More than 16.5 million new cars hit the streets in the U.S. in 2014, making it the most successful year for the auto industry in a decade. At the same time, the automotive supply chain—from OEMs to suppliers—came under unprecedented scrutiny from regulators and customers after a wave of recalls.
Car parts suppliers are juggling that unusual contrast of both higher demands in production and ensuring new levels of visibility on quality control and component traceability. Many are now investing in new technologies and
processes that anticipate risk at the earliest stages of product development, identify volatility before an event turns into a major supply chain issue, and enable suppliers to trace the history of a single part from creation to its customer.
"When you look at where the industry is moving, we all have to be on the forefront of technology and a new way of doing things," says Ned Reckamp, head of supply chain management at Continental Automotive Systems. "We need to not just keep up with the speed of change, but be innovative with it as well."
New Levels of Traceability
Continental, a supplier of tires, brake systems, and powertrain and chassis components, has grown aggressively in recent years through a series of acquisitions. With different facilities using multiple systems across its operations, Continental recently standardized its manufacturing execution system (MES) for all of its U.S.-based facilities that manufacture electronics.
"It allows us to track the manufacture and sequence of events and have complete traceability," says Reckamp. "It's not just internally, but also all of our sub-suppliers for each and every product. I can tell what day a product was manufactured, what lot it came from and the supplier's traceability. All of that is critical today."
Continental can now instantly identify an issue as it happens, contain it, find its root cause and take corrective action. Over the next three years, the company hopes to roll out the system worldwide across all of its central electronics plants.
Identifying Defects Earlier
Another important trend cited by several suppliers is shorter timeframes to be production-ready, meaning plants need to identify design or production issues earlier than ever before. The sooner these issues are found on the design curve, the easier and cheaper it is correct them before ramping up.
Inteva Products, which produces roof systems, motors and electronics, has tried to address this trend by essentially assigning a birth certificate to every component that enters its value stream and track its progress through every stage of operations.
At Inteva's Adrian, Mich., plant, which produces instrument panels for pickup trucks for General Motors, a molded panel will go through several stages of processing. A scanned label can verify if a molded panel has entered its pre-treatment process before hitting the paint line.
Electronic controls have been in place in the automotive industry for many years now, such as the ability to track part numbers and ensure the right quality. What's new is this visibility is now moving to the upstream operations that feed the assembly lines in greater detail.
"We have more and more individual part control where we can flag issues as they happen," says Clive Smith, plant manager of Inteva's Adrian plant. "In the past, maybe we would have discovered the issue when it's on the assembly line or after it's gotten to the customer. Now, it's instant and that gives us a new level of quality control we've never had before."
Anticipating Disruptions, Not Reacting to Them
From the Fukashima tsunami and nuclear meltdown, to the Icelandic volcano eruption, to civil unrest, work stoppages and unseasonably cold weather, the auto industry has learned that events on the furthest reaches of the globe will reverberate downstream through the supply chain.
BorgWarner is taking steps by anticipating events—not reacting to them. The powertrain and transmission systems and components manufacturer has developed an automated supplier-monitoring system that identifies looming supplier problems so early and accurately that it can flag an issue before managers at a supplier see it on their radar.
BorgWarner's Supplier Performance Monitor, which first rolled out in Germany and Ireland three years ago, has played a crucial role in the company's efforts to reduce parts defects and thereby stock fewer surplus parts. According to the company, suppliers have reduced their parts per million (PPM) by 33%, meaning more of the parts delivered from suppliers are passing quality inspections.
About 230 suppliers are being monitored. BorgWarner intends to ultimately implement the system in the United States, other parts of Europe, India and Korea.
BorgWarner's system analyzes the quantity of parts in each delivery, comparing the figure with the original order and the number of parts that have to be returned for quality problems. It then weighs each delivery in greater detail than was previously possible, helping estimate the potential for future problems.
For example, an order might be flagged if a batch is supposed to be delivered all at once but the parts come in multiple shipments that deviate from the schedule. When a potential problem is spotted, BorgWarner employees will contact the supplier to confirm it, offer help and begin working on a solution as quickly as possible.
Analytics and Human Expertise
A powerful driver of innovation will continue to be the balance between the data new technologies are producing and the individuals reviewing that information. So while new investments and tools can help process information faster, it's still the human element that drives the next great leap.
The automotive supply chain has undergone massive amounts of change over the last 10 years, shifting toward a JIT business model and a super-lean, highly interdependent system. While wildly efficient, it was also brittle and susceptible to disruption on a massive scale.
"What you're seeing is a bigger effort to be more resilient and more aware of what's happening and when," says Carl Fowler, vice president of North America field sales and solutions at Menlo Worldwide Logistics, a third-party logistics provider. "The biggest enabler has been IT integration for all systems. There's no silver bullet—it takes multiple systems talking to each other. But automotive after many years is finally catching up with other industries on this."
That means being more flexible and imaginative in how suppliers define themselves, says Reckamp. Technologies are blurring the boundaries between physical and digital worlds. Reckamp sees a future with collaborative robots, utilizing Industry 4.0 (aka the Industrial Internet of Things), and mining Big Data to drive the next generation of manufacturing and quality control.
"You always need to embrace the change and recognize it's a journey and not a destination," says Reckamp. "It's a way to stay ahead of the competition, but also a way to improve the knowledge of your employees. The day you stop embracing new technologies is the day you stop being relevant."
Peter Alpern is a freelance writer covering topics related to manufacturing, technology and finance. He lives in the Pittsburgh, Pa., area.