GM's Bill Hurles (left) with the winning team was made up of: Caleb Harshbarger, a junior from Botkins, Ohio; Xianwu (Ken) Lin, a junior from China; Christine Buehler, a junior (third year) from Omaha, Nebraska; and Daniel Ruffley, senior (fourth year) from Cincinnati, Ohio.
The expansion of North American vehicle production and the continuing globalisation of markets and supply chains have meant that manufacturers and logistics providers are recruiting even at a time of high unemplyment elsewhere in the US. “Job demand in supply chain is 90-95% right now,” said Bill Hurles, executive director for supply chain at General Motors. “Supply chain specialists are in high demand at GM and in the auto industry.”
This was evident at the GM/Wayne State University Supply Chain competition this past autumn. Held at the Renaissance Center in downtown Detroit, it featured presentations by teams from 16 universities based on challenges written and judged by companies supporting the event, including General Motors, Delphi, Lear, Bridgestone, Ryder and the AIAG.
The competition, organised by Wayne State University’s School of Business Administration, was also an opportunity for recruitment and education in the supply chain. GM’s Christine Krathwohl, executive director of global logistics and supplier diversity, said it was important to send a message to young people about the opportunities in logistics. “We need to be talking to these students and we need to be selling them on the benefits of working for GM,” she explained.
Analysing total supply chain costs
University teams were given details of a case several weeks in advance of the conference. They were split into four regional divisions to present their cases to a judging panel made up of supply chain and logistics executives. Four regional winners were selected after the first day and given a new case for which they had only one night to prepare before presenting their recommendations the next morning.
In the initial case, the students were told that GM was considering pulling forward the launch date of the 2014 Chevrolet Malibu Eco from July 2013 to gain market share and increase profitability. A range of constraints, costs and lead-time data was provided, which the students used to make recommendations on what would be the most feasible and cost-effective date to pull production forward to, including considerations for a shutdown period and conversion costs for lost production, supplier changes and logistics cost.
The case was based on real business problems (GM did actually pull forward the launch of the 2013 Malibu Eco) with costs and data provided to students that were generally accurate. For example, students had to decide between using two different rubber polymers for tyre manufacturer Bridgestone in building tyres for the new Malibu – one from Japan that would be ready immediately, and another from North America that would not be ready until later in 2013. The Japanese polymer would allow a faster start time for production but would also require more logistics and inventory costs as well as longer lead times. Furthermore, the Japanese polymer had a 20% chance of not being validated for production, necessitating a $500,000 cost for testing. Students needed to consider every cost, strategic and profit factor.
In another of the case’s factors, GM was faced with two different factory sites for its seat supplier, Lear – a brownfield site 10 miles (16km) from GM’s Detroit-Hamtramck plant, where the Malibu is built, or a new plant that would be built more than 100 miles away. The per-unit costs of the new site would be lower, but the factory would not be ready until April. The students had to consider the logistics and inventory carrying costs of supplying the sites from further distances.
Although the case was a simplified version of the thousands of supply considerations that would go into changing a launch date, it demonstrated the critical thinking required in such decisions. Some university teams, for example, opted to dual-source the rubber polymers, while others eliminated the Japanese polymer altogether based on validation risks. Several student teams also chose to eliminate the Lear brownfield factory once the new facility came online, while others determined that the risk to just-in-time manufacturing and the effects of logistics and inventory cost would render the closer factory more cost-effective.
Judges analysed the students’ reasoning, presentation and creativity more so than their choice of ‘correct’ sourcing decisions or production start dates. The four regional winners – Howard University, Miami University of Ohio, Michigan State and Penn State – each selected different start dates. One of the judges and authors of the case, Derrick Mitchell, responsible for supplier development and diversity at Lear, pointed out that each of the selected dates had a valid justification.
“I went into this competition thinking that March 4th was actually the date to pull forward production, but after listening to each presentation, I realised that they could all be right,” he said.
Although there were effectively no wrong answers, the judges revealed that logistics and inventory considerations should have played a significant part in the students’ decisions. Another judge and case author, Jeff Kosloski, Ryder’s group director for customer logistics, pointed out that, in the case of the Lear seat factories, the extra 100 miles in transport should have been viewed as critical.
“We wanted the students to understand the importance of just-in-time production and logistics,” he said. “Many were eager to use that facility 108 miles away, but the costs of moving the seats this distance add up very quickly.”
But the judges also revealed that logistics should not always stand in the way of sourcing decisions either. Bill Prince, a purchasing manager at GM, said the Japanese polymer would be worth the costs to enable production to start sooner, while the shipping costs could be mitigated by a full-container-load solution. Judges also agreed that the 20% non-validation risk was low relative to the advantages in this instance, and therefore worth the $500,000 testing costs.
The winning approach: alternative transport and business continuity
The final case was less specific and data-driven than the first, and depended more on students’ risk assessments. It stated that Delphi’s factories for numerous components in the Malibu, including wiring and instrument panel harnesses, were single-sourced from different locations in Mexico. Considering there have been ‘supply chain disruptions’ in the country, students were asked to consider the risks, advantages and disadvantages of Mexican supply, and to give their recommendations. The potential costs of engineering changes for each product were given, as well as pallet quantities, dual-tooling investment costs and weights per commodity.
Judges selected Miami University as the winning case. In contrast to other presentations, which recommended dual sourcing or even shifting production out of Mexico to avoid disruptions because of drug-related violence, Miami’s team was more measured in its assessment of the risks, with research suggesting that the impact to Delphi’s production was not high enough to warrant changing location. Rather than investing in dual tooling or warehousing that would compromise Delphi’s ‘lean strategy’, the team opted to maintain current production and to mitigate risk by introducing air freight shipments where necessary.
This approach was coupled with a ‘business continuity plan’ that would include GM working more closely with Delphi in areas of supplier communication and crisis management. According to John Taylor, associate professor and chair of the Department of Marketing and Supply Chain Management at Wayne State, the judges selected Miami Ohio thanks to the team’s extensive research and the “viability” of its plan. “The judges noted that the team had carried out very extensive and considered research on Mexico and Delphi,” he said. “They presented a very viable solution that the judges expected would also have the lowest cost.”
Miami looks at ‘realistic’ options
The Miami team told Automotive Logistics that they had based their decisions on assessment of the actual risks posed by the violence in Mexico versus the substantial costs of dual tooling. “On a daily basis, it is more realistic to rely on alternative transport than to change your production locations,” said Christine Buehler. “Sometimes you have to call your 3PL for a truck or a plane. It is more realistic than building a $2m warehouse in which something negative still might happen.”
Caleb Harshbarger agreed that a focus on supplier relations and communication could yield more positive and realistic benefits than shifting supply from Mexico. “It’s better to have good communication with your supply chain and, if push comes to shove, shift to an air charter if you need it,” he said.
Miami’s consideration of Delphi’s lean logistics approach and also for the costs of dual tooling may have been one of the factors that put it ahead. “Everyone wants dual tooling but nobody wants to pay for it,” said another judge, Rick Birch, responsible for global production control and lean at Delphi. “It’s actually very difficult to arrange the flow and cycle times for dual sourcing as well.”
A bold vision by the runner up
The first runner-up team, Howard University, caught the judges’ attention for its bold and creative ideas. The team, which included juniors James Thompson, Adeshile Allinson, Travis Smith and senior Grayson Mitchell, took a more radical approach in recommending that Delphi shift production away from the locations on the border that it deemed to be at highest risk of disruption.
They recommended that some of the production be shifted to lower risk locations further away from the border in Mexico. For components prone to engineering changes, the team recommended building a warehouse in the Chicago area to be closer to the Malibu plant.
The team’s coup de grâce, however, was in its plan for payinge for changing locations. Taking the assumption that the Malibu pull-ahead had been successful and had generated significant profits for GM, the team suggested that Delphi could use “supplier leverage” to get GM to pay for relocating production.
While the judges applauded the team’s creativity, they pointed out issues with Howard’s approach. For example, moving Mexican production away from the border would not eliminate the need to pass through it, said GM’s Krathwohl. There were also questions over the labour costs of having a warehouse or production near Chicago.
The judges also smiled at the rationale for GM paying the relocation costs, Bill Hurles ultimately dismissed it. “There is no supplier leverage, nor should there be,” he said.
The team was nevertheless satisfied that it had learned lessons as well as pushed boundaries in ways that few others in the competition might have done.
“One concept that we could have explored more was the inventory costs and savings that would have come with the Chicago location, which might have put us over the top,” said Grayson Mitchell. “But we really wanted to establish ourselves as a serious supply chain organisation and I think we have.”
As with the winning Miami team, the Howard team had three juniors, each anxious to return next year. “We’ll fix our mistakes and I’ll see you next year,” said James Thompson.
Changing perceptions of automotive
The event’s aim was ultimately to give students the opportunity to network with industry leaders, as well as to showcase the automotive industry to students. Many were from cities far away from – and much warmer than – Detroit. Considering the turmoil of the automotive industry in recent years, it might not be surprising to find such students less interested in the automotive sector or living in the city.
But while some admitted that it wasn’t for them, the reaction among many students towards the idea of working in the automotive supply chain sector was positive. Daniel Ruffley, from the winning Miami University team, and a previous participant in the event, said that he agreed with a speech given by Ryder’s Tom Jones, general manager of supply chain solutions, about opportunity within the automotive logistics sector. “There is a lot opportunity for supply chain graduates to be put in development positions,” he said. “These companies are seeking younger people with fresh ideas.”
GM’s Krathwohl also emphasised her desire to be “an employer of choice”, where people are inspired to work for her team because “we share the same values”.
Learning more about GM’s corporate values in the supply chain was certainly valuable to students, but equally important perhaps was the chance for companies to learn more about the students’ values. Ruffley and his teammate Ken Lin, for example, put considerable focus on ethical business practices.
No matter where a company is doing business, whether Mexico or China, they should consider the values of their customers,” said Lin. “These values might seem secondary to business but you can see the risks from companies like Nike, which did a horrible job on [ethical supply chains] and it took them ten years to rebuild their reputation.”
The students also showed concern for environmental issues. Harshbarger, whose father was a General Motors’ dealer, said environmentally friendly cars and business operations should be an important part of a company like GM’s global image. “For me at least, the products we make, the different practices that we employ and how we treat our workers are an important part of how our nation is viewed in a global market,” he said. “You can see it from how [the US has] shifted from big cars in the 1990s to more environmentally friendly cars today. Our focus is being skewed towards treating the environment better and having more fuel efficiency while minimising cost to make us competitive globally.”
As well as emphasising greener cars and businesses, the students also showed enthusiasm for companies willing to innovate and adapt to new ideas – an area in which the automotive industry, including logistics, might be seen as trailing high-tech companies such as Apple.
“Every industry has to be ready to step over the line and try the next big thing to find new ideas,” said Howard’s Grayson Mitchell. “You might fail, but being able to step outside of your comfort zone is important.”
The good news for automotive companies, which have struggled to recruit top talent in the US in areas like engineering or computer programming, is that the students’ perception of the industry improved once they learned more about it. A tour of GM’s assembly plant in nearby Orion, for example, revealed how the carmaker had redesigned production and logistics to build a subcompact car competitively in the US. Several students also pointed to more creative advertising and marketing.
“The automotive industry is trying to find new ways to be efficient and creative,” said Dan Ruffley. “You can see it in their manufacturing, but also in their advertising and marketing, such as Chrysler’s ‘Imported from Detroit’ campaign.”
“The marketing and advertising approach has changed the image of the industry,” said Howard’s James Thompson.
“My peers and I might have had a preconceived notion of the auto industry as being stiff, but by doing this competition I think that it’s quite different,” said Howard’s Travis Smith. “It has taken an attitude more similar to that of a start-up.”
A ‘win-win’ for GM
Bill Hurles told Automotive Logistics he saw the competitions as a “win-win” experience since GM got the chance to hear new ideas and students gained an insight into the industry. “It’s also an opportunity for GM to give something back to the community,” he said.
Meanwhile Krathwohl said she was “blown away” by the level of creativity and quality of analysis among the students. She strongly urged the students to consider GM and the automotive logistics industry in their career focus, pointing to an increasingly global supply chain, with new factories and supply hubs opening in Indonesia, Vietnam and Russia – all exciting opportunities for graduates. However, maybe the land of opportunity – for now, at least – could lie closer to home, in the motor city itself.