Auto Part Manufacturer Set to Push Production Efficiency
The Thai Summit Autoparts Industry Co., Ltd. (TSAI) set to cut production cost and improve
its production efficiency with aim to reduce inventory on raw material up to 150 million baht
by next year.
The company, which is the biggest auto parts manufacturer in Southeast Asia, has started
using Kanban, a just-in-time management technique developed by Toyota which attempts to
maintain minimum inventory. The concept works by having a supplier or the warehouse to
deliver components to the production line when they are needed, so that there is no storage
in the production area.
According to TSAI’s general manager, Chatkaew Hart-Rawung, the Pull System of
Kanban helped reduce the company’s warehouse cost to some degree. But in practice, his company still needs to stock raw materials to ensure smooth production.
“The inventory cost costs us about 500-600 million baht monthly. If we can reduce
inventory cost to 30%, we can save more than 150 million baht,” said Chatkaew.
“Initiate measure has been carried out. Our
aim is to cut storage of raw material time to
be within 10-day time, work in process within
3 days and finished products within 3 days,”
Pull cooperation from suppliers
TSAI will draw close cooperation from suppliers. The working process is customers
will quote the amount of the vehicles they plan
to produce in a year and the amount of
monthly amount in advance. They will confirm on the numbers again when the time of
production is coming near, usually it’s about 3 to 10 days.
“When we get this information, we will work closely with the suppliers to settle the
amount of raw materials required and date of delivery,” explained Chatkaew. “For imported
materials, order must be placed six months in advance.”
But since a minimum lot for the order is required, Chatkaew said TSAI has to stock raw
materials for at least three months to prevent abruption in production process. Negotiation is
underway to cut down time and amount of inventory.
“Suppose a customer plans to build 10,000 units of cars, but ends up produce 5,000 units.
We’ve reserved the raw material. But this doesn’t cause much concern since the models of
the car are changed every four years and for motocycles, every two years. We must recheck
with the customers when dates of certain models are running out so that we can adjust our
“But if the customers decide to stop producing that model before the deadline, talks must be
carried out on who will bear the responsibility of the inventory cost. Some stocks can be used
for other models,” said Chatkaew.
Tap new technology to give another push
TSAI has applied SAP to replace AS400 for its operation management in order to
boost manufacturing efficiency and reduce inventory costs further. The system has not
worked yet since it needs time to equip the staffs with the understanding of the new system
and the program needs to be modified to fit the requirement.
“If SAP is properly run, the precision of inventory prediction should be reached by 95%. It is
expected to be perfected by next year,” said Chatkaew.
TASI also puts robots to work in production line which can reduce human errors and
increase work by 30%. “If we can fully utilize robot workers in the production, the work will
rise up to 90%,” said Chatkaew.
Just-in-Time is another system employed by TSAI to maintain its competitive edge. The
company uses dual delivery system. Customers like Toyota, Nissan, Isuzu, Hino, GM and
Mitsumishi will use their own Milk Run system to handle their own delivery while Thai
Summit Autoparts Industry will handle the rest.