The Future of Supply Chain and Quality Management in the Auto Industry

[Transcript]

Jan Griffiths: 00:03

Welcome to the Auto Supply Chain Prophets Podcast where we help you prepare for the future in the auto supply chain. I'm Jan Griffiths, your co-host and producer.

Cathy Fisher: 00:13

I'm Cathy Fisher, your podcast host. Our mission is to help automotive manufacturers recognize, prepare for and profit from whatever comes next in the auto supply chain.

Terry Onica: 00:23

I'm Terry Onica, your podcast host. I will be giving you best practices and key supply chain insights from industry leaders.

Jan Griffiths: 00:29

Because the auto supply chain is where the money is. Let's dive in.

Jan Griffiths: 00:37

Hello, and welcome to another episode of the Auto Supply Chain Prophets podcast. And today, we're gonna take a macro view of the industry and the standards in our beloved auto industry. But first, let's check in with my co-hosts. Cathy Fisher, how are you doing today?

Cathy Fisher: 00:58

I'm great, Jan. How are you?

Jan Griffiths: 01:00

Oh, not too bad. It's been a week. Terry Onica, how are you today?

Terry Onica: 01:04

I'm doing great. I'm glad it's a cooler day in Michigan today.

Jan Griffiths: 01:07

I know, before we get into the meat of this episode, Cathy, what have you been up to this past week?

Cathy Fisher: 01:13

I have been preparing for the second half of 2023. We have been reviewing our progress so far this year, which has been quite amazing. We've had some really good client work that we've been doing and just kind of gearing up for the second half of the year and getting ready also for some more learning. From my standpoint, I always like to sharpen the saw.

Jan Griffiths: 01:35

You know, you've been in business for how many years now?

Cathy Fisher: 01:37

27

Jan Griffiths: 01:39

27 years, you've gone through this process a number of times, I am always interested to know as you hone in that strategic planning process. What are you doing differently this time? That’s perhaps better than previous years.

Cathy Fisher: 01:55

I think it really starts with having clarity around who your clients are, who you're working with, the markets you're serving, and most importantly, the value that you're bringing to your clients and the problems you're helping them solve. So, we've been really lucky at being able to fine tune that by leaning into the automotive space for the past 20, actually 40 years of my career. And in that time, we've really been able to, say, streamline how we go about recognizing, how we add value to our clients, as well as what the most pressing problems that they're facing currently are, so that we can add maximum value. That's great.

Jan Griffiths: 02:34

I love that. Terry, what do you been up to this past week?

Terry Onica: 02:36

This week, I did some MMOG/LE training with a fully plot class of 25 students. So, that's a big virtual class for me that's always fun to manage at. Another big project I'm working on QAD is our web refresh for our content. So, all the verticals are updating the content on the web. So, I'm working on the automotive and really giving it a new makeover. So, it's been fun.

Jan Griffiths: 03:01

Don't talk to me about web refresh. I'm going through the same thing right now. I can't even tell you how many times I've updated my website. But I would like to tie both of these things together, because you have to have a clear strategy and know who your clients are going back to what Cathy has been working on this week. Because without that you can't generate the copy, as we say, which means the words that you actually have on your website. You can't generate the copy unless you know who your target clients are. So, it all ties in together. And for me, this past week, I celebrated an anniversary five years ago, I walked away from my corporate job.

Cathy Fisher: 03:49

Congratulations. That's wonderful.

Jan Griffiths: 03:53

And what a journey it has been. And I have been tempted along the way to go back as we all have been entrepreneurs in this space. But I'm still here. I'm still standing, and authentic leadership is my jam. And I'm going to keep going.

Cathy Fisher: 04:07

Yeah. And the industry still needs our voices and our encouragement towards change with everything that the industry is facing right now. The transformation is just, it's a revolution.

Jan Griffiths: 04:20

Yeah, I agree. Well, culture transformation in our beloved industry is happening. I had some companies get it and on an accelerated path more than others. Let's talk a bit about the standards that go along with that. When I think of automotive standards, my mind automatically jumps back to the old AIAG blue books. I was one of the first people that really took that up and I was like, "AP QP Yeah!" In fact, I was working for Bosch back in the day. There was no AP QP training, and I made my own training tapes and brought people in for training sessions into the Bosch St. Joseph plant. And I mean, I was literally dragging manufacturing engineers that didn't want anything to do with it, literally dragging them in there. I mean, you know, I had to have food and everything right to get them in there. And I look back and I think, Boy, how far we've come from those days when there was resistance to just a little old AP QP planning. But that being said, what does the future look like? Cathy? What does the future look like from a standards perspective in this industry?

Cathy Fisher: 05:30

Well, I wish I had the crystal ball to tell you what's coming. I do know that there's changes that are in the pipeline, so to speak for the IETF 169 49, which is our current automotive quality management system standard. And there's also some work that's happening in reviewing and updating some of the core tools. I don't know specifically about AP QP, but I do know that there's a project that's going on right now with AIAG and VVA on harmonizing SPC members, statistical process control that was actually the first AIAG manual that was released in 1993. I think it was, yeah, so it's a long time ago that these blue books have been around. But what we've been seeing, you know, especially as we look at the impact that COVID has had to the industry, as well as the transformation that we're making rapidly into electrification and in the future, certainly autonomous vehicle, is our standards are not really keeping up. In my opinion, they really aren't, you know, we had talked back in the 2015 timeframe about the need to have more focus around software, and the impact that software has in vehicle systems, as well as the integration of software into the current technology and the vehicles. And we added a couple things into the IATF standard, but not really substantially reviewed the core tools, for instance, and in terms of how those need to be adjusted to reflect the level of technology, especially software that the industry is facing. And we've added as far as sanction interpretations to IATF 16949, some additional requirements around cybersecurity. But it's not necessarily looking at cybersecurity. From a systemic standpoint, it's more Hey, make sure cybersecurity is addressed as part of your contingency plan, and make sure that people are aware of cyber-attacks and that type of thing within the organization. So, my opinion is that we really need to take a strong look at our automotive standards, not just from the quality standpoint, Terry, what does it look like from your side in terms of MMO G/LE?

Terry Onica: 07:38

Well, MMO G/LE, we're pretty religious about updating it every three to four years. And actually, if you want to know how much time it actually takes, it takes a good year, because there's a lot of criteria in MMO G/LE. Our intent is never to replace IATF, nor is IATF ever to replace supply chain. But I think what you and I see is that they need to highlight words complimentary. So, in my AIAG, MMO G/LE training class, I teach in the industry, I've been bringing up the cross reference that we did, which shows where MMO G/LE and IATF complement each other. And I tell you that has been very hot in class, all the students want to have a copy of it. Because a lot of times they have some starting point or from a quality side, right, and they can use that. And it's helpful for the quality people to understand how that overlaps an MMO G/LE. So, I can see there's really good strong encouragement at the plant level for it, I still don't know if beyond the people that have to complete the assessments, understand the value of it. So, the plant manager, VPs of operations, CEOs, they feel like we're back to where we were where we're paying attention to the assessment when there's this event, and we've got a customer coming in to look at it. And then after that goes away, it all just gets wheeled away and filed and we just keep resubmitting our assessments. So, I see that a lot. I'm sure Cathy, do you see that on the quality side to where you put a lot in for the audit and then after that, that it just simmers afterwards? To an extent?

Jan Griffiths: 09:15

Yeah, I like that word simmers. Yeah, I think I think you're right. But I have to go back to a point that you just made Terry, you said that in your class people really like this document that shows that you mapped MMO G/LE and IATF. You know me, you know, I'd rather have a nice pick in the forehead and go through that, that exercise, but I am certainly glad that there are people like you and Cathy Fisher on the planet that want to do that. But I could see the benefit in doing that. Just in case our audience. They want to get their hands on that. Can they get that from you?

Terry Onica: 09:52

Yes, we can put on the websites and also, we'll make it available with this podcast. Absolutely.

Jan Griffiths: 09:52

Okay, in the show notes.

Terry Onica: 09:52

Yes.

Jan Griffiths: 09:55

So, what You see, Cathy, do you see that as being true? A lot of focus, a lot of effort on the actual assessment. And then as Terry said, it just kind of simmers.

Cathy Fisher: 10:08

Yeah, I think one of the issues is that manufacturers in the automotive supply chain are not viewing MMO G/LE as a set of criteria in defining their supply chain management system, I think we've got a long way in terms of establishing quality management systems back in the day, QoS 9000, ISO TS 16949. And now currently IATF 169 49. And over those iterations, because of the certification requirements that the OEMs and tier ones have of their suppliers, there's been a focus on building a management system, a collection of processes that are interrelated and work together in the organization, towards fulfilling the customer's requirements. But when we talk about fulfilling the customer's requirements, that includes delivery, which is all about supply chain, yet we don't really expand on the processes of supply chain as a management system in the same way that we do quality. And this is the advantage I see certainly with MMOG/LE that there's all your criteria organizations rather than just viewing this as all my customers asking me these questions about supply chain, I'm going to answer them for the assessment, they should be looking at those criteria from the standpoint of what are the processes inside of my organization that support this, and how are those processes working together in an integrated fashion, not just from a supply chain standpoint, but also connecting with quality, this is where this cross reference really helps them see that they can leverage existing processes and fulfilling some of those MMOG/LE criteria. And we also need to expand beyond that is not just quality and supply chain, we also need to be looking at some of the other factors, especially around sustainability, which is now a requirement in MMOG/LE, and I anticipate we're going to see some language around sustainability, if not in future versions of IATF, most possibly, and even the ISO 9001 standard and the future.

Jan Griffiths: 12:08

Terry, how do you see all of this mapping back to the 24 essential supply chain processes because that document really you've done a lot of the hard work the both of you co-authored this document. And it really is a total macro view of supply chain, and how to run your business what to focus on, right?

Terry Onica: 12:31

Absolutely. And you know, when you think of 24 essential supply chain processes, you think that's just a lot to focus on. But supply chain is not easy. I don't know where anybody really thinks that supply chain is easy, right? So, what Cathy and I did is we took MMOG/LE, Cathy went through it and looked at where it crosses over with IATF 16949. And then from there, we looked at the F three questions. So, an MMOG/LE and three questions is a core foundation of supply chain management. So, that's really where our 24 essential supply chain processes came, we made sure we address the most critical of those three questions, and then put that as a starting point out there for folks to take a look at. And I can tell you that those 24, Every time Cathy and I go out to work with customers on it. They can pick five, sometimes they say we want to go over every single one. There's just challenges and all those areas and people really recognize that they're failing in those areas. So, our assessments against those really helped to bring people back. Another thing I really want to mention right now that I see as a trend, and we're struggling in the industry is there's so many new people. So, every time I teach an AIAG MMOG/LE training course. And I go around to say let me know a little bit your experience with MMOG/LE very rarely do I get somebody that says I've been doing this for five years, it's always brand-new people. So, to me, it goes back to we're not documenting our processes. We don't have that culture yet in our plants, because when these new people come in, they lose all of that knowledge. So, something is going wrong there. I still think we're okay with just you know, premium freight trading things. Just get it there. That's our, that's our method. And we got to stop the madness because Cathy and I were talking earlier, we think sustainability, in automotive it should be so easy for us in supply chain because we've had lean. Lean is by eliminating waste and manufacturing, right? Yet why are we having this trouble in supply chain we shouldn't be having done. But I think lean in many cases was just people said they did it, but it was all about just cutting to the bone and not really applying the right processes and practices to get you the efficiencies that you need. It was all about just reducing costs. And I think that's where we went wrong in supply chain.

Jan Griffiths: 14:58

I think so. Let me give you a recovering Supply Chain Leaders perspective, right, I've spent as you know, I've spent 36 years in supply chain in automotive. And as a supply chain leader, I was measured on cost reduction on piece price reduction, right. And I was given a budget that would shrink typically every year. And you have to make a decision on where you're going to put your headcount. Now, the people that worked, I would say, on the guts of the ERP system, so setting up the part numbers plan for every part, all the advanced supply chain work that we know is important. Honestly, that would be one of the first positions that I would next because it did not tie directly to purchase price variance. So, if you're not, if you didn't tie directly to PPV, you're at risk. And it's because the leadership and the measurement system comes from the leadership comes from the CEOs, right? So, that flows all the way down. Now, the reality is that because you take out the people who really understand the ERP system, know how to set up a part number properly in the system, know how to do a plan, for every part, know how to walk across the aisle to the quality people and make sure that AP QP and all the program management disciplines are in place. Because those people are not there anymore, or you've skinny down so far, they can't be successful, that cost comes back and bite you in the butt later. Because you didn't have the right capacity at the supplier. That's a problem. Premium freight is hitting you left and right. So now you've got all this unplanned expense. It's about doing it right up front. Do you think Cathy, do you see some of that happening?

Cathy Fisher: 17:00

Absolutely. And you know, one of the things that comes to mind is that there's this thinking that supply chain comes down to purchase part variants, hello, purchasing is not the sum total of supply chain. In fact, it's just one piece, just like manufacturing is just one piece of supply chain. And until we move towards the supply chain orientation and managing our business, we're constantly going to be clipping a little bit here, clip a little bit there, and sub optimizing what systems we do have in place, right, and also losing a lot of organizational knowledge, which is essential for continuity. And ultimately what sustainability is all about. Sustainability is not just about environmental and paying your people and making sure that you've got governance in place, it's the entire realm of making sure that your business is going to be in business 10, 20, 30 years from now, that's what sustainability is really all about. And the only way that organizations can be successful at sustainability, is to view their business from a supply chain perspective, because all of those elements work together.

Terry Onica: 18:09

And break down the silos like Cathy and I said, how often do you hear the purchasing, pick the supplier, because they were low costs, and you're the Materials Manager say this supplier constantly disrupts us every day. But they were the cheapest supplier, so live with it, right? We got to get people working together and in all phases of supply chain. Otherwise, we will just continue to fight these battles. And it's just at the end of the day. It always feels like it's about cost and not about doing the right thing in the industry. And it's so frustrating for me, because I see it all the time when I go out to plants. And oh, Cathy does, too. We talked about all the time all the shenanigans that we see going on. I wish I could drag CEOs and VP of Operations with me to the plant and say, let's just go through the checklists with you standing here and see just how poor some of these plants are running. And a lot of times they want more, but they can't get it. Because it's viewed as something, oh, I got to invest in that. So, I don't want to spend money to maybe get more efficient to maybe give them the tools that they need. I don't want me times I go out to plants and they're running on, you know, green screens, black screens. Why? In 2023? Would anybody be on a black screen or a green screen? I just don't get it. So, it's just frustrating.

Jan Griffiths: 19:24

It is and the shenanigans you referred to. The shenanigans are typically the hallmark of a command-and-control culture that's been in existence in our industry for decades. Now. We've talked about this on this podcast before. There is an advantage to being a legacy auto supplier or manufacturer because you have infrastructure, you have systems you have an understanding of what for example, an ERP is you know what a quality system is, you know what the standards are, and the startup companies’ myths, a lot of that basic knowledge. However, the startups don't have so much of that cultural impetus to protect the silos. And I believe, and you've heard me mention this before, but when I spoke with Dr. Andy Palmer from a former CEO of Aston Martin, CEO of Nissan, Godfather of the EV, they called him. He knows a thing or two, right? He said, there is no idea that the startup culture is right, or legacy Auto is wrong, or vice versa. There is only the culture that you as a leader want for your organization, which means that the CEOs need to break the mold and start to define what is the culture they want? And think about that.

Cathy Fisher: 20:47

Yeah, and I think that there's a big opportunity right now that we can take the best of both worlds, right, we've got all of this history and legacy and knowledge that exists in the industry. But clearly, we're having to change the way that we're operating to compete with the new technology players who are coming in and challenging the EV space and autonomous vehicle space. And they're bringing some great ideas, some great perspectives. And this was really what prompted Terry and I to take a strong look at the automotive supply chain and quality realm is that as we looked at structures like Amazon, like, that's technology, and that's the competition that's coming in and challenging the automotive industry is not, let's adopt 100%, what they're doing is let's look at what's working for them. What's working for us in automotive, and how do we bring the two together to truly optimize the future of the industry from a supply chain perspective,

Terry Onica: 21:46

My dream is to see a traditional OEM and an EV. OEM come together really want to listen to each other and adopt each other's behavior. That would be an awesome company, because what I think is that the startups don't understand how to mass produce. That's where I see they start to fall. They don't understand that traditional companies understand mass startups, but they don't understand how to be lean and nimble and creative sometimes I think is the startups to that innovation culture that they have. So, I think the blend would be amazing.

Jan Griffiths: 22:18

I totally agree. They almost need to do what you guys did with IATF and MMOG/LE. Right? List the criteria, list the values and what they believe are the hallmarks of both cultures, and then mash them together and let's see where they need to go. I absolutely love that. So, for all of our tier ones, and OEMs, who are out there listening to the show today, if any of this has resonated with you and I suspect that it has done then please download the 24 essential supply chain processes. They are there to help you, it is a phenomenal starting point. Thank you, Cathy. Thank you, Terry. Thanks, Jan.

Jan Griffiths: 23:01

Are you ready to find the money in your supply chain? Visit www.autosupplychainprophets.com To learn how or click the link in the show notes below.