According to Bloomberg, the market for electric vehicles is growing at a rate of 33.6% (CAGR) with sales expected to exceed $3 trillion by 2027. To keep up with this rising demand, manufacturers of traditional internal combustion engine (ICE) vehicles will have to transition to electric vehicles (EVs) in what may be the biggest, most profound manufacturing transformation since the Industrial Revolution.
It will not happen overnight, of course. Traditional ICE vehicles will continue to be in demand for many years, although EV production will increase sharply during the next several years. This transition period means that global OEMs will have to manage a larger product portfolio to supply components for ICE vehicles along with battery electric, hybrid electric, and plug-in hybrid vehicles. This is a substantial challenge for vehicle OEMs, made even more challenging by the fact that electric vehicles are evolving continuously as EV manufacturers embrace new technology and strive to meet consumer demands.
The winners will be OEMs that can adjust quickly to customer demand and shorten lead times. OEMs need to reimagine their design and manufacturing processes to be able to handle a more complex product mix seamlessly and cost-effectively, while maintaining or, ideally, improving safety, quality, and overall productivity. OEMs should go back to the fundamentals of “lean manufacturing” that became common knowledge in the 1980s.
The ideas behind lean manufacturing go all the way back to the 1930s and Toyota’s manufacturing strategy. In his book The Toyota Way, Jeffrey Liker says, “When lead-time is short, focus on keeping the production line flexible, not only to achieve customer responsiveness but also higher quality, better productivity and utilization of equipment and space.” This statement holds true for OEMs serving the EV market. They need to create a flexible ecosystem of people and technology that enables sustained production of existing products (ICEs) while allowing new products (EVs) and features (for both ICEs as well as EVs) to be rolled out quickly.
Most OEMs today use a modular platform for the production of multiple combinations and permutations of the chassis, powertrain, and suspension. Modularity dramatically improves flexibility on the shop floor while reducing design and engineering costs. As EV design improves and evolves, it will generate a cascade effect across multiple business functions and manufacturing processes. For example, a traditional part may require welding, which may not be necessary for a part created by a 3D printer. 3D printers may ultimately replace welding jigs on the shop floor. Whenever new equipment is introduced on the shop floor, the entire plant layout may be affected.
As Figure 1 illustrates, design, development, and production of EVs will require changes to individual KPIs for each department. OEMs must enable seamless coordination among those KPIs with the help of digital technologies as they pursue a common objective: to meet customer demands with agility and efficiency.
Figure 1: Reimagining Electric Vehicle Manufacturing
Here’s how the major departments of OEMs need to transform themselves to enhance their ability to make the transition to the EV-dominated world.
Improving production flow and delivering continuous improvements continue to be critical challenges for production engineering teams. An essential step is to redesign the shop floor for maximum flexibility, to connect various stations and accommodate changes in customer demand. The goal should be to maximize throughput by improving the flow of personnel, material, and equipment.
By embracing digital twin and augmented and virtual reality technologies, production engineers can perform unconstrained simulations to continuously improve existing layouts. Some OEMs are also exploring drones instead of traditional conveyors and automatic guided vehicles (AGVs) to connect stations and make the floor flexible in three dimensions.
An increasingly complex product mix and ever-changing customer demands will require frequent modifications to production plans to allow for production leveling (sometimes called “smoothing” or heijunka). Planning in this environment requires an agile, dynamically optimized approach that uses artificial intelligence/machine learning algorithms that continuously learn and simulate scenarios to provide useful insights to production planners.
A shop floor must be agile, ready to implement quick line balancing and to reconfigure resources to meet continuously changing production plans. This is only possible on a shop floor that has truly embraced digital transformation. Manufacturing processes, operating standards, quality and safety checks should be digitized so that deviations can be reported in real-time using sensor data and analytics, then turned into near-real-time actions using a combination of artificial intelligence and human skills. People on the shop floor can use guidance from AI to make digitized systems more reactive and more predictive, which means they’ll be better able to respond quickly to changing requirements and demands.
By using a digital twin of the shop floor – machines, humans and processes – production teams can improve their capability to monitor and control almost all operations. Video analytics will help analyze the shop floor in real time and point out inefficiencies or hazardous conditions. AR/VR will assist humans in training and in addressing quality and maintenance issues. 3D printing will make the shop floor more flexible and leaner, but a robust execution strategy will be required to integrate it with conventional manufacturing.
As any manufacturer will appreciate, quality is a holistic process. OEMs must have the ability to perform digital root cause analysis at each stage of the manufacturing process and be able to turn discoveries into improvements for future product designs. Moreover, the quality process should shift from reactive to predictive. For example, using data analytics during the final inspection of EV components and assemblies can not only predict potential defects, but also generate automatic tweaks for machines on the shop floor.
As ICE manufacturing progressively gives way to EV manufacturing, the classic automotive manufacturing supply chain structure and supplier tiers will change. The industry (in fact, the larger economy) has already experienced the risks posed by supply-chain management: the semiconductor shortages have made it clear that good sourcing strategies and risk management are vital. A prime example of an EV supply chain issue is ensuring availability of key components like lithium. Tesla, for example, has secured lithium mining rights in Nevada and even plans to purchase mines outright. Competitors in the EV arena should focus on manufacturing batteries as closely as possible to production lines (or at regional gigafactories – another Tesla tactic).
A digital, analytical approach can offer real-time, end-to-end supply chain visibility with alerts and impact analysis to help mitigate the risks of sourcing materials from alternative suppliers. For many OEMs and Tier N suppliers, a block chain-based smart contracts system can provide speed and efficiency by providing ability to immediately (and automatically) switch suppliers and execute new contracts in response to changing conditions.
The shift from the manufacturing of internal combustion engine-based vehicles to electric vehicles won’t be easy, entailing multiple challenges like those described here. It will create major disruptions in the old ways of working (even ones that were highly effective). It demands an enterprise-wide kind of collaboration driven by digital technologies; all major business functions will have to take a fresh look at how they operate and reimagine them using digital tools.
A good place to start is to build a foundation for a holistic digital transformation for the ecosystem consisting of OEMs and their suppliers. Individual departments can start portfolios of digital projects that leverage today’s technologies, then progressing to a system and a culture of continuous digital innovations that accelerate their ability to respond to a changing business environment. With this model in place, OEMs can address the challenges of shifting to electric vehicle manufacturing and improve their ability to handle future disruptions.
Design to Ship Domain Lead in Wipro’s Global Automotive Practice
Ashish has more than 21 years of global business experience and has worked closely with clients on multiple digital transformation projects. His substantial experience in Industrial IoT, cloud, blockchain, analytics, and AI/ML helps customers realize business outcomes. Ashish also has extensive experience in large ERP Implementations and IT consulting projects. Before joining Wipro, he worked in the manufacturing and supply-chain management domains at Maruti Udyog Ltd. (Suzuki Motors Corporation). Ashish has an undergraduate degree in mechanical engineering as well as an MBA.