quality & delivery risks in the automotive supply chain
TRANSCRIPT
Proactively Managing Quality & Delivery Risks in
the Automotive Supply Chain
SCAC/AIAG Supply Chain & Quality Conference September 6, 2018
Automotive Management Systems Experts
Terry Onica Director, Automotive, QAD
MMOG/LE Expert
Cathy FisherPresident, Quistem, LLC
ISO 9001/IATF 16949 QMS ExpertSCAC/AIAG Supply Chain & Quality
Conference September 6, 2018
Session Agenda➢ Intersection of Quality & Delivery risks
➢ 5 levels of risk to consider in Automotive Supply Chain
➢ Potential losses to your organization
➢ Lessons-learned from the field
➢ Framework for identifying Quality & Delivery risks
➢ Risk evaluation tools
SCAC/AIAG Supply Chain & Quality Conference September 6, 2018
Risk and Uncertainty
“We are in the midst of seeing more change in the next five years than we’ve seen in the last 50 years.”
Mary Barra, GM, December 2016
“This is an era in which the correctanswers are unknown.”Akio Toyoda, Toyota, November 2017
SCAC/AIAG Supply Chain & Quality Conference September 6, 2018
QualityCost
Delivery
SCAC/AIAG Supply Chain & Quality Conference September 6, 2018
RISK
Risk-Based Thinking & Assessment
ISO 9001:201
5Internatio
nal Quality
IATF 16949:20
16Automoti
ve Quality
MMOG/LE v4
Supply Chain
SCAC/AIAG Supply Chain & Quality Conference September 6, 2018
➢ Developed by AIAG/ Odette with OEMs, Suppliers and QAD
➢ Assessment tool to evaluate/select suppliers➢ Completed at the site level
➢ Benchmark against supply chain best practices
➢ Determines level of plant performance (e.g. A, B, C)
➢ Full and a Basic Assessment
➢ Currently, in the process of its 5th revision
What is MMOG/LE?
MMOG/LE = DeliveryIATF 16949 = Quality
SCAC/AIAG Supply Chain & Quality Conference September 6, 2018
1. Define
2. Prioritize
3. Develop action/contingency plans
4. Train, test, validate
5. Assess supplier risk
6. Proactively reduce
7. Incorporate lessons learned
8. Instructions for customer-owned processes
9. Require to the next tier
MMOG/LE Requirements for Risk
8SCAC/AIAG Supply Chain & Quality
Conference September 6, 2018
Risk in MMOG/LE v5➢ Ensured alignment with IATF 16949
➢ Requirement for Level A ➢ Cyber security policies
➢ Mapping of suppliers
➢ Risk assessment process is included in sub supplier terms and conditions
➢ Sub-suppliers must have a risk assessment process and contingency plans
➢ Sub-supplier risk must be included in all evaluations
SCAC/AIAG Supply Chain & Quality Conference September 6, 2018
IATF 16949 Supply Chain Risk Requirements
6.1.2.3 Contingency Plans➢ Prepare contingency
plans for continuity of supply in event of:➢ Key equipment failures➢ Interruption from
externally provided products, processes and services
➢ Cyber-attacks, etc.
8.4.1.2 Supplier Selection➢ Assessment of selected
supplier’s risk to product conformity and uninterrupted supply
➢ Supplier selection criteria:➢ Business continuity
planning, (e.g. disaster preparedness, contingency planning)
➢ Logistics process, etc.
SCAC/AIAG Supply Chain & Quality Conference September 6, 2018
Ford Customer-SpecificRequirements for
MMOG/LE 2.5.1/2.5.2
SCAC/AIAG Supply Chain & Quality Conference September 6, 2018
SCAC/AIAG Supply Chain & Quality Conference September 6, 2018
➢ Natural Disasters
➢ Packaging
➢ IT Systems (Cyber security, ERP, EDI, Bar Code scanners, etc.)
➢ Inventory loss
➢ Container loss
➢ Capacity
➢ Equipment failure
➢ Skills gaps
➢ Facilities/Utilities
➢ Domestic and international logistics
➢ Customs
➢ Labor shortages
➢ Geopolitical
Risk Considerations for Supply Chain and Quality
SCAC/AIAG Supply Chain & Quality Conference September 6, 2018
Levels of Risk
Unanticipated Emergencies
Anticipated Emergencies
Emerging risks
Operational Planning risks
Operational Day-to-Day risksSCAC/AIAG Supply Chain & Quality
Conference September 6, 2018
Unanticipated Emergencies
SCAC/AIAG Supply Chain & Quality Conference September 6, 2018
How could this affect our organization?
Unanticipated Emergencies➢ Natural, and sometimes man-made disasters➢ May not be able to anticipate such disruptions➢ Few and infrequent➢ Tsunamis; earthquakes; explosions➢ Potential impact: devastating; loss of business➢ Risk strategy: What can we learn from these?
How can we prepare in case?➢ Management review; sourcing strategy
SCAC/AIAG Supply Chain & Quality Conference September 6, 2018
Anticipated Emergencies
SCAC/AIAG Supply Chain & Quality Conference September 6, 2018
How robust is our Emergency Action Plan?
Anticipated Emergencies➢ Natural, and sometimes man-made disasters
➢ Hurricanes; floods; winter storms; utility curtailment
➢ Potential impact: loss of production/output
➢ Risk strategy: Emergency Action Planning with periodic exercising/testing; early-warning and preparation
SCAC/AIAG Supply Chain & Quality Conference September 6, 2018
SCAC/AIAG Supply Chain & Quality Conference September 6, 2018
Emerging Risks
Emerging Risks➢ Internal: workforce; infrastructure
➢ External: technological; financial; geo-political
➢ Potential impact: obsolescence; loss of business to competition
➢ Risk strategy: anticipate; actively monitor and review internal & external issues; apply Risk Framework to support contingency planning
SCAC/AIAG Supply Chain & Quality Conference September 6, 2018
Risk Framework
SCAC/AIAG Supply Chain & Quality Conference September 6, 2018
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➢ OEMs released an AIAG guideline developed by:
➢ Goal: Protect information between the OEMs and their business partners
➢ The VDA has issued cyber security guidelines
Implementing Cyber Security Best Practices
SCAC/AIAG Supply Chain & Quality Conference September 6, 2018
Operational Planning Risks
SCAC/AIAG Supply Chain & Quality Conference September 6, 2018
http://www.takatapanel.com/panel-report/
Operational Planning Risks➢ Proactive consideration of internal and
external influences in consistently fulfilling requirements
➢ Potential impact: late launch; early field failures; reduced profitability
➢ Risk strategy: APQP; feasibility; product-specific contingency planning, (design alternatives, back-up processes); apply across supply chain
SCAC/AIAG Supply Chain & Quality Conference September 6, 2018
SCAC/AIAG Supply Chain & Quality Conference September 6, 2018
Core Tools ensure proactive Supply Chain risk management
SCAC/AIAG Supply Chain & Quality Conference September 6, 2018
Operational Day-to-Day Risks
Operational Day-to-Day Risks➢ *It happens!➢ Critical equipment failure; absenteeism;
transportation issues➢ Potential impact: production downtime, late
deliveries; premium freight➢ Risk strategy: Monitoring and early
communication along supply chain; back-up production plans; safety stock; spare parts; alternative sources
SCAC/AIAG Supply Chain & Quality Conference September 6, 2018
➢ Mapping of supplier locations➢ Natural disasters, trade wars,
infrastructure, labor issues, etc.
➢ Financial viability
➢ Quality
➢ Delivery
➢ Annual risk assessments
➢ Turning insights into actions
Risk Considerations for Sub Suppliers
Look Beyond Your Immediate Suppliers!
SCAC/AIAG Supply Chain & Quality Conference September 6, 2018
Disaster recovery: Prepared for the worst?18 January 2018 | Malcolm Wheatley
these events in Japan served as a wake-up call. Rather than continue to respond to supply chain disruption through crisis management techniques, it resolved to be more proactive in terms of supply chain risk management. More specifically, a decision was made to use emerging technologies to digitally overlay disruptive events on a global map of all its suppliers, irrespective of their tier
SCAC/AIAG Supply Chain & Quality Conference September 6, 2018
Develop & Execute Action/Risk Plans
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Action/Contingency Plans Should Include:
Key contacts ✓
Containment actions ✓
Recovery steps to normal
operations ✓
Train, review, test, validate ✓
Lessons learned ✓
Ensure plans:➢ Work on all shifts
➢ Are in one document and one location
➢ Accessible on/off site
➢ Identify internal translators
SCAC/AIAG Supply Chain & Quality Conference September 6, 2018
➢ Track performance objectives
➢ Identify and track risks➢ Missing targets
➢ Corrective actions
➢ External, Internal andsupplier audits
➢ Customer and supplier performance
➢ Store action/contingency plans
➢ Track employee training
➢ Enterprise customer and supplier visibility
Leveraging an Automated Quality Management System
SCAC/AIAG Supply Chain & Quality Conference September 6, 2018
➢ 1.0 Basic contingency plans
➢ 2.0 Introduction of risk management
➢ 3.0 Risk-based thinking
➢ 4.0 Uncertainty advantage*
Evolution of Risk Management
*Gary S. Lynch
• Case study:
• Xirallic
– Pigment used in paint
– Many OEMs rely on Xirallic
– Produced by a single source from a single factory in Japan
• Result: 4 month recovery advantage
– Already seeking alternatives
– Cut-over to a new supplier in 5 weeks. Other OEMs didn’t resume production for 5 months
Example: Uncertainty Advantage
➢ The industry is rapidly transforming
➢ Technology is advancing faster than ever
➢ The supply chain is at high risk fromevery imaginable aspect
➢ Risk must be considered enterprise-wide
➢ Are you ready for a market advantage?
Summary & Conclusions
“Risk abatement is front and center.” Joseph McCabe, AutoForecast, July 2018
SCAC/AIAG Supply Chain & Quality Conference September 6, 2018
SCAC/AIAG Supply Chain & Quality Conference September 6, 2018
How are you systematically managing these 5 levels of risk in
your Supply Chain?
SCAC/AIAG Supply Chain & Quality Conference September 6, 2018
Thank you for joining us for today’s session
Terry Onica Director, Automotive, QAD
QAD.com
Cathy FisherPresident, Quistem, LLC
Quistem.com
SCAC/AIAG Supply Chain & Quality Conference September 6, 2018