The automotive industry's success is tied to quality, and that's a matter of supply chain management. Operating on the principal that car manufacturers can only be as good as the supplier of their smallest components, participants in this industry are devoting new efforts to measuring and communicating about quality, in service to both the new-car market and the automotive aftermarket.
That effort depends not only on supply chain visibility, but on foresight. Much of the risk in putting a car or truck together is introduced at product development time, which makes the ability to anticipate trends more important than hindsight for any supply chain manager. Decisions are often predicated on such nitty-gritty details as raw materials availability and international currency fluctuations. Those issues have to be addressed three or four years before a vehicle hits the road.
For example, the new Ford F150 has more aluminum in it than in the past. This material is harder to work with and more expensive than other materials, but Ford is betting on higher gas prices down the line, so the lighter a car, the more fuel efficient. And the new Corvette has carbon fiber parts to take some weight out. GM is even looking at polycarbonates to replace window glass in some cases.
The best supply chain managers in the automotive industry make a risk management checklist part of every vehicle's life cycle—even going beyond the vehicle's original market presence to the aftermarket. For that kind of visibility the cloud can make the market picture clearer, not only for OEMs, but for suppliers from every tier.
European automaker Renault SA (www.renault.com/en) is broadening its use of a cloud supply chain platform to support the company's expansion into international markets. Based on a successful live pilot last year covering the spare parts export supply chain from France to key markets such as Brazil, Saudi Arabia, and South Africa, this year Renault will roll out its "Easy Tracker" project, enabled by GT Nexus (www.gtnexus.com), to all export markets around the world.
As part of the company's "2016 - Drive the Change" corporate initiative, the after sales organization is focusing on the high value spare parts and accessory business. The company expects that the visibility and control available through a cloud supply chain platform will help Renault better serve its fast growing international markets and customers, while reducing inventory and transportation costs.
"The emerging markets are very competitive and Renault wants to guarantee spare parts and accessories availability at the best-in-class level, while reducing safety stocks, inventory, and expediting costs," says Francesca Gamboni, after sales logistics vice president at Renault Group. "The ability to have real-time tracking of customer orders and shipments across our value chain is a key enabler."
Greg Kefer, vice president of corporate marketing for GT Nexus, says the cloud platform's contribution to supply chain visibility will prove itself in the automotive and heavy equipment industries as OEMs expand their relationships with logistics service providers.
"The ability to control long, extended multinational supply chains comes down to visibility," he says. "[OEMs] would traditionally get silos of information. You might have a carrier portal to log into or a key 3PL that's providing information on what's happening. If you look at the way supply chains move and how inventory changes custody many times from the moment it's ordered to the point it's delivered, you realize what a challenge it is to see what's going on in real time."
Respondents to a survey commissioned last year by the Automotive Industry Action Group (www.aiag.org), a not-for-profit association of automotive supply chain companies and related organizations, indicated quality measurement is critical across the chain and must be consistent at every link.
The problem with the current state of quality measurement is that it focuses too much on past performance or on quality problems of the moment. Metrics need to track leading indicators, perhaps in the areas of design and process on the manufacturing side or in service timeliness on the aftermarket side. In other words, accentuate opportunities for good quality rather than escape from evidence of poor quality.
The latter option is often driven by fear of making your competitor look good at the expense of your company's reputation. The U.S. Automotive industry is driving away from that negative approach to quality by cooperating with competitors—where it makes sense.
That's the idea behind the United States Council for Automotive Research LLC (www.uscar.org), a collaborative automotive technology organization developed for Chrysler Group LLC, Ford Motor Company and General Motors Company. The goal of USCAR is to further strengthen the technology base of the domestic auto industry through cooperative research and development. Steve Zimmer, executive director of USCAR, says for any world class company to survive they'll have to be just as good at collaborating as they are at competing. That's especially true as car makers adopt cutting edge technologies using suppliers that may be new to them.
"In any emerging technology where you also have an undeveloped supply chain there are concerns," Zimmer says. "As we move into some of these more exotic types of technologies like batteries and motors you're getting into components that have some issues, like rare earth materials, that will be challenging to the supply chain. In those areas where we look out there and see a material issue, we're trying to identify some other type of technology that removes that as a barrier, or figure out how to use a lot less of that material."
The problem is that many alternative materials are costly. They're too expensive to scale them and expand their application as wide as the OEMs would like to. That's where USCAR comes in. It works on material characterization and formulation to find ways to make these materials and technologies cheaper. The organization's Advanced Material Group looks not only at the base materials but how they can be scaled into high volume manufacturing—not only to be manufactured but to be integrated into a vehicle's high-volume assembly system.
"Each company has its own strategy on how it will integrate advanced materials into their new vehicles in the next two years but we try to identify some of the common issues or challenges that prevent them from moving as far as they should," Zimmer explains.
USCAR also works on standardization for testing protocols. For example, for fasteners and connectors it is trying to develop common designs and specifications which can be passed on to SAE International, the global engineering association, for consensus standards development. Zimmer cites the use of LED lighting systems as another example.
"We worked through workshops to develop automotive requirements to make sure that in this new technology not only the legal and performance requirements are understood, but the automotive requirements are understood so when those systems come in they're more robust and can be more easily integrated into a vehicle," he says.
As these opportunities to innovate multiply in the automotive industry, component suppliers are busy finding ways to maintain the operational flexibility necessary to accommodate the demands of their OEM customers. Many are adopting wireless controls to enable quick plant reconfigurations when a new technology hits the line.
"A lot of automotive suppliers might need to reconfigure their lines as they get different projects and jobs and the fact controls are wireless allows them to reconfigure their production line without rewiring the monitoring infrastructure," says Bob Gardner, senior product manager at Banner Engineering (www.bannerengineering.com), provider of wireless controls and sensors. "One company was doing speedometers and dashboards and their production lines were all monitored wirelessly so they knew from a central location the status of the pick and place machines. That allows them to meet their production schedules more reliably. If you have 20 pick and place lines running you may want to know how one in particular is operating, especially if it's for a customer that has an expedite on their order."
Challenges frequently arise in tiers 1 through 3 of the automotive supply chain. Financing technology improvements gets harder as financial times get harder—or even as these suppliers start emerging from hard times.
"Some of the tier 2s and smaller guys, particularly privately owned, are seeing some difficulty in getting financing or credit, even with a solid book of business," says Jim Zamjahn, program development manager for AIAG. "That's why managing down the supply chain becomes an issue. GM was signing teams of engineers to work down the chain to make sure a quality problem at a tier 2 didn't show up in their assembly plant."
Tier issues can pose big capacity, quality and capability challenges for OEMs. Just knowing who your tier 2 and higher suppliers are can be a mystery in the automotive industry. The consequences of such blindness became visible after the Japanese tsunami a few years ago.
"In many cases tier one suppliers don't want their customers to know who their suppliers are so it's somewhat problematic," Zamjahn continues. "So visibility, from ‘Where are my suppliers?' to ‘Where are my parts in transit?,' is becoming increasingly important."
Throw in political and trade issues like conflict minerals and the consequences of poor supply chain visibility multiply. For example, Apple's use of Foxconn in China with its reputed use of slave labor and the bribery charges made against Walmart in Mexico may come to mind. Those problems fall under the category of risk management, where a company's good name is at stake.
AIAG is working on those challenges for the industry. As far as conflict minerals, for example, it has a system in place to track compliance down through the tiers, even without a bill of material.
"We're working on some programs with U.S. Customs on C-TPAT, the Customs trade partnership against terrorism," Zamjahn says. "That's a common database system that will provide more information regarding security of supply chains as well as facilitate trade and relieve some of the burden being put on suppliers by all these regulations coming at them."
Continuity of vision, just like business continuity, requires best practice guidelines. Those guidelines are only as good as the execution behind them, and in the automotive industry that's leading OEMs and suppliers down the road of collaboration. After all, at the end of that road they want you to get behind the wheel of their ride.
The new initiative will assess the risks posed by the industry’s principal raw materials — mica, cobalt, rubber and leather, amongst others. “This will allow Drive Sustainability to identify the most impactful activities to pursue in order to address the human, ethical and environmental issues within the supply chain,” said Stefan Crets, Executive Director of CSR Europe, which coordinates the partnership.
The Dragonfly Initiative, a specialized sustainability advisory firm, will conduct the risk assessments. Results are expected in January 2018 and once input from stakeholders is received, Drive Sustainability will put together an action plan to address the identified risks at the beginning of 2018.
According to CSR Europe, Drive Sustainability is currently in talks with the Responsible Mica Initiative to support to its ambition of achieving a 100 percent responsible Indian Mica supply chain over the next five years.
“A potential collaboration with the Responsible Mica Initiative is a learning opportunity for both organizations. For Drive Sustainability, this is an occasion to contribute to cross-sector actions to tackle child labor issues and unacceptable working conditions in the raw materials supply chain,” said Crets. “We invite all suppliers and stakeholders along the value chain to collaborate with us in order to obtain sustainable sourcing of raw materials.”
Drive Sustainability was established five years ago. The group has already adopted a common sustainability approach to monitor compliance, promote its sustainability principles through the procurement process and organize capacity building actions, such as supplier trainings and local supplier networks.
“This is a perfect opportunity for an integrated approach amongst auto companies to come together and share a common platform for how we look at some of the very important aspects of sustainability, like working conditions and our collective environmental footprint,” said Bob Holycross, VP of Sustainability, Environment and Safety Engineering of Ford Europe. The Drive Sustainability initiative builds on the company’s own “Partnership for a Cleaner Environment Program,” which provides monitoring tools to help suppliers track and achieve their own sustainability goals, report their progress and share their best practices.
As the industry begins to put a greater emphasis on electric vehicles — which rely on materials, such as cobalt, that are typically sourced from high-risk countries — the Raw Materials Observatory offers automakers with a critical tool to prevent both reputational risk and regulatory action, as well as a roadmap to better, more sustainable sourcing.