Case Study

Enterprise resource planning

The concept of agility is creating something of a stir among manufacturers. New techniques and
technologies, it is said, will enable companies to steal a march on their less nimble rivals.

Agile manufacturing underpins the success of the Smart car, DaimlerChrysler’s city car brand.
Thanks to its agile processes, Smart has been able to respond rapidly to customer demands. There
are now five Smart car variants, including a not-so-small roadster, introduced last month.

The Smart car is made in a purpose-built plant in Hambach, France, which is also home to the
suppliers of its main parts. The production system is unusual: suppliers are given greater
responsibility (Smart prefers to call them ‘partners’); processes are shorter and thus more reliable;
and buffer stocks are kept to a minimum, in accordance with the ‘just-in-time’ model.

A key feature of the plant is its ‘flexibility funnel’: the system holds three weeks of orders and a
sequencing tool allows the plant to optimize production of the variants according to the orders in
the system. Surprisingly, there is no fancy software powering the plant – just an off-the-shelf
enterprise resource planning (ERP) product from Baan, the Dutch software vendor. For simplicity,
Smart chose not to develop customized software but to adopt a standard package, customizing it
where necessary. For the same reason, it used established electronic data interchange (EDI)
networks to communicate with its suppliers.

An important feature of the IT system is its flexibility to handle changes in existing processes and
the development of new ones within a very short period of time. Smart has already put this
flexibility into practice with its new Roadster model. Instead of the pure ‘just-in-time’ model, this
car is made using a hybrid process: some stock is held in warehouses run by an external partner.

Agile and lean are not synonymous terms. Lean manufacturing dates back to an era of mass
production and unchanging processes. Agile manufacturing accepts that there are things that
manufacturers cannot control. So, they should adopt technologies and processes that enable them
to adapt to change. In an agile world, customers increasingly call the tune. They require more
specific products and shorter lead times. Design, manufacturing and procurement have a greater
tendency to be customer-driven.

Questions
1. What advantages did the manufacturers of the Smart car gain from using ERP software?

What difficulties might other organizations face in trying to emulate the experience of Daimler
Chrysler?