Course Code: Course Title: Global Management Solutions

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Academic Task No.: 2 Academic Task Title: Analysis of the production system of
Mercedes-Benz

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Introduction to the company

Mercedes-Benz is a German automobile manufacturer, a multinational division of the German

manufacturer Daimler AG. The brand is used for luxury automobiles, buses, coaches, and trucks.
The headquarters of Mercedes-Benz is in Stuttgart, Baden-Württemberg, Germany. The name
‘Mercedes-Benz’ first appeared in 1926 under Daimler-Benz but the origin was from Daimler-
Motoren-Gesellschaft's 1901 Mercedes and from Karl Benz's 1886 Benz Patent Motorwagen
which is widely regarded as the first automobile. Mercedes-Benz's slogan is "The best or
nothing". Mercedes-Benz is a part of the "German Big 3" luxury automakers along
with Audi and BMW. These three are the best-selling luxury automakers in the world.

History

Mercedes-Benz traces its origins to Karl Benz's creation of the first petrol-powered car, the Benz
Patent Motorwagen financed by Bertha Benz patented in January 1886 and Gottlieb Daimler and
engineer Wilhelm Maybach's conversion of a stagecoach by the addition of a petrol engine later
that year. The Mercedes automobile was first marketed in 1901 by Daimler-Motoren-
Gesellschaft. The first Mercedes-Benz brand name vehicles were produced in 1926 following the
merger of Karl Benz's and Gottlieb Daimler's companies into the Daimler-Benz company.

Throughout the 1930s, Mercedes-Benz produced the 770 model, a car that was popular during
Germany's Nazi period. Adolf Hitler was known to have driven these cars during his time in
power with bulletproof windshields. Most of the surviving models have been sold at auctions to
private buyers. One of them is currently on display at the War Museum in Ottawa, Ontario.
Mercedes-Benz has introduced many technological and safety innovations that later became
common in other vehicles. Mercedes-Benz is one of the best known and established automotive
brands in the world and is also one of the world's oldest automotive brand still in existence today
in 2014 having produced the first petrol-powered car.
Company-specific standardization: Mercedes Production system (MPS)

The Mercedes-Benz Production System (MPS) is an example of a particular company-specific

solution within the development and introduction of standard production systems currently seen
in the automotive industry. The plant-wide production system was introduced after the merger
between Daimler-Benz and Chrysler in 1988. This decision of Mercedes-Benz followed a
number of competitors which either had or were in the process of introducing the company-
specific production systems. The automotive industry got aware about the efficiency of Japanese
manufacturing techniques after the oil crisis in the 1970s. With the formalization of the Toyota
Production System in the early 1980s, it gained wide-spread recognition as a company-specific
production system. Although the discussion on the lean production in the early 1990s had
pointed out the need to improve the production efficiency through the introduction of production
systems but the history shows that the wave of introducing company-specific production systems
was set in motion only during the second half of 1990s. The MPS which was created in 1999 and
implemented in 2000 was one specific solution within this trend. Basically the system was
introduced to tackle the various quality problems and to enhance the quality of the products. This
approach of having a company-specific production system possesses a large resemblance to the
lean Toyota Production System that has inspired automotive plants worldwide in the past decade.
Both the approaches require just-in-time inventory. Both reduce job descriptions to simplified,
standardized routines. Both strive for stable production flows in the belief that stability leads to
product quality. Both organize their plants into work teams that strive for skill development.
Both believes in and embraces the mantra of continuous improvement.

The Mercedes-Benz Production system is a five step program which focusses on five areas:

1. Work structures and group work (Human infrastructure)

2. Standardization
3. Stable quality processes
4. Just-in-time inventory
5. Continuous improvement

It is a production system which is a tool kit of best practices with 5 subsystems and 15
production principles.
Mercedes-Benz Production System

Source: Daimler Chrysler (2005)

The five subsystems are the five areas mentioned earlier and the principles are the components of
the five subsystems followed by Mercedes-Benz. The five subsystems and their principles are
supported by 92 detailed MPS methods and tools. The principles of subsystems are as follows:

Work structures and Group work

 Leadership:
The first principle is leadership. In this, the company has formed groups and appointed
leaders for each group who will be responsible for the activities of the group.
 Clear tasks and roles:
The roles and tasks given to the workers are clear and understandable. The workers are
communicated in such a way that they are able to identify what needs to be done to
complete the tasks.
 Involving and developing personnel:
The employees are involved in the activities of the organization and proper training is
given to the employees for developing their skills and to motivate them.
  Group work structures:
The group work structures are not complex and the workers know about how to work in
groups and whom to report first and whom to report second.
 Industrial safety and environmental awareness:
The workplace safety has been ensured so that no worker should get harmed and they are
given proper information about how to keep environment clean and safe for work.

Standardization

 Standardized methods and processes:

The methods and processes used to develop the automobiles are standardized throughout
the plants located at different locations and areas. Same techniques are used to build the
vehicles throughout the all facilities.
 Visual management:
In this, clear instructions exists and are displayed for each of the techniques specified in a
production system. This is further explained through the following figure.

Source: Daimler AG (2005)

Quality and robust processes/products

 Rapid identification of problems and elimination of faults:

Mercedes-Benz follows a system in which the problems are identified rapidly and
through proper measures, they eliminate the problem. They also make sure that in future,
the problem should not occur again by eliminating the faults.
 Stable processes/products and preventive quality management:
The processes used in MPS are stable and do not change frequently. Also, they have a
system of preventive quality management which means being proactive to the quality
problems and not to be reactive which means acting only after the problem happens.
 Customer orientation (internally and externally):
The production system and its activities always keeps in mind the needs and preferences
of the customers and works in accordance to make what is desired by the customers. The
same thing is followed internally and externally in the outlets.

Just in Time inventory

Just in time (JIT) is a production strategy that strives to improve a company’s return on
investment by reducing in-process inventory and associated carrying costs. Just in time is a type
of operations management approach which was originated in Japan in the 1950s and Mercedes-
Benz has adopted it as a part of their production system.

 Production Smoothing:
The first principle of JIT is production smoothing. It means the production should not be
having any breakdowns because of inventory shortage. JIT in MPS ensures that the
production is going on continuously and the materials required are placed just before they
are needed for smoothening the processes.
 Pull Production:
Mercedes-Benz uses pull production technique in which it produces the vehicles only
when there is demand of the same by the customer. In this, the dealers places orders to
the company and then the company starts producing the vehicles and deliver them to the
 dealers thereby using pull production and not push production. It also reduces extra
inventory levels thereby reducing costs.
 Flow production:
Mercedes-Benz uses flow production which involves a continuous movement of items
through the production process. This means that when one task is finished, then the next
task starts immediately. Therefore, the time taken on each task is same.
 Takt production:
Mercedes-Benz uses Takt production. Firstly, the Takt time which is derived from the
German word ‘Taktzeit’ is the average unit production time needed to meet customer
demand. In Mercedes-Benz, if the customer wants to buy 10 units per week, the average
time to build a unit is 4 hours (or less) as the units are built during a 40 hour work week.
The production cycle time in MPS is less than Takt time. The cycle time to complete
work on each station is often less than the takt time in order to ensure that the customer is
never short of product. Although, the company tries to match cycle time to takt time to
avoid building inventories and over-sizing equipment but the reality is that demand is
dynamic and never precisely known and also process disruptions such as unplanned
downtime can occur.
 Conclusion

In the end, we can say that the production system used by Mercedes-Benz Cars (MBC) has a
long tradition and has become one of the driving factors behind the success of the premium
Mercedes- Benz brand with a pronounced focus on technology, innovation, quality, safety and
sustainability. In 2000, this system was made a closed system for the first time – the Mercedes-
Benz Production System (MPS) by leveraging different developments in the company. They
adopted the philosophy and practices of the Japanese manufacturer ‘Toyota’ by forming a
company-specific production system resembling the Toyota Production System (TPS). They
embraced the TPS according to their work culture and transformed the company into a different
and an improved organization. The techniques like JIT helped Mercedes-Benz to be a lean and
profitable producer of high-end automobiles. The adoption of the system contributed in its
success of becoming one of the top three German automakers in luxury segment.
References

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Anon., 2005. Mercedes-Benz Production System. In: Global Production: A Handbook for Strategy and
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Chappel, L., 2001. Mercedes' factories embrace a new order. [Online]

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Follmann, J., Laack, S., Schütt, H. & Uhl, A., 2005. Lean Transformation at Mercedes-Benz, s.l.: s.n.

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