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Beetlemania: Under the tech hood of the new Volkswagen bugs

June 12, 1998
Web posted at 10:00 a.m. EDT

by Julia King

(IDG) -- Fire-engine red. Banana yellow. Water-bug black. Every minute, two shiny, built-to-order Volkswagen Beetles glide off the all-new computerized factory floor here.

In a single day, up to 1,000 cars -- some days, no two alike -- are manufactured to the specifications of adoring customers worldwide.

Virtually everything about the reincarnated bug -- from its liquid-cooled engine to its $17,000 sticker price -- is new.

So is all of the information technology enabling the car's wildly successful comeback.

Behind the Beetle's rebirth is the largest technology renovation in Volkswagen AG's history. It started with a $100 million outsourcing deal and led to a new factory information system and a massive data center migration to client/server Unix systems, Oracle Corp. databases and SAP AG software.

"Production of the new Beetle is big for the company, but the real goal is getting the right car to the right customer," said Hans-Jurgen Bartels, chief information officer at Volkswagen North America in Auburn Hills, Mich.

Technology is so vital to that goal that Bartels' $10 million IT budget of four years ago blossomed 350% to $35 million per year. "VW decided years ago," Bartels said, "that the Beetle was part of our strategic future."

This year, U.S. sales of new VW Beetles are expected to hit 50,000. Last year, by contrast, U.S. sales for all VW models totaled only 15,000 -- roughly the same volume as one of General Motors Corp.'s largest dealerships.

Volkswagen is also counting on the new Beetle's immense consumer appeal to attract buyers for its pricier Golf and Jetta models. Both cars are built on the same chassis as the Beetle. Thanks to the new $10 million factory information system, all of those models can be custom-configured here at a rate of 850 vehicles per day.

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"The increase of VW models production in Mexico couldn't have been done with the old technology," said Gerhard Rieder, director of finance at Volkswagen Mexico. "It was clear to us that without investing heavily in IT, we would not have been able to fulfill our objectives."

In 1995, the automaker invested an initial $10 million and entered into its seven-year, $100 million outsourcing contract with Gedas North America. VW also bought 50% of that division of Gedas, in an unusual equity partnership (see VW Mexico buys 50% stake in outsourcer to ensure service).

The major technology initiatives undertaken by VW/Gedas so far include the following:

• Creation of the all-new automated factory information system, which revamped VW's entire production process.

• Migration of more than 40 mainframe systems running IBM's MVS to Unix platforms and of all corporate data to Oracle databases.

• Installation of SAP R/3 software for all financial and spare-parts information. Conversion of 2,500 users from an MVS-based mail system to Microsoft Corp.'s Exchange.

• Remediation of 6.5 million lines of code for the year 2000 date change, with 1.2 million left to finish this year.

Didn't skip a beat

In essence, the company built a completely new computing infrastructure, all without missing a day of production.

"We did all of these changes during the day, as the factory was running and as year 2000 fixes were being handled," said Stefan Wiesner, Gedas' chief technology officer and project executive on the VW contract.

One of the key reasons Gedas beat out larger outsourcers, such as Andersen Consulting, was its insistence on changing almost everything about VW's systems -- and many of its business processes as well.

"We were also lucky not to do just an outsourcing process but to make a total jump in IT philosophy," said Rieder, who is also chief of the Gedas board of directors.

Migrating 42 systems with 3,500 programs from mainframes to lower-cost Unix-based systems was at the heart of Gedas' proposal. Also key was the development of nine object-oriented systems, including the factory information system and dealer communications system.

The software projects were completed in less than two years by a combined VW/ Gedas team of 200 developers using a highly structured "software factory" approach. It involved extensive reuse of software objects across systems, plus continuous quality monitoring by a 50-person staff of expert programmers from a separate quality assurance group.

"We're convinced that no one person can be completely objective about the quality of their own software code, so outside quality assurance is designed in from the first day," said Gedas systems manager Sabine Abraham.

The mantra at VW became: "No bugs, no rework, next project," she said.

To encourage code reuse, Abraham also offered special bonuses to developers.

Both measures -- the quality checks and software reuse -- paid off. Reported systems errors plummeted by 68%, literally saving the company thousands of dollars per minute in downtime.

If the mission-critical factory system were to crash, for example, the lost revenue would amount to $20,000 per minute, Wiesner said.

"Up to now, there has been no downtime that cost us production," he added. Before the factory system went live in March 1997 there were crashes, but by the time the first new Beetles rolled off the line a year later, the system had had a year to work out bugs of a different sort.

The proprietary online factory information system (FIS) controls which cars are produced on the factory floor based on incoming orders, which are sent to Germany from all VW operations worldwide and then funneled to the FIS in Mexico via SAP R/3.

Built in C++ and Smalltalk, the FIS also executes on-the-fly manufacturing changes based on shifting worldwide forecasts, just-in-time parts availability and promotions. A Fourth of July sale in the U.S. might prompt a line reconfiguration to produce more red, white and blue cars, for example.

VW officials credit the system with boosting the plant's production capability from 200 to 600 Beetles per day and reducing missing-parts problems to near zero.

Another benefit: VW managers from around the globe can review all manufacturing data via a company intranet.

Taken together, VW's new information technologies afford the automaker the ability to respond to consumer demand more rapidly than ever before -- and reduce costs.

"The flexibility [of the systems] allows them to adjust more quickly to demand. Since they're getting quicker feedback on what they're selling, they can adjust production lines more quickly," said Bob Schnorbus, a Detroit-based analyst at J.D. Power & Associates in Augora Hills, Calif.

That, in turn, greatly lowers inventory costs and vastly increases Volkswagen's ability to keep its Beetle-adoring public happy.