Though occupying a large chunk of land in the Segambut area, expansion over the years has used up most of the available area and the location has also become rather impractical as Kuala Lumpur has become much more congested. The sales volume for Tan Chong has also grown substantially over the years and besides that, like many old plants, the layout of the Segambut plant (which was patterned after the Nissan Zama plant in Japan) does not readily allow the use of modern manufacturing processes like modular assembly.
“The new plant is crucial as the Segambut plant alone would not be able to cope with the expected medium-term production and sales requirements. It will play a critical role in the daily business operations of the Group. Going forward and in line with Nissan’s aspiration to increase its worldwide sales volume under the Nissan Global Plan and beyond, the sales volume of Tan Chong Motors is also projected to expand in tandem,” said Tan Chong Motors Chairman, Datuk Tan Heng Chew when he announced the project in 2006.
TCM made the strategic decision of building a second plant away from KL which would be a ‘greenfield’ development, meaning it would be built in a new area. A greenfield development offers many advantages especially in terms of space to grow. Of course, its location must also be convenient from the logistics aspect and the site chosen was in Serendah, which is also where the Perodua plant is. It is just off the North-South Highway, less than an hour from the Klang Valley where many suppliers have their factories and completed vehicles can be dispatched throughout the Peninsula easily too (and of course, an easy link to Port Klang for shipping to East Malaysia).
Groundbreaking of the 19-hectare site began in March 2006 and operations commenced less than a year ago with the Latio, followed by the Grand Livina and since this year, the Sylphy. From the outset, the plant was designed to have modular assembly, which allows greater productivity and better quality. It also helps that the first three models to be assembled there share the same platform, meaning that there is a greater degree of commonality.
“Our new plant has been designed to use the Nissan Integrated Manufacturing System which has, among other features, a flexible single line that allows us to assemble a variety of models,” explained Low Seng Chee, Executive Director of Tan Chong Motor Assemblies Sdn Bhd. (TCMA). “Modular assembly allows us to have closer integration with our suppliers and a more value-added operation.”
Automation is on a limited scale which is normal for an assembly plant which does not have high volumes to justify the extremely high cost of robots. Most of the plants in Malaysia don’t have body-welding robots apart from Proton and Perodua which have outputs of more than 100,000 units a year. Mr Low said that just because there is no robotic assembly does not mean that quality is much poorer. On the contrary, he explained, it can be comparable and human involvement also allows for faster identification of flaws.
“Robots can weld together bodies at high speed and in a consistent way but when there is a flaw, tens of units may have already moved along the line before it is ‘caught’. Human welders may be slower but this is also not a total disadvantage so there are pros and cons,” explained Mr. Low. Nevertheless, two robots will be installed towards the end of the year for dangerous and difficult work.
The Serendah plant does not do any stamping of body panels as this too is something that requires high volumes due to the enormous cost of the stamping machinery. All the panels come from Nissan plants in other countries and other components are sourced either locally or from global suppliers outside Malaysia.
Modular assembly has made production more efficient and faster because major sections of the vehicle come as modules from suppliers. In the past, the various parts of a dashboard would have to be assembled in the plant but now, a supplier does the job at its own factory and then sends a completed dashboard module to TCMA. There are cost-savings as well as increases in overall quality.
The current workforce at Serendah is just over 1,000 (TCMA is the second largest employer in the area after Perodua) which is 33% more than Segambut. A notable thing about the plant’s workforce is that many of the senior workers are experienced, having started in the Segambut plant. And while workers in the Proton and Perodua plants tend to be in their 20s, those at the Serendah plant average 30 years old, with an average of 6 years of service.
“Like other plants, we do have a turnover of workers but many prefer to stay with us because we treat everyone like ‘family’ and the working conditions are also good. We also have a special incentive program where they can earn bonus points for good suggestions to increase efficiency and productivity and these points can be redeemed for everyday items,” said Mr.Low.
Up till May this year, the plant’s cumulative output reached 14,000 units with production having been stepped up from the second quarter when the second shift was activated. This took the monthly output from 1,200 units to 2,400 units (‘with a bit of ‘stretching’, the number can go to 2,640 units’, said Mr Low). The largest volume has been taken by the Grand Livina which got a stronger reception than anticipated.
With the new range of models selling like hotcakes and anticipating growing demand (not to mention additional new models to come), TCM is already making plans for expansion in 2010. The original investment was RM191 million (5.5% of which was contributed by Nissan as a minority shareholder in the plant) and for phase 2, it is presently estimated to cost RM100 million. The capacity will then increase to as much as 63,360 units a year with two shifts. As with the current phase, the increase in output will depend on market demand and a second shift will only be activated when needed.
In the short-term, the aim is to reduce costs by 8% and achieve the No.1 position in the JD Power & Associates annual quality surveys (which products from the Segambut plant have achieved before).
“The Serendah plant is certainly more advanced than the Segambut plant since it uses newer processes so we can produce cars of even higher quality. Our aim is the be the best CKD plant in the Nissan world. Even now, I believe we are pretty high up the list and our plant is considered a ‘model plant’ by Nissan,” said Mr Low.
To know more about Tan Chong Motors or Nissan products and services, visit their website