A flow cost model: a case study at Volvo Trucks Corporation

This master’s thesis was carried out at Volvo Trucks in Gothenburg, Sweden. Volvo Trucks is one of the world’s leading manufactures of heavy trucks and they have always seen the value in having effective material flows in order to succeed in the highly competitive automotive market.

All trucks are assembled based on the customer’s needs. This makes each truck unique, developed to meet the individual need of the customer. This is a competitive advantage for Volvo Trucks, but it also requires a lot from production where the effectiveness of the internal material handling is very important. The department of Production Engineering Logistics has today done some calculations on the handling of the internal material, but a lot of these calculations are based on old data. Since Volvo want to analyse different alternatives concerning internal material handling based on current data, a reliable cost model that can be updated is needed.

The purpose of this project is to construct and present a cost model that Volvocan use to determine the costs of the different internal material flows at theproduction plant in Gothenburg. This task requires that the material flows areidentified and mapped, therefore flowcharts of the processes in the plant was first conducted.

When conducting this cost model, all components included in the total cost concept have been investigated. The total cost concept has been biased in a way that the customer is the assembly line, which contributes that the other five major cost categories is the activities that support the material handling processes. The goal with identifying the relevant activities is to uncover the costs. By identifying the activities of the flowchart and the resources that each activity consumes, the costs could be discovered. When the costs had been identified the cost model based on time studies was developed. A concept that showed the design of the cost model was built up, and the final cost model was constructed in Excel. Visual Basic for Applications was used to get a clean layout and to make the cost model easier to use. The model is based on five excel sheets where each process represents one sheet. One row in the Excel sheets represents one specific activity and the columns represent the activity time followed by the different costs that is included in the activity. The rows are arranged after activity which makes it easier to find a specific activity when for example updating the model.

When the cost model needs to be updated, the authors have added comments on the essential cells where a calculation has been performed. In that way, it is easier for the employees to update the model and to se how the costs have been calculated.

The authors find the cost model highly trustworthy and the accuracy corresponds to the purpose with the cost model. The model is easy to use and to understand and since it is based on time studies it also contain clear and specific costs that is easy to trace. The cost model can for example be used when deciding how the material should be managed at lowest cost. The employees can compare different possibilities of transporting a specific material in order to receive the lowest total cost. The employees can for example use this model when deciding about the layout of the plant. Would it be cheaper to have the chassis line placed closer to F11, or would it be more expensive?

Author: Bengtsson, Sandra; Sjöblom, Teres

Source: Lulea University of Technology

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