Quality & Delivery Risks in the Automotive Supply Chain ...

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


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


QualityCost

Delivery


RISK

Risk-Based Thinking & Assessment

ISO 9001:201

5Internatio

nal Quality

IATF 16949:20

16Automoti

ve Quality

MMOG/LE v4

Supply Chain


➢ 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


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


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


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.


Ford Customer-SpecificRequirements for

MMOG/LE 2.5.1/2.5.2



➢ 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


Levels of Risk

Unanticipated Emergencies

Anticipated Emergencies

Emerging risks

Operational Planning risks

Operational Day-to-Day risksSCAC/AIAG Supply Chain & Quality


Unanticipated Emergencies


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


Anticipated Emergencies


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



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


Risk Framework


22

➢ 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


Operational Planning Risks


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



Core Tools ensure proactive Supply Chain risk management


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


➢ 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!


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


Develop & Execute Action/Risk Plans

31

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


➢ 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


➢ 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



How are you systematically managing these 5 levels of risk in

your Supply Chain?


Thank you for joining us for today’s session

Terry Onica Director, Automotive, QAD

QAD.com

Cathy FisherPresident, Quistem, LLC

Quistem.com


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