All supply chains have fundamentally the same objectives: to deliver a product or service at the right time, in the right quantity, with the right quality - and in the most cost-effective manner.
Now, while they may share the same objectives, supply chains can provide different levels of complexity and challenge across sectors. The high volume and high complexity of the automotive sector contrasts with the similar complexity but lower volumes needed by aerospace or marine. Within automotive a vehicle can be assembled in a matter of hours with reliance on just in time production, whilst in marine the construction of a vessel may take years, thus posing significantly different challenges, both in procurement, product development and manufacturing, when compared to the world of mass production.
Whilst automotive is still widely regarded as a leading provider of world class supply chains and productivity, there is no doubt that other sectors have made steady progress in their development and some of this can be attributed to the transfer of best practice from automotive.
As the auto sector itself now moves into a different level of complexity and volume it is also learning, with increasing frequency, from other sectors such as aerospace and marine. A good example is the increased demand being seen by Jaguar Land Rover for high end, personalised vehicles requiring low volume, specialised components which can only typically be provided by smaller, specialist motorsport suppliers.
A further area of cross over, as a result of a growing interest in new materials such as lightweight composites, is drawing automotive manufacturers like McLaren towards suppliers who have traditionally been part of the aerospace sector.
The three most common problems
These insights were gained from adapting our own automotive supply chain heritage to deliver best practice for supply chains that operate very different levels of volume and varying degrees of complexity:
Our experience tells us that supply chain issues are derived from any number of sources. However, we would broadly categorise the origin of chronic issues within three key areas, namely:
- The capability of suppliers (particularly, smaller, specialist providers) to be able to meet the ever-increasing demands of Original Equipment Manufacturers (OEMs), Primes and their customers
- The capability and behaviours of the Primes and OEMs to be able to manage the complex demands that they put onto their supply chain – and the subsequent ineffective processes which are used to manage these demands and which are often at the root cause of issues.
- The ability of Primes, OEMs and their suppliers to manage the life cycle of products - particularly the development and pre-production phase of the product/process design, proving and approval.
The root cause of issues here can be many and varied; we have identified some more common examples of typical causes, which can become the basis of immediate focus:
Capability of suppliers
- Many have limited capability in business planning, ability to invest in technical capability and understanding of product costs. This can make them uncompetitive, resulting in the OEMs sourcing from other, less preferred organisations or geographies.
- Often suppliers will lack the operational basics at shop floor level, including good health and safety, adherence to control plans, standard operating procedures, workflow planning and problem resolution systems. This drives poor quality, productivity and delivery.
- This lack of basics often means that fundamental process data such as capacity and lead times are not fully understood or managed. This is compounded when their customer's requirements change, such as a ramp up to higher volumes, and at which point previously hidden process issues may suddenly emerge.
Capability of OEMs & Primes
- Supply sourcing and selection is challenging. E.g in low volume supply conventional supplier assessment and selection processes can be inappropriate; the processes are often geared towards mass production supply. The result is that the most suitable suppliers can sometimes be disqualified, or poor suppliers selected.
- When working with many suppliers it may be the case that it is the customer’s processes and ways of working can be the real root cause of many issues. This impacts performance and relationships, creating conflict, distrust and a blame culture.
Product / process development and approval
- The manufacture of precision, high-technology components to achieve the original design intent is becoming more challenging. This produces an increased need for engineering concessions (which are difficult in themselves to manage) that may go on to impact product quality and delivery.
- We see more and more examples of temporarily approved product and processes enduring beyond the start of production
What actions can you take to address these issues?
Capability of suppliers
Toyota learned the value of pro-actively investing in their own supply chain to build capability and collaboration. Several OEMs and Primes have followed this lead. For example, Sharing In Growth was established in 2013 through a collaboration with Industry and the UK Government. A major manufacturer in nuclear and aerospace, seeking to secure and increase its sourcing from UK, recognised that the existing supply base was not fit for purpose in the long term.
A cross sector, collaborative strategic programme was launched in the nuclear and aerospace supply chain. This is a long-term programme, sponsored by a major prime, with the aim of collectively increasing capability and competitiveness in UK supply chains.
63 specialist suppliers have so far been engaged in the programme. It looks to identify gaps in competitiveness and bring together a multi-functional team of expert partners who then support suppliers as they work to close those gaps. Unipart are proud to be an original partner on the Sharing In Growth initiative. We provide expert capability to lead and deliver operational excellence as part of the overall programme.
Capability of OEMs & Primes
OEMs and Primes are becoming more and more aware of the impacts that their own processes and behaviours are having on their supply chains. Through root cause analysis many have been surprised to discover that issues that they thought originated from their suppliers, were only symptoms of inadequate processes or management within their own organisations. For example, a major high volume, luxury car manufacturer needing to diversify into lower volume, specialist components for customised models saw the need to develop a new portfolio of suppliers. Many of these would be highly specialist and very low volume, often drawn from aero and motorsport industries.
It was soon apparent that their standard supplier assessment criteria were not inappropriate, as all the prospective specialist suppliers were being disqualified. The reason for rejection was the lack of adherence to mass production systems even though their own systems were considered to be entirely fit for purpose. Another issue was the need to overcome the culture and change the behaviours of their assessment teams who were more familiar with mass production and subsequently lacked the flexibility and assessment capabilities to make balanced judgements. In this instance, Unipart was asked to develop and embed a new team of supplier development engineers. The new team reviewed existing assessments and support processes and then modified them to suit lower volume, specialist suppliers without compromising the high demands of quality, cost and delivery. This was achieved and fully handed over to the OEM once the new system and processes where proven to be effective and sustainable.
Product and Process Development
Of critical importance in any manufactured product, is the design and development stage prior to the start of production. During this pre-production phase original design intent is evaluated and prototype parts are used to validate the parts and processes for approval and sign off.
Achieving the original design intent and confirming the reliability, repeatability and capability of processes is critical during this phase, but it is often not well managed - with limited collaboration between critical partners. This results in delays to the start of production, or the carrying of temporary approvals into the production process, thus jeopardising quality, cost and delivery.
There are now many examples of OEMs seeking to develop standards and controls during this phase and taking a more collaborative approach. Unipart has recently assisted a major, high volume automotive OEM to introduce systems that ensured all pre-production trials were representative of the conditions required for the start of production. This ensured timely development and approval. A key component of the process was to create a regular schedule of formal reviews and workshops, involving all key partners including engineering, purchasing, supplier technical assistance, supplier quality, logistics and, of course, the supplier themselves. By harnessing the collective knowledge and managing subsequent actions and improvements, this ensured timely approval of parts and processes to the required quality and cost.
Have you experienced similar challenges? Can you add further insight from your industry? If you are facing similar challenges to those above then we would be happy to discuss these with you.