predict new trends in customer behavior, while also helping to identify potential quality issues. This in turn will enable more granular forecasting and better planning through early signal detection.

Developments like these are especially important in helping automakers meet the expectations of mainstream and luxury vehicle buyers for a high level of customizability with their vehicles, without huge price increases. However, more options (related to safety, emissions/drivetrain, comfort and entertainment) also mean more manufacturing complexity, which translates directly into cost. Manufacturing complexity is compounded by the industry’s now-accelerating shift to battery-electric vehicles and other alternatives to the fossil fuel-powered internal combustion engine (ICE). Recently two of the industry’s biggest names, General Motors and Volvo, announced they intend to produce only electric cars by 2030. So the onus is on manufacturers to find ways to efficiently produce these new breeds of vehicle alongside traditional ICE models. What’s more, shorter innovation cycles are further increasing vehicle variety, leading to even more manufacturing complexity and cost.

Mercedes-Benz’s Factory 56 in Sindelfinger, Germany, provides a prime example of how vehicle manufacturers are using a modular manufacturing approach to manage more vehicle variants and product offerings. Launched in September 2020, Factory 56 produces a range of Mercedes S-Class vehicles, from compact cars to SUVs, with conventional as well as plug-in hybrid and battery-electric drivetrains. “Production can be adjusted quickly and flexibly to meet market demand,” the company said in unveiling the plant, hailing a process called “fullflex marriage” whereby the vehicle body is joined to the drive system at several modular stations. “For new product requirements, the individual modules can be replaced within one weekend” to avoid lengthy production interruptions.

For automakers to profitably deliver greater product variety and complexity, the consulting firm McKinsey suggests in a recent report that they will need to “tighten annual cost improvement beyond 3 to 4 percent.” Modular production appears capable of delivering improvements of that magnitude. By some estimates, it could increase productivity by 20% compared to traditional assembly-line production. Efficiency gains this substantial likely will encourage auto manufacturers around the globe to invest in new greenfield factories, or modify existing factories where possible, with LEGO-like modular stations that are quick to ramp up and down, with the flexibility to change tooling and workflows on the fly. Then they can offset the higher manufacturing and digitalization costs that typically accompany complexity and customization.

That’s not to say that traditional linear approaches to auto manufacturing are obsolete, however. For factories or production lines that are still producing a more homogenous product mix, such as for fleets and autonomous cars in the future, pearl chain lines still will have a role. But we expect production adaptability to become a key strategic success factor for automakers in the coming years. With intelligent, Industry 4.0 factories equipped with modular production capabilities, they’ll have the flexibility to use both linear and modular assembly approaches to produce a wide variety of products and configurations, and to adapt volumes to short-term signals, more efficiently than traditional specialized factories.

So as much as automakers may yearn for the linear simplicity of days gone by, many of them are realizing that here in the era of customization and extreme volatility, the road to a strong bottom line isn’t always only linear. We see a world in which both modular and flow production co-exist for a long time to come.

Author Bios

Julia Quintel and Eva Jung are Senior Solution Managers in the Automotive Business Unit at SAP, with responsibility for Industry 4.0 and Manufacturing.