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1.1 Land Rover (UK)
Abstract
This case study examines Land Rover's implementation of an RFID-based Vehicle Tracking and Management System (VTMS) for newly assembled vehicles at Land Rover's facility in Solihull, England. The project is Land Rover's second application of RFID at the Solihull production facility. In the first project in 2002, Land Rover focused on material replenishment, using RFID products and services from WhereNet, a Zebra Technologies company to manage inventory on the manufacturing lines. In 2006, the production managers approached Land Rover's IT organization asking for a way to better manage work-in-progress inventory and track vehicles as they come off the assembly line and are prepared for delivery to the dealers. The implementation went live in January 2007, and Land Rover estimates it received a return on its investment in less than a year.
Case study fact sheet
Full name of the company: Until recently, Land Rover's worldwide operations were wholly owned by Ford Motor Company. In March 2008, Ford announced an agreement to sell its Jaguar Land Rover operations to Tata Motors. Location (HQ / main branches): Gaydon, England is the corporate headquarters for
Land Rover and the home of its Design and Engineering Centre. Land Rover's manufacturing is in Solihull and Halewood England
Main business activity: Production of luxury, four-wheel drive vehicles Year of foundation: 1948
Number of employees: Worldwide 16,000, with most employees located in the UK
Turnover in last financial year: $7.7B USD in sales (estimate). Ford Motor Company did not disclose financials for the Land Rover brand
Primary customers: Automobile buyers in 160 countries around world Most significant geographic market: Primarily in the UK, US, and Europe, with strong
growth in Russia and China
1.1.1 Background and objectives
Land Rover has produced four-wheel drive vehicles since 1949, through many changes in the automotive industry and in its own product line, progressing from utilitarian to premium vehicles. Today, the company's most widely recognized vehicle is the luxury utility vehicle introduced in 1970 – the high-end Range Rover with a starting price of more than 60,000 euros. Land Rover vehicles introduced in the last 30 years were designed to address changing market conditions, including increasing global competition, market expansion, and changes in consumer demand. For example, the Discovery was introduced to compete against more car-like utility vehicles from Japan, and the Freelander and the Range Rover Sport are smaller and less expensive sports utility vehicles intended to appeal to a broader market and address consumers' interest in utility vehicles for everyday use.
Across the automotive market, most well-established automotive manufacturers need to improve capacity utilization of older production facilities. They are also undertaking efforts to improve communication of bills of materials (BOM) and attain higher levels of flexible manufacturing. Many companies are looking to new emerging markets, often China, India, Russia, and Eastern Europe for growth; although many of those markets will be served by low-end more basic vehicles than those that Land Rover delivers. In turn, the increasing strength of companies that can deliver to the lower end of the market will also make them a greater source of competition on a global basis. Most importantly, the global automotive market is facing weak sales, high labour costs, and declining net profits.
Going forward, Land Rover's primary challenges in this competitive market include maintaining its premium quality against rising production costs, while responding to consumer demand and expansion into Russia and China. Land Rover's transition from Ford Motor Company to Tata Motors will also put a spotlight on Land Rover's operations. To address these challenges, Land Rover adopted RFID to improve its visibility into its manufacturing processes and inventory, and as a result, improve its overall efficiencies.
1.1.2 e-Business activities
In 2006, Land Rover's production managers approached its IT organization asking for a way to better manage work-in-progress inventory and track vehicles as they come off the assembly line and are prepared for delivery to the dealers. Under the direction of Dave O'Reilly, IT manager of manufacturing and purchasing for Jaguar and Land Rover, Land Rover's goal was to improve the efficiency of delivering vehicles to meet dealer orders and in the process, build on the success of its first RFID project, applying their knowledge of how RFID worked as well as re-using some of the RFID hardware. Basic requirements included improved visibility of all finished vehicles at the facility including in the yard, better coordination of post assembly verification and test processes, and managing quality repair, containment, and shipping zones.
The company operates close to capacity, but since Land Rover's operations are not capacity constrained, the initial focus was on tracking vehicles after they are out of captive sequence. Vehicles physically move around the facility for testing, configuration setting, rework, rectification, and so on, making it difficult and time-intensive to manually
track exactly where each vehicle is and what its next process should be. With RFID, the company expected to minimize the vehicles’ dwell time between end of line and the delivery chain because of the greater visibility RFID would provide.
Project justification was completed through Land Rover's standard process for appropriation requests – what Land Rover calls "Time Adjusted Rate of Return" or TARR. In other words, any appropriation request must indicate when the company will receive a payback on its investment. If the investment will be paid back in less than a year, it's considered 100% TARR, and understandably, projects with 100% TARR are much more likely to be funded. Land Rover's IT organization was able to justify its projections of 100% TARR based on the value derived from reducing work-in-process and overtime. Although Land Rover did not indicate the total project cost, the company did break the project costs as follows: 56% for the cost of the software including training; 12% on hardware; 20% for installation costs mainly for the antennae placement; and 12% for local labour costs.
Implementation: installation details and technology
Because Land Rover had already implemented an active RFID real-time locating system (RTLS) from WhereNet, a Zebra Technologies company, for the parts replenishment system in 2002, Land Rover already had an existing wireless infrastructure to build upon, as well as an understanding of how RFID worked and its challenges. The intent with the newer project was to re-use some of the existing infrastructure but expand the system as necessary for vehicle tracking. The entire project took place over a year, starting in early 2006 and going live in early 2007. The ramp-up phase included a 3 month planning cycle, applying for project funding, installation, testing, training, a 2 month pilot, and then final implementation details. A significant amount of time was devoted to installation and configuration – almost 7 months.
The implementation relies on reusable active RFID tags (transmitters) directly placed in vehicles as they leave the captive sequence of the assembly line. Each tag, in a bright yellow tag holder, is placed on the rear grab handle within the cabin so personnel may easily identify the tag. The tag's identification number is connected to the VIN in Land Rover's database. The active tag is programmed to transmit a signal every four minutes to identify the exact location of a vehicle, until the tags are removed once the vehicle is released for shipment. At about 50 key points, WherePort exciters send messages to the tags to send out a signal to one of 130 wireless WhereLAN location sensors, which record an exact time a tag is passing a specific location, in addition to the read every four minutes. The information is then sent back to the WhereNet visibility server software. The exciters do require a power source, but are not connected to a wired network. The location sensors were installed in and around the facility, on ceilings and mostly outdoors in the shipping yard, on light poles, or corners of the outdoor buildings, to complement the sensors previously installed for parts replenishment. This part of the project was lengthy, because of the civil engineering aspect - locating sensors on fairly large poles, which were sunk into the ground to make them stable, or attaching sensors to the outside of Land Rover's buildings and positioned to operate properly.
The location information received from the tag is also used to analyze the time vehicles take to pass through certain key processes, and this can be compared to the expected time and to identify areas that can be improved. The VTMS includes workflow features where you can add rules based on the vehicle model, destination, or task. The data can also be used to issue dwell time alerts or create alternative workflows if the system detects a bottleneck at one of the stages.
The shipping yard staff is equipped with Intermec's mobile handheld RFID readers with displays. The readers are used to scan the vehicle RFID tag and establish if the vehicle is authorized to ship. This forms part of the quality control process to ensure a vehicle is not released for shipment until it has passed through the required processes.
Change requirements and stakeholders
Although IT was responsible for identifying the appropriate technology, the implementation process, and the project justification, the production organization identified the business need – vehicle tracking. The production staff is responsible for keeping work-in-process (WIP) below specific thresholds and ensuring vehicles move as quickly as possible from end of the assembly line to the main dispatch point. If WIP builds up, then vehicles aren't moving to the dealership quickly enough and inventory carrying costs increase. As inventory increases, locating vehicles becomes even more challenging, and overtime labour costs increase as time is wasted physically locating and managing the flow of vehicles. As a result, the production staff was very receptive to the implementation and considered the project as a way to help them improve their jobs, not replace jobs.
The implementation also required minimal changes to existing business processes and minimal training. Incorporating RFID into the work was relatively simple and required workers to scan an RFID tag and hang it in the vehicle. The bigger change was in how the information could be used to identify a vehicle's location, but that training was also basic and replaced a more difficult process of making verbal inquiries to physically locate a vehicle.
Satisfying corporate guidelines
Throughout the project, Land Rover ensured the implementation satisfied corporate guidelines related to issues such as data security, interoperability, and health and safety. For example, Land Rover has strict policies related to security over a wireless network, and the company worked with its vendor WhereNet to include encryption and security standards to prevent external parties from accessing its network. Other aspects of the implementation satisfied European or UK legislation related to health and safety. Although there weren't any issues in this project, Land Rover did note that occasionally there were regulatory conflicts when the company wanted to use its former parent's resources, given that Ford is headquartered in the United States. The FID project also satisfied Land Rover's company requirements related to Interoperability, such as the WhereNet software operating on the company's standard platform and hardware.
The Outcome -- benefits from RFID in Land Rover's facilities
As a result of the RFID project, the key business benefits were a faster order-to-cash cycle and a reduction in overtime costs. Of the total project cost savings, 25% of the savings were achieved through overtime reduction, and 75% of the savings were from reducing the inventory of finished cars on site and expediting them through the order-to-cash process.
Other benefits include:
Labour productivity: reduced the amount of labour needed to search for vehicles in the yard or to check the status of a vehicle,
Production velocity and throughput: higher velocity moving cars through the system and the ability to expedite shipping on a daily basis
Use of Land Rover's facility: decrease in work-in-process and inventory carrying costs and higher utilization of Land Rover's physical space,
Vehicle quality management: better implementation of quality procedures to ensure vehicles are shipped only once all steps have been completed and verified
Improved documentation of the vehicle and the process: creation of a historical record of a vehicle's progress as well as information necessary to perform flow analysis for continuous improvement and monitoring lean manufacturing principles.
1.1.3 Impact
The Land Rover implementation highlights a key point – the first RFID project often gives a company insight in to other areas of the business that could improve with RFID, as Land Rover only identified the vehicle-tracking project after completing its first RFID project for material replenishment. The first project also enabled the company to be more cost effective in its second project, reusing some of the original project's infrastructure to keep costs down. Another key point is Land Rover's leadership from the IT organization which added a valuable, "big picture" perspective on how the system could speed the order-to-cash cycle, and not just improve vehicle tracking. Understanding how to evaluate a project and its contribution to the overall business is critical to getting a project off the ground.
In the future, Land Rover is considering expanding the VTMS to additional facilities as well as other processes within its factories and in its extended supply chain. One option would be to use RFID to track reusable containers, or stillages, beginning at the supplier's location, in transit, and upon arrival at Land Rover's facility. This type of project would incorporate global positioning satellite (GPS) system because of the distances goods travel from supplier to production. Because the company uses many specially-designed stillages to carry petroleum tanks and other items, the stillages are relatively important to Land Rover's processes. RFID tags on the stillages would provide a way of tracking the containers and preventing their misplacement. Although the tag would be on the containers, the information could also provide visibility into the movement of the goods themselves, if the contents of the container were associated with the tag on the container. The result would be both an inventory and asset tracking system. The company has a
study underway to decide when it is appropriate to replace bar codes with RFID. Any future projects will also need to satisfy Land Rover's TARR requirements.
1.1.4 Lessons learned
From the two RFID projects for materials replenishment and vehicle tracking, Land Rover's Dave O'Reilly, IT manager of manufacturing and purchasing for Jaguar and Land Rover, summed up his advice as follows:
Bring in a partner for RFID: the project implementation was much more successful with WhereNet than it would have been handling the services on his own.
Allow time for the physical implementation survey: matching the physical conditions with the RFID technology could be challenging, especially in older facilities.
Get management buy-in early in the process: improving the order-to-cash cycle helped gain management's approval for the project, which in turn made it easier to convince the rest of the company.
Make the implementation easy from the end user perspective: Land Rover wanted the system to be easy to use, and the company also made sure the people who would be using the system – including all of the equipment, the readers, the tags, and the software – received the training they needed and understood how it would make their jobs easier.
1.1.5 References
Research for this case study was conducted by Kimberly Knickle, IDC Manufacturing Insights, on behalf of the Sectoral e-Business W@tch. Sources and references used:
Interview(s) with Dave O'Reilly, IT manager of manufacturing and purchasing for Jaguar and Land Rover, on March 6th and April 16th, 2008
Interview with WhereNet, February 29th, 2008
About this document
This case study was initially published as part of a comprehensive Sectoral e-Business Watch study report on RFID adoptions and implications (2008). The European Commission, Enterprise & Industry Directorate General, launched the Sectoral e-Business Watch (SeBW) in late 2001 to monitor, study and assess the implications of ICT for enterprises and sectors. The results support policy formulation, notably in the fields of industrial and innovation policy. All study reports and further resources such as data on ICT adoption in enterprises are available online at the SeBW website (www.ebusiness-watch.org).
For further information, please contact
European Commission
Enterprise & Industry Directorate-General D4 "ICT for competitiveness and innovation" e-Mail: [email protected]
Sectoral e-Business Watch
c/o empirica GmbH
Oxfordstr. 2, 53111 Bonn, Germany e-Mail: [email protected]