Automotive sharks in the sea of supply chain

Loads of attention for supply chain leadership goes to the stars of hi-tech and consumer packaged goods. And yet, for all the fanfare, I’ve come to think that it’s really the automotive value chain that is the most evolved, efficient, purpose-built beast in the supply chain kingdom – sort of like sharks, the ancient apex predator of the sea.

I say this now knowing that Gartner’s upcoming Supply Chain Top 25 featured only one true auto maker last year (Ford at #22) and is unlikely to change much this year. This seems a shame when the best in this sector have pioneered so much of what the rest of us follow today.

End to end from the beginning

Last month I co-authored a report on design for profitability that drilled into several essential practices that better tie engineering and new product development to supply chain to improve lifecycle profitability. The three main takeaways (that platforming is everything; that supplier engagement is essential; and that programme management is really orchestration) are old news in automotive.

We featured an example of Fiat’s use of platforms, for instance, as a winner and GM’s bad call on the Cobalt ignition switch as a loser. In both cases, though, we were looking at long-established approaches that are only recently being learned in other sectors.

In particular, the recommendation that supplier collaboration be used to support innovation has been around for so long in automotive that the big OEMs have traded places on the leader board of supplier relations, as tracked by the annual Working Relations Index, since 2002.

The 2014 results, released earlier this week, show that, after several years of worsening relations, Toyota and Honda are once again extending their lead over both US and German OEMs (with the notable exception of BMW). Automotive has come full circle here, having gone from initially embracing suppliers’ innovation, to grinding them for cost savings, and finally back to collaboration.

The evolutionary process has played tricks on our minds. Foundational supply chain breakthroughs such as lean production, manufacturing automation and modular design were born in automotive, but have somehow taken on a veneer of rust as we’ve come to take them for granted. How, I wonder, is this possible when the product rendered by this supply chain has much of the complexity and mission criticality of an aircraft but volumes like a laptop?

These guys deserve more credit.

This shark keeps hunting

This little love letter to car makers is not just about nostalgia. It’s also a tip of the hat to leadership for the future that seems to be coming out of Detroit and Munich and who knows where else. One of our recent webinars, for instance, explores the case study of Ford’s use of a sophisticated risk modelling technique developed with David Simchi-Levi at MIT.

The approach used “time-to-recover” and “time-to-survive” analyses of over 5,000 suppliers mapped against profit impact, allowing the big OEM to isolate and manage critical exposures in detail. Considering how big a deal supply chain risk has become, it’s fair to say this case offers direction for anyone.

The metal-banging image of automotive is also well out of line with another interesting fact, which is that automotive respondents to our CSCO survey last year were nearly three times more likely to use social media analysis to track disruptions in supply chain.

Almost 4 in 10 auto sector respondents are currently doing this, compared with just 14% of the overall population. Another webinar in our library gets into some detail here, explaining how BMW uses a two-stage selection model with an embedded learning algorithm to screen huge volumes of unstructured data from the web. This lets it flag work stoppages, supplier problems or quality issues before they hit the press and do something to fix it.

It’s interesting also that a cursory check of a few Facebook pages reveals a slightly surprising hierarchy of social media coolness:

Looking ahead, I can see some megatrends working very much in favour of automotive, including advanced robotics, the internet of things, digital feature provisioning and even regional manufacturing strategies.

Watch out, Apple!