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Blurring Links in the Supply Chain

Acquisitions, alliances, cross-company teams, cross-functional teams no matter how you look at it, the nature of the supply chain is undergoing tremendous change. This necessitates new managerial thinking and the ability to go for the breakthrough. Here's a look at what a leading Tier One supplier, Visteon, is doing...

In his more than 25 years in the auto industry, James W. Wynalek has seen a lot. He's been a product design engineer in body engineering...a business planning manager dealing with electronics and fuel handling...a plant manager...a chief engineer for rear-wheel-drive vehicle development. Now he's vice president and general manager of Visteon Exterior Systems Division. During his career, Wynalek says, he's been involved in "almost all aspects of the business." Which is certainly a good thing because nowadays, the automotive business—especially for suppliers like Visteon—is one where the boundaries are blurring not only between functions within an operation, but also at an enterprise level and even, in some cases, between companies.

According to Wynalek, "One of the largest challenges we face today is the industry's transition from a component-oriented, build-to-print environment to an integrated supply environment." No longer is it sufficient, at least at the first tier in the supply chain, to expect to have the customer supply a print for a part. For one thing, it's not just that the print has given way to a data file, but chances are, the OEM is expecting the supplier to actually engineer that data into existence. And, for another, the days of "a part" have given way to a requirement to provide an entire module, or a combination of a multitude of parts. This explains a number of things that are going on in the marketplace, not the least of which is the series of acquisitions that are occurring with a remarkable regularity.

As Wynalek puts it, market conditions are "continuously upping the ante in terms of the amount of content and the engineering expertise necessary to deliver a package." Once it was enough to produce a part. Now it is a matter of designing, engineering and producing a package, and managing those functions so as to meet (or beat) the customer's time frame and pricing points.

Blocks: Organizational & Mental.

But the path isn't necessarily a smooth one to travel. He points out, for example, that some purchasing organizations at OEMs are oriented toward components, not packages. While a system may be the real object of interest so far as a program manager may be concerned, if Purchasing is thinking in terms of discrete parts, there can be problems for the supplier that is looking to provide an integrated solution.

 

Another possible problem area may be found within a supplier's own group: "Some manufacturing organizations haven't come to grips with the needs of assembling systems for modules," Wynalek says. They are thinking and equipping themselves for what used to be appropriate.

Or there may even be a more fundamental issue. Everyone knows that the industry is now "global." But how many people really think in an international context. Having spent time overseas—Wynalek was director of European Electronics Operations for Ford for three years—he is sensitive to the issue of the differences between the U.S. and other parts of the world. He observes, "We tend to have one mental model of how business is done here." That model is important but insufficient. "You have to reload and reprogram when you get into some foreign markets," he explains. Suppliers that want to deal with customers around the world must take this into account.

Regardless, however, of where the customer is, Wynalek points out: "The real challenge for us"—by which he means Visteon, but this is, presumably, a challenge for all those who want to be an active player—"is to know our customers extremely well, to be extremely articulate about what capabilities we have, and to agree with our customers about where they want to go so that we have the right product and skills on tap where and when they need it." This necessitates considerable customer focus.

Although Visteon consists of seven divisions—Chassis Systems, Climate Control Systems, Electronics Systems, Exterior Systems, Glass Systems, Interior Systems, and Powertrain Control Systems—and an array of product lines and component groups within those divisions, the organization's management recognizes that it is becoming increasingly necessary to cut across those internal demarcations: "We are trying to create a macro, high-level focus on where Visteon would like to go." He says they are taking what he describes as an "enterprise view."

Measuring Differently.

When you get right down to it, anyone within a given organization tends to be measured on individual accomplishment, not that of the enterprise. Given that, individuals might think in terms of themselves, or their department, or their more-immediate area of interest long before they'd think of, say, Visteon (or whatever company they work for) as a whole. So if that is true, then how are they handling this at Visteon? Wynalek answers, "We're talking a lot more about how Visteon wins and are working a lot harder at how we can cross the business units and allow people to make tough compromises that may impact their financial performance but still get credit for helping the overall organization." Wynalek adds, candidly, "I would be kidding you if I said we had the winning recipe, but we do have some sterling examples beginning to pop up where people from business units have come together, have co-located, and have contributed their resources freely. They've begun to develop some products that are real breakthrough kinds of things." These breakthroughs are the consequence of cutting across boundaries. Because it is recognized that some people had to give up some of their "turf," in effect, for these breakthroughs to be realized, they will be rewarded, not penalized, because the organization benefits from their commitment.

This leads to an organizational approach at Visteon that has at least two levels: business and personal. About the former, the upper level, he remarks, "Some companies have a basic business strategy to throw cash up into the air and let the divisions fight for what they can get and compete against one another." This Darwinian approach may have had some benefits in an earlier business environment, but Wynalek thinks it is presently untenable: "The problem is that if you buy into the idea of the growing systems organization, the larger automotive environment I'm talking about, that strategy can't succeed because the next generation of products and systems requires collaboration rather that confrontation." The scrambling for the funds is not a good way to win friends and influence people between divisions.

As for the personal perspective, Wynalek suggests that open communications are key: "Many of us have felt over time that `I am my job.' If you change it, or one's responsibility, it causes uncertainty and concern. I think the key for anyone going through this change is to be very clear with your people about where you are going, what the business strategy is, and what the redeployment plan might look like."

Talk About It.

Wynalek takes communications very seriously. For example, there is a weekly hour-and-a-half meeting that he and his operating committee—including business unit directors, plant managers, supply personnel, etc.—conduct. According to Wynalek, there are "no stripes." Hierarchy isn't the important thing; what is important is that people feel that they can say what needs to be said without fear of subsequent negative repercussions. He admits, with candor, that when the meetings were first held, about a year-and-a-half ago, "I was ejected from four meetings in a row. They asked me not to come until we reached a comfort zone on what the real rules are." In other words, in order for there to be a free flow of information it is important that people not be inordinately concerned with what the boss wants to hear. Collaboration requires the free exchange of insights and information.

But there is considerable focus. At Visteon, they are working hard on operational excellence and lean manufacturing. On product development cycle time reduction. On systems engineering. On strategically managing the product portfolio. Wynalek says that one of the problems that exists in some organizations is that everything is presented as being important: "There are too many competing initiatives and there is no clarity for the people who have to execute." And he recognizes that execution is what really counts.

 

Survival At the Lower Tiers


One thing is clear. There are big Tier One suppliers. Oftentimes, the big are getting bigger. So what of those companies that are at lower tiers? What can they do? Jim Wynalek has a couple of suggestions. One is that the smaller suppliers align themselves with bigger suppliers. The other is that they work hard at enhancing the products they provide.

As for this enhancement approach, he explains that it is even important for large suppliers like Visteon. "All OEMs are expecting continuous cost reduction. Year after year, the costs must come down. Using conventional methods, we're barely able to keep up." So they are working to achieve "breakthroughs" in product design and processing, working to "enhance the value equation for the customer." He explains, "If they get different or better service, or a product configured differently that gives them better reliability or a better package or lighter weight, we can begin to work with them to manage the total cost equation."

While this might seem to be easier from the standpoint of someone who is supplying, or who has the potential to supply, an entire system, Wynalek thinks that it is essential for all those companies that want to survive to start thinking—and acting—within this context: "Those businesses that tend to be in decline are many times commodity in nature." They haven't been working to differentiate themselves. Wynalek observes, "The people running those businesses tend to develop an excessive—or obsessive—focus on cost reduction, minimization, and people reduction." He contrasts that with companies on the upswing: "Businesses that are accelerating are those where the CEOs and presidents are driving top-line growth. They're enhancing the product and investing in the technology necessary to evolve that product development."

Wynalek succinctly notes: "If you keep doing what you always did, you can't survive."