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AUTOMOTIVE PARTS MANUFACTURING INDUSTRY:

Muzalwana A. Talib*
Department of Applied Statistics, Faculty of Economics and Administration,
University of Malaya, Kuala Lumpur, 50603 Malaysia
Telephone: +603-79673764
*Corresponding author
Susila Munisamy
Department of Applied Statistics, Faculty of Economics and Administration,
University of Malaya, Kuala Lumpur, 50603 Malaysia
Telephone: +603-79673669
Shamsuddin Ahmed
Department of Engineering Design and Manufacture, Faculty of Engineering,
University of Malaya, 50603 Kuala Lumpur, Malaysia
Telephone: +603-79674455

Acknowledgements
This research work is supported by University Malaya Research Grant:
Short Term Research Grant - F0284/2007B
Postgraduate Research Fund PS227/2007B; PS318/2009A

Abstract
This paper puts forth the strategic importance of statistical quality improvement for automotive stamped parts
manufacturing process. The review on the Malaysian automotive parts suppliers reveals that the automotive
stamped parts suppliers are facing with quality-related problems. Intense pressures for quality improvement are
actually experienced by automotive parts suppliers to stay-tuned in competitiveness and to build a long-term
relationship with automotive manufacturers. The automotive parts suppliers in Malaysia are urged to contribute
towards enhancing the overall quality of national car. While empirical studies have shown that statistical
concepts are crucial to good quality management and key in dealing with manufacturing processes, there has
been inadequate emphasis on the deployment of statistical approach in quality practice among these suppliers.
This paper proposes a conceptual framework for statistical quality improvement in automotive parts
manufacturing. The practical implications of applying the statistical thinking methodology towards continuous
quality excellence are also highlighted.
Keywords: Quality improvement, conceptual framework, statistical quality control, automotive stamping
industry

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Introduction

High quality is now an innate need and a leading operating priority in all types of organizations be it
manufacturing or services. It is the key orientation towards enabling organizations in facing rapid changes in the
marketplaces. Changes in the marketplace can arise from different aspects such as increasing variety of
customer demands, new and ingenious innovation in production techniques as well as changes in market
condition due to globalization and increasing international trade between nations. Within the automotive
manufacturing industry, the trend has been increasing product variety and short product life cycles (Curkovic,
Vickery, & Droge, 2000). In the meantime, consumer knowledge and product requirements have increased
extensively with the exploding access to information and technology (Ernst & Young Global Automotive Center,
2010). Undeniably, the automotive parts manufacturers need to be more competitive in terms of cost and quality
and being able to build long term relationship with automotive manufacturers.
The objective of this study is to expound on the importance of statistical approach in the pursuit of quality
enhancement of automotive parts manufactured. This study firstly examines the historical background of the
Malaysian automotive industry by highlighting the inception of two national cars which have become the pride
of the nation. Secondly, this paper explores on the challenges faced by the Malaysian automotive subsidiary
industry and the opportunities laid down by these challenges. The following section accentuates the potential
role for the automotive suppliers to play at the international level by pointing out the importance of quality
excellence as the key success factor. This study progresses to give some insights on the overriding importance
of statistical tools and techniques as the cornerstone of quality improvement for automotive manufacturing
process. This study, then, proposes a conceptual framework based on statistical approach for quality
improvement in automotive parts manufacturing. The final section probe into the implications on the operating
practice as the resolution to the quality quest of the local automotive parts suppliers before the concluding
statements.
2.
2.1

A Malaysian case
Brief history

Malaysia has come a long way since the last two decades to build up a real image of national car
manufacturer within the global automotive industry. The journey of Malaysian automotive industry began with
episodes of local assemblies to the inception of the first national car project undertaken by Perusahaan Otomobil
Nasional Berhad (PROTON) in 1985 and a second national car project, Perusahaan Otomobil Kedua Sdn Bhd
(PERODUA) in 1993. These two major local car manufacturers have significantly provided new impetus to the
development of local auto parts and components manufacturing industry. This development is a part of an
integrated capabilities in Malaysian automotive manufacturing which include local design, engineering
capabilities, and full scale manufacturing operation (Mohd Nor, 2006).
The subsidiary automotive parts and components industry has witnessed a subsequent tremendous increase in
number of local manufacturers. For instance, at the end of 2005, there were more than 590 automotive
component manufacturers supplying to PROTON and PERODUA (MITI, 2005). Of this figure, 227 were
PROTON vendors (32 tier one vendors), 161 PERODUA vendors and the rest of the vendors supply to both
PROTON and PERODUA). More than 70% of the component manufacturers are Malaysian-owned, mainly
small to medium sized industries (SMIs), locally or foreign-owned or joint-ventures (JVs) and many have tieups with several Japanese companies (Lim, 2003). The increase in sales volume of locally manufactured
vehicles has equally contributes to the growth of market size of the auto-parts manufacturing industry. For
example, when total sales volume of vehicle increased by 3% from 2004 to 2005, the market size for the autoparts manufacturing industry surged to RM 8.36 billion in 2005 from RM 6.1 billion and RM 6 billion in 2003
and 2004 respectively (MITI, 2005).
The expansion of automotive and auto parts manufacturing industry has a profound impact on the economic
contribution in terms of employment and revenues generation. Under the employment sector, the automotive
manufacturing alone has provided around 2.5% of the total employment in Malaysia in 2005 and for the same
period, the employment opportunities in the sector was estimated to be around 50,000 (Mohamed, Cha, Chin, &
Ayeb, 2006). More importantly, the growth in automotive manufacturing industry has spurred strategic
development of linkages between Malaysian main and subsidiaries industries, new entrepreneurs, industrialists,
financiers and service providers (Leete, 2007; Mohd Najib, 2006). A study on the linkages within automotive
sector reveals that the emergence of automotive manufacturing industries in Malaysia has led to the growth in

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the number of the SMI suppliers. The SMI suppliers have significant role in producing equivalent local contents
for PROTON and PERODUA, which substitute the previously imported components (Hassan et al., 2006).
There are several factors which have contributed to the tremendous growth of SMIs. One for the important
factor is the need to meet the demand for various components by the national automotive manufacturers
following an increase in the total production of local automotive vehicles. The other factor which fosters the
growth of local SMI automotive suppliers is direct government support through two policy instruments, namely,
the Local Material Content Programme (LMCP) and the Vendor Development Programme (VDP) (Leete, 2007).
Under LMCP, the national car manufacturers are required to substitute imported components with locally
produced equivalents. Aggressively pursued VDP has helped to spur the growth of SMI suppliers by
guaranteeing markets for the outputs produced by them. Financial and technical assistance are also offered by
the parent company and the Malaysian government. For example, the Industrial Adjustment Fund (IAF) is set up
to encourage the suppliers to develop greater international linkages (Mohd Najib, 2006). Apparently, the
increased number of local automotive suppliers is evident with the impressive number of firms nurtured under
PROTONs VDP. When PROTON was first started in 1985, there were only 17 local parts manufacturing firms
but the number has increased to 188 by 1998. In the same year, PROTON has sourced out 228 parts to domestic
suppliers and now the number has reached to a total of 4,319 parts. In 2007, 350 firms are reported as being
outsourced by PROTON to produce components and parts for the Malaysias automotive sector (Leete, 2007).
2.2

Challenges and opportunities

The saga of Malaysian automotive industry is not without challenges. Not only the challenges come
from within its locality, the local automotive industry is also facing challenges at the global arena. Apart from
the radical process of consolidation and liberalization portraying the introduction of ASEAN Free Trade
Agreement (AFTA) and World Trade Organization (WTO), the industry is also hit by the rapid technological
changes, alliances and acquisitions (Mohd Najib, 2006; Mohd Nor, 2006). The scenario of acquisitions and
mergers among the global automotive players also has resulted in a reduced number of vehicle manufacturers.
Worse still there is an increased price competition from the automotive manufacturers from the low wage
countries like China and India (The challenges of globalization, 2008). The changing landscape in the global
automotive industry witnesses a global production shift from the high labor cost countries (for example,
Germany, US, Japan, Canada, UK, France, Italy) to the lower and ultra lower labor cost industries Mexico,
Thailand, Russia, India and Indonesia including Malaysia, (Mohamed, et al., 2006).
The inevitable rapid changes in the global landscape of automotive industry must not only be seen as
challenges but also as opportunities because many of the major international manufacturers are actually
outsourcing their component sectors. Despite the reduced number of the major vehicle manufacturers, the
component manufacturing industries have actually shown a substantial growth (The challenges of
globalization, 2008). The future shift and wind of change provide signals to the Asian automotive players
which includes Malaysia, to enter the world market rather than solely producing for the local market (Mohamed
et al., 2006; Vairangkar, 2006; The challenges of globalization, 2008). In fact, due to the lower operating cost
factor, the local parts manufacturers are opened to the opportunity to develop substantial exports by establishing
international linkages with the international vehicle manufacturers (Mohd Nor, 2006). At the local
marketplaces, the suppliers could reap the opportunity for larger market share and take the lead in supplying to
the domestic demand following the increased trend in the domestic sales of national vehicles. The Malaysian
domestic sales of vehicles have experienced a series of peaks and troughs over the past two decades. For
instance, after a slight fall in sales for the year 2009 in comparison to 2008, the sales are expected to improve in
2010 (MITI, 2010). Apparently, for the first nine months of 2010, the total national vehicle sales volume has
increased by 14% compared to the same period of 2009. Further analysis on the domestic sales of passenger
vehicles by brand name of the same period January to September 2009 to 2010 show that sales volume of the
two national automotive manufacturers, PERODUA and PROTON, has grown by 14.8% and 8.9% respectively
due to the improved economy in that duration. Figure 1 illustrates the trend in sales volume of commercial
vehicles and passenger cars in Malaysia for the period January 2005 to September 2010. Although Proton and
Perodua are making only passenger type of vehicles and not commercial vehicles, this figure shows the general
increasing trend of the Malaysian vehicle sales volume. Figure 2 illustrates the domestic sales of passenger
vehicles by brand name in Malaysia from January to September for the year 2009 and 2010.
Given the opportunity of larger market for automotive part supplies, the Malaysian automotive parts suppliers
ought to venture into gaining the competitive edge, aiming for larger market penetration and to play a serious
role in the global automotive industry. The strategy to achieve these objectives is by producing high quality

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automotive parts at competitive cost. Having said these, the local car manufacturers need to enhance the quality
of their processes, and the quality of their automotive parts so as to meet the demand for high quality supplies in
both local and global marketplace.
3.

Quality quest in automotive parts manufacturing

In dealing with quality, many automotive parts manufacturers have at least applied a number of quality
approaches embedded in quality management systems or quality frameworks. Total Quality Management
(TQM) and the certification of international quality standardization (ISO) are among the widely applicable
systems. TQM puts emphasis on continuous process and systems improvement as a mean of achieving customer
satisfaction to ensure long term company success. Similarly, the ISO aims at continuous improvement supported
by the fundamental principles of total quality. Six Sigma methodology is a process improvement methodology
that goes far beyond problem solving featuring the five-stage improvement framework: DefineMeasure
AnalyzeImproveControl (DMAIC) (Evans & Lindsay, 2005; Pande & Holpp, 2002). TQM and the ISO
certification are the heavily promoted quality management frameworks and are seen as important quality
milestone of an organization (Idris, et al., 1996; Kanapathy & Jabhoun, 1998).
In the quest of quality panacea for the automotive parts manufacturing, one has to define quality objectives in
the context of automotive body manufacturing. One of the main quality objectives in automotive body
manufacturing is to meet the dimensional integrity and functionality between automotive stamped parts and the
assemblies of automotive vehicle body (Hammett, Baron, & Smith, 2000). Dimensional integrity is a critical
process characteristic in automotive body manufacturing where automotive sheet metal parts are welded
together into subassemblies. Subsequently, the sub-assemblies are welded together to produce the skeleton
vehicle body. Nonetheless, dimensional integrity cannot be achieved when automotive dimensional
measurements deviate from their nominal specifications or even larger than what is allowed by their design
tolerances. Typically, when dimensional integrity are not met, this indicates the presence of excessive
variations. Excessive variations or deviations in stamped automotive parts are the cause of variations in
assembly dimensions. Several studies in automotive stamping process claim that it is the excessive variations in
stamped automotive parts that hinder good fits in automotive parts and their subassemblies (Guzman &
Hammett, 2003; Hammett, et al., 2000; Kuzma-Smith, 2000; Yang & Trewn, 2004).
In manufacturing context, essentially, quality is inversely proportional to variability. As such, reduced
variability is the quality objective of manufacturing operation ( Montgomery, 2005). This modern definition of
quality purports the importance of variation reduction as to increase the quality characteristic of a product. With
reduced variation, more products meet quality conformance and this leads to less scraps and less rework.
Consequently, cost can be reduced and the manufacturing operator competitive edge can be derived from its
value-added quality product. By studying variations in the manufacturing process, the potential sources of
variation that have the greatest impact on the process can be identified to improve the quality of automotive
parts (Montgomery, 2005; Montgomery & Runger, 1999). In most cases, variations can only be described and
better understood through statistical methods (Makrymichalos et al., 2005). As such, statistical concepts are the
key in dealing with manufacturing processes and their inherent variation problems hence is crucial to good
quality management (Evans & Lindsay, 2005).
3.1

Attitude towards statistical approach to quality improvement

Until now, empirical evidence indicates lack of statistical application to quality improvement among
the Malaysian local automotive suppliers. As has been revealed in a study, the Malaysian automotive suppliers
do not use statistical methods as their major approach for quality improvement (Noviyarsi & Sha'ri, 2004).
Evidently, there is lack of awareness on the importance of statistical approach to process control among the SMI
automotive suppliers (Hassan, et al., 2006; Jafri, Sha'ri, & Ismail, 2007; Lim, 2003; Mohd Nizam et al., 2009;
Salimah, 2001). Even though many automotive suppliers apply the basic process control techniques like check
sheet, cause-and-sheet diagram, histogram, Pareto diagram and control charts to monitor the manufacturing
process, these suppliers generally perceived the statistical quality tools and techniques as the least important
issues for them to deal with (Hassan, et al., 2006).
Despite the existing applications of basic process control techniques by the local automotive SMI suppliers,
there is no clear indication of improvement in the quality of locally manufactured automotive parts. After being
in the industry for almost three decades, the local automotive parts suppliers, particularly, the SMIs, are still
reported to be bogged down with the longstanding issue of low quality products (Leete, 2007). Additionally,

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there are pressures for the local SMI suppliers to improve on the overall quality of parts supplied to the
Malaysian pioneer car manufacturer (Wan Mohamed, Cha, & Chin, 2006; Mohd Najib, 2006; Mohd Nor, 2006).
The quality of these automotive parts has been reported as the withstanding issue among the SMI automotive
suppliers or the local vendors (Adnan, Mohd Sharif, & Awaluddin, 2006; Leete, 2007; Wan Mohamed, 2008). A
fairly recent study reveals that 56.4% of the SMIs automotive suppliers admit facing problems related to poor
quality of their own products (Hassan, 2006). As revealed in a study, the higher level of wastage in the locally
produced automotive parts due to process rejects are associated to lower input in R&D by the Malaysian
automotive part vendors (Mohamed, 2008). Although quality has been set as high in the lists of manufacturing
priorities by the local suppliers, yet problems still exist in the quality of automotive parts. Higher level of
wastage and process rejects among the Malaysian local automotive suppliers does not go unnoticeable and has
actually added cost to these suppliers (Mohamed, 2008). This could explain why the cost to the local
manufacturers of original equipment manufactured parts and components (OEM) are still higher even though
these manufacturers supply higher percentage of OEMs to the national car producer. The local automotive parts
manufacturing suppliers could reduce their costs when the quality of their product is improved. With the policy
of increased localization for cheaper car model, these part suppliers need to improve on quality and reduce cost.
There is a critical need for the local suppliers to look for the more effective quality enhancement tools and
methodologies. Therefore, this study recommends for the automotive parts supplier to harness the powerful
statistical methods as part of their quality improvement initiatives.
4.

The proposed quality framework

Although statistical methods are not meant to replace the other quality approaches embedded in the
quality management systems, there is a need to have a combination of quality tools for an effective quality
control and improvement efforts (Ryan, 2000). To re-emphasize the importance of statistical orientation in
deriving continuous quality improvement within automotive parts manufacturing, a conceptual framework is
proposed here. This framework is derived from the work done by several quality advocates.
Demings philosophy of quality improvement have stressed on the role of quality as the management
function and broaden the responsibility of defining quality not only to manufacturing departments but other
departments too (Garvin, 1988). Thus, other than the manufacturing process control, the other two building
blocks of quality management are continuous improvement and customer orientation. More recent quality
promoters give attention on how to achieve the quality that they perceived in a management context and
embedded in frameworks. The concept of Total Quality coined by Feigenbaum set up a people-focused
management system aiming at continual increase in customer satisfaction (Evans & Lindsay, 2005). Snee (1990)
models the concept of Total Quality under three levels of activity i.e. strategic, managerial and operational. Snee
(1990) further associates the three levels with statistical thinking, in which, the strategic level is associated to the
concept of quality; the managerial level relates to statistical process control procedure and the lowest operational
level is associated to the statistical tools and techniques to be applied. Total Quality concept further progresses
into the concept of Total Quality Management (TQM). In a similar tone, TQM put emphasis on continuous
process and systems improvement as a mean of achieving customer satisfaction to ensure long term company
success.
Henceforth, the quality conceptual framework for improvement in automotive parts stamping
emphasizes on achieving quality by employing the manufacturing-based quality definitions within a TQM
framework. In line with manufacturing-based definition of quality, the framework is further expanded under the
notion that quality means meeting the conformance to requirements or degree to which a product conforms to
design and specification. Conformance is the degree to which a products design and operating characteristics
meet the pre-established standards. As the heart of quality improvement of manufacturing process, variations
reduction fits into the quality objective of automotive manufacturing to achieve dimensional integrity and
functionality of stamped body parts through the assembly work (Guzman & Hammett, 2003). Figure 3 illustrates
the conceptual framework of quality analysis.

5.

Practical implication

This study implies the need for statistical thinking in quality paradigm of quality practitioners within the
automotive parts manufacturing industry. Statistical thinking method provides the methodology towards
continuous quality excellence through several key concepts. The key concepts are; to view work as a process, to

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use data as guide to decisions and to recognize and respond to the omnipresence of variations. Having said this,
the most important idea for the automotive suppliers to grasp is to reduce the variations that could possibly
caused by man, material, machine, method or environment. Variations will affect the quality of automotive
manufacturing process and ultimately deteriorate the quality of automotive parts. As such, the correct estimation
of process variation is the most crucial in determining the acceptable level of process performance under normal
condition. The understanding on variation and how it can be reduced to ultimately improve quality can be
achieved through the application of statistical methods. The customary or naturalization of application of
statistical methods for quality improvement is imperative to the automotive parts suppliers.
As mentioned earlier, the application of basic process control techniques like check sheet, cause-and-sheet
diagram, histogram, Pareto diagram and control charts is common to many of the automotive suppliers. These
techniques are the basic tools under statistical process control (SPC). Setting up of the SPC system itself, serves
as a practical guideline to naturalization of statistical methods application. Under this guideline, some of the
steps involved are determining which process to monitor, identifying what variables to monitor, determining the
appropriate chart to be applied and establishing data collection. Effective data collection including sampling
work should be planned once the selection of quality variables has been finalized. Careful planning for data
collection should be made on how and where data can be collected, who will be responsible, how often data
should be collected, who would do the inspection and review the results and who is responsible for taking the
corrective action. In a control charting procedure, it should only involve the most appropriate parameter to be
monitored as not everything can be monitored. Therefore, the critical part to quality (CTQ) variables is the
prime candidate. In sequence, these variables will determine the variation from which the process will be
monitored. In short, the application of basic statistical process control tools is already within the process control
framework of many automotive suppliers. Unfortunately, there is a huge gap on how these statistical techniques
can be optimized so as to achieve the competitive quality level. Henceforth, the study strongly recommends for
a revisit study on the statistical approach to quality improvement for automotive stamped parts manufacturing
where the SPC methods could be integrated with the other existing quality practice such as FMEA, Kaizen etc.
With the upcoming policy development on improving the quality of automotive parts, ISO/TS 16949 i.e. the
International Quality Systems Standard for Automotive Suppliers, the exposure to statistical oriented approach
to quality improvement is the most appropriate. Increased statistical knowledge of automotive suppliers could
provide avenue towards achieving the ISO/TS 16949 compliant for defect prevention; reducing the magnitude
of variations and waste in supply chain and encouraging improvement in customer satisfaction. The study could
also support for the introduction and enforcement of mandatory standards for parts and components as the step
towards improving the quality of locally manufactured parts and components. With increased competitiveness
and exports due to the enhanced quality and value added of their products, the local automotive suppliers should
be welcomed to take advantage of the new measures of substantial tax exemption on statutory income for certain
percentages of their value of increased exports in Malaysia ("Update: New National Automotive Policy ", 2009).
Specifically, under the Malaysian New Automotive Policy Review for continued development of the domestic
automotive industry, the integration of techniques could give further insights to best practices ("Update: New
National Automotive Policy," 2009).
6.

Conclusion

The present scenarios on competitiveness and automotive parts or product quality issues of the Malaysian
automotive manufacturing industry as depicted in this article. Despite the changing landscape in the global
automotive industry, the Malaysian automotive suppliers have a bigger opportunity to supply to the international
market as well as catering to the domestic demand for national cars which is ever increasing. Plausibly, these
local parts manufacturers could foster the growth of the national automotive industry and economy. The effort
towards increasing growth to automotive industry and economy, definitely deserve further work and
considerations on improving the quality of automotive parts produced by these suppliers. In this paper, the
emphasis has been made on the application of statistical tools and techniques in their quality paradigm although
many of the suppliers have put lesser emphasis on this aspect of quality improvement due to lack of knowledge
and awareness on the benefits to be reaped from statistical approach to quality improvement. This study
proposes a conceptual framework for statistical quality improvement for automotive parts manufacturing, and
generally expounds practical implications of quality improvement efforts to the automotive suppliers.

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600,000
500,000
400,000
300,000
200,000
100,000
0
2005

2006

2007

2008

Commercial Vehicles

2009

Jan- Jan-Sept
Sept'09
'10

Passenger Cars

Year

Passenger
Cars

Commercial
Vehicles

Total Vehicles

2005

416,692

135,624

552,316

2006

366,738

124,030

490,768

2007

442,885

44,291

487,176

2008

497,459

50,656

548,115

2009

486,342

50,563

536,905

Jan-Sept'09

361,793

36,157

397,950

Jan-Sept '10

408,450

44,799

453,249

Figure 1: Malaysian Annual Sales of vehicles by type, 2005-2010 (until September 2010) (MITI, 2010)

Year
2009 (Jan-Sept)

Perodua
122,858

Proton
110,265

Toyota
47,838

Honda
29,575

Nissan
17,450

2010 (Jan-Sept)

141,111

120,173

52,781

34,104

19,725

TOTAL
361, 793
408,450

Figure 2: Malaysian Domestic Sales of Passenger Vehicles by Make, 2009 and 2010 (January September)
(MITI, 2010)

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Total Quality

Figure 3: Conceptual framework of statistical quality improvement study for automotive stamped parts

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