Driving the Future: AIAG's Leadership in the EVolving Industry

[Transcript]

[00:00:00] Jan Griffiths: This is the Auto Supply Chain Prophets Podcast, where you'll hear from experts of all facets of supply chain in the auto industry to help you prepare for the future. I'm Jan Griffiths, your co-host and producer.

[00:00:17] Terry Onica: I'm Terry Onica, your podcast co-host. Let's dive in.

[00:00:23] Jan Griffiths: Hello, and welcome to another episode of the Auto Supply Chain Prophets Podcast.

Let's check in with my co-host, Terry Onica. Terry, what's going on in your life?

[00:00:33] Terry Onica: Last week, I got to go do an on-site AIAG MMOG/LE training for a new supplier to Ford. There was about 18 people in the class from the whole plant. And when I got done, they said, you've helped us out so much, you know, I just love that about my job, and I love that about MMOG/LE. When you go in there and say, 'I understand this assessment better, and I understand what Ford's looking for, and our plant manager understands the importance of it as well, too.' So, it's just such a great feeling.

[00:01:05] Jan Griffiths: Yeah. Yeah. And I can see it. I know this is a podcast, it's an audio medium but I can see it on your face, you know, the excitement and the passion around it.

[00:01:14] Terry Onica: I just love it.

[00:01:16] Jan Griffiths: Unless you've been living under a rock lately, you'll know that I've been focused on a book, publishing the book. As we talked about before, the book is called AutoCulture 2.0: Leading with Gravitas because we need a new operating model and operating system for our leadership and culture in this industry. But it's not just me that thinks that or understands that, every organization in automotive is going through some form of transformation. And one of the organizations that we know and love in this industry and have done for many years is AIAG, the Automotive Industry Action Group. And we are thrilled to have with us today, Matt Pohlman, who is the CEO of AIAG.

Matt, welcome to the show.

[00:02:06] Matt Pohlman: Hey, everybody. Hey, Jan, how are you? Hey, Terry.

[00:02:10] Jan Griffiths: It is lovely to have you on with us today. Matt, AIAG is also going through a massive transformation, maybe even a rebirth. Is that a fair statement to make?

[00:02:26] Matt Pohlman: Rebirth might be a little bit much, but we are going through a transformation. We clearly are. I've been around AIAG for a long time with my past career in the automotive tier space as a board member, but now I'm in about 18 months as the CEO, and I was actually brought in with a specific directive to try to bring AIAG into this newer space that you referred to earlier, Jan, and that we're operating in today.

There is a transformation we're going through. We're trying to make sure we're relevant. We've been around 41 years. My goal is how to make sure we're relevant the next 41 years. So, there's a lot of tried and true processes that are out there. There's a lot of things happening in the EV space and everything. It's going to require us to change. A lot of activity that we do is setting standards, you know, those are a lot of processes and a lot of meetings to get agreement on that, but we have to find a way to go faster because the industry and the world is making changes much faster. If we take two years to develop something, by the time we roll out with it, it's already outdated and irrelevant.

So, we have to find a way to go faster. We have to change the way we do work. We have to find a way, different ways of getting ideas. There are a lot of things we have to do, but at the end of the day, AIAG we're the largest automotive industry group in the world. We have 40 OEMs; we have 5,000 tiers. Our strength is in how we pull those groups together and work on standards. So, we have to continue to make sure we're bringing new people in, bringing new ideas in, and making sure we're finding a way to start working on the newer challenges. It's too easy to work on the old stuff. Because it's tried and true, and it's easy. We know how to do that. But working on, you know, stuff involving EV batteries or working on software, working on ESG things, all of those things are hard. So, yeah, we're trying to reflash ourselves into something newer and better, but we're living on the principles that we've had in the past.

[00:04:29] Jan Griffiths: Matt, there are different types of CEOs in this business, and a CEO that comes in to maintain a business or an organization is one thing; a CEO that takes a company or an organization through a period of transformation or reinvention is quite another. It's a different skill set. What qualifies you to be in the role of CEO of somebody taking AIAG through this period of massive reinvention?

[00:05:00] Matt Pohlman: In my past, I would say if I look back at some of the key roles and responsibilities I've had, and I've worked at a lot of tier ones: Federal-Mogul, Delphi, ZF, a lot of the roles that I've been into was Basically trying to reinvent those groups into something else. How do we transform those groups? Whether it was changing a customer service organization from being in warehouses to being a standardized call center or taking at Delphi, we were a supply chain run by division and tried to make it a global organization with global reach, as well as a regional focus. I've had to transform many different organizations over that period of time. I've tried and got bruised over the years, but I think that all of those were significantly big projects where I had big teams. I do think I have the background and experience to do that. Now, applying it as a CEO is a bit different, but there are a lot of different responsibilities the CEO has. And in some cases, I'm learning as we go. But I would say there are certain areas that I feel very comfortable in, and I'm surrounded with a great team, and for me to just make sure we're, I'm nudging them along. My team might not think I'm nudging them. They might think I'm hitting them with a sledgehammer sometimes, but I think that we are making the change. We're shifting to this new technology and trying to go faster with our members as well.

[00:06:22] Jan Griffiths: You are a real change agent.

[00:06:24] Matt Pohlman: Thank you.

[00:06:25] Terry Onica: And I can say for myself, I'm on the AIAG Supply Chain Steering Committee, and I can even see how AIAG is working in the committee now, doing things differently than they've done before. I know we're looking at some new training in the area of MMOG/LE, and a little speed at what they want to get it out. And it's just, it's amazing. So, I've definitely seen that on my side from your staff. So, kudos to you.

[00:06:47] Matt Pohlman: We're trying to think of new ways to get ideas and rewrite standards, rewrite best practices. We try to then develop training and manuals to go along with that. We have to be relevant to our membership. Our membership have to want to come to us to solve problems. And we have to be viewed as those problem solvers. We've got a great history of that and legacy of that, but we've got to get in this new space because a lot of people think of AIAG as maybe an automotive gas or diesel company, and we're not. We are many more things than just that. And we're broader than just quality. We were in the ESG space, the supply chain space; we do a lot. Terry, you just mentioned the MMOG/LE work you're doing, and we're working on how do we get an MMOG/LE, too, or that advanced class, a master's if you will. So, we're working on trying to develop new things that the industry's asking for in a way that'll be relevant.

[00:07:39] Terry Onica: What do you see from the AIAG Board of Directors? What would you say the top concerns they have right now that they would like to see happen at AIAG?

[00:07:49] Matt Pohlman: The Board of Directors, we have 25. I have 25 bosses. We've got OEMs, tiers, some sub-tiers, and we've got some transportation providers. And just last month we added Micron, which is a semiconductor company. We've brought them in to give new insight into the technology space that we're in. And we're looking to expand that a little bit more. But the things that the board is looking for me to do is how do we make sure we're relevant in that electronic space, whether it's a hybrid or electric batteries, there's a lot. You guys talk a lot in your podcasts about risks in the supply chain; there's a significant amount of risks now with regulatory and legislative changes that to the prior question that Jan had, what is the board asking for? The board asked us to come forward with some more training. There's such a changeover, if you will, with people, and people are coming in, and they don't understand the supply chain. They don't understand, you know, they understand maybe one piece of it. They don't understand the end-to-end piece of it. So, the board said, 'Can you develop some better training?' That's not my saying in-person training, but the Essential Supply Chain Management is an online course. It's got six learning elements or modules that are available both in English and in Spanish. The program is an initiative that was developed by AIAG, developed processes that look at the whole supply chain to make it understandable to folks that are new. And if you're in one space, what are the connective pieces to that, and how is that relevant? So, when they come out of this course, they've got a better understanding of the whole supply chain, which makes them better. And you can be a finance person that's taken a new role in purchasing, perfect class to understand what supply chain is. And you can do it on your own pace and some other things.

[00:09:37] Jan Griffiths: I want to go back to my experience running supply chain organizations, and we've just finished a discussion around supply chain basics, right? Supply chain essentials. I think sometimes when people look at training, they look at it as a necessary evil and they're like, oh no, you know, I got to pull people off the job. I got to put them through training. Oh, but it's, you know, it's a third-party training. They won't understand the uniqueness of my system, of my company. Every company says that.

[00:10:10] Matt Pohlman: And I agree completely with you. If you're not focused on it and you don't plan for it correctly, the cost at that end can be overwhelming; missing a delivery and premium freight is staggering on how much it can cost. But we also have some other training things that we do. I think both of you are somewhat involved in it as well. But we offer quite a few training pieces that are in collaboration with Wayne State: Certificate in Purchasing and Supply Chain Management Program, that is now in its 11th year. I was able to welcome that group into AIAG. They were in our building along with Wayne State. You know, we've had hundreds of folks go through that and graduate. Just last night, I was speaking with the group so they asked me to come down and talk about my experience being an expat living in the UK, living in Switzerland and Luxembourg, and what could I offer that? What was it like running a global supply chain? So, I got to speak with the team of students last night, share my experiences. So, there's a lot that AIAG is doing in that space. These are programs that are designed for the automotive space. It's supply chain, but it's tailored for and geared for specifically the automotive sector, and we have a mix of Wayne State professors that are teaching as well as industry experts that come in and speak about their experiences across the wide variety: purchasing, supply chain, customs. We also have a class called Tomorrow's Leaders Today that we're working on with Wayne State. And that's a development class for people that want to advance their careers over time in the supply chain space. Within that, there's mentors that are assigned. There's a project that they have to work on. They have to go back and report to the company about what they're doing, just a great class that we offer. And it's really something that we're excited about. We're in our second year of that one, but both of those are in partnerships with Wayne State. And both of those programs speak to the testament that AIAG is dedicated to empowering supply chain professionals and making sure that we're doing what we can to make sure they're ready for the challenges of the future.

[00:12:18] Terry Onica: One thing I'd like to add on is that I hope executives out there that are listening to this and leaders really take the advantage of sending their people to AIAG classes. And I'll just give you one example: in the MMOG/LE class that I teach for AIAG, I get consistent feedback at the end of that class, 'This was so eye-opening. I understand what I need to do now.' And I think what AIAG does is they explain what it is and why you need to do it. Because oftentimes, people just don't know, why do I need to do this? Why should I do this, right? It's just not intuitive because we just don't have enough time in the day. So, I really encourage anybody out there. Send your people to AIAG classes, all of these evening classes, the Purchasing certificate, and the executive leaders today. And so, I think executives need to get back to really getting training of their employees out there. Again, it's amazing. I think you're losing out if you're not going to training. A good example is every time I do an MMOG/LE training, and we sit down, and we really break through each of the criteria and the best practices, it's a given 15 to 60 percent reduction in inventory because now people understand why all those best practices are important and the result for you as an executive is anywhere from 15 to 60 percent reduction in inventory. So, AIAG classes deliver. They help you to get those savings.

[00:13:47] Matt Pohlman: And for those of you that don't know what MMOG is, it's a global materials management operation. And there's a guide, and Terry does a fantastic job. So, well worth it.

[00:13:57] Jan Griffiths: Let's switch the conversation to the new EV OEMs. When we talk about OEMs, Matt on your board, you've got OEMs, you've got tier one suppliers. Do you have any new EV OEMs?

[00:14:14] Matt Pohlman: Yes, we do. As members, we have many on our board. We have Lucid. And as members, we have Rivian and some others. I think it would be amiss to say that the major OEMs, Nissan, Toyota, GM, Ford, they're all EV companies as well. Let's not forget that they're having the same troubles. They just have a legacy that they're trying to bring forward versus somebody starting from scratch.

[00:14:40] Jan Griffiths: The reason I asked the question that way is because we've often heard that EV, pure EV OEMs startups, for one of a better word, they're beyond the startup phase now when you're talking about Lucid, but those kinds of companies typically do not understand or value standards and following a process that's proven over decades. And it's tough because you don't want to be held back or restricted by legacy auto type thinking, but certain standards and processes can help you establish a supply chain, scale your business. So, I would have to imagine that some of those board meetings must be very interesting. Have you seen that kind of philosophy playing out?

[00:15:32] Matt Pohlman: We have. A lot of people just want to go faster. So, it's how do I go fast? And I don't want to follow all these rules. What we're also experiencing, Jan, is with all of those changes going on, people think they have to have people brought in to lead that have non-automotive experience. They're coming in from electronics companies or other spaces that are in the newer technology space. They're just not automotive, and they think they can bypass those. What we're experiencing is they quickly learn on certain areas. If I don't follow some of those tried and true things like APQP core tools and some of those other pieces, they falter real quick. I would say just in the last six months, I've been to BYD. I've been to Geely. We've been to many of the OEMs. We've got some very specific EV-only type project teams that we're working with to make sure we're listening to that group for what they need, but they are defaulting as a group to making sure that they fall back on like the APQP standards.

We just updated the APQP standards. We just this week launched the new standards for that. And it's very relevant to the old way of doing things but it hasn't been updated in 14 years, and we've spent a lot of time focusing on the software side of things and many other spaces. So, it's been updated to be relevant to the EV space that there is today. And it's very important that people go out and there's training associated with it. We're launching it in multiple languages, and all that happened this week. It's very relevant to the space that we're in today. And companies are saying that's required for my supply chain. You follow those procedures; BYD and Geely are also requiring that of their supply chain. So, it's a tried and true piece that's been brought up to speed with the newer ways of doing things. It's updated and it's ready to go. And it's been vetted by, we add 30 or 40 OEM tier one companies, making sure they were looking at it and reviewing it, making sure it was relative.

[00:17:39] Terry Onica: One other thing I want to add is we work a lot with EV OEMs, myself at QAD, and we go in there initially, and we discuss quality and MMOG/LE. And what I find is they're pretty excited to hear about that. They've got something to start on at the beginning to map to. They don't have to reinvent anything on their own. And where I think sometimes it could be a competitive disadvantage to the OEMs, to the traditional ones is that these EV companies are willing to start off with best practices. So, I think AIAG and the tools that they bring to the party for a startup is amazing because you can literally jumpstart their business by following. They don't have to invent anything, you know; they can start from day one with the best practices. So, I see that in my aspect of what I do at QAD that I think it's a big competitive advantage for EV startups and battery startups.

[00:18:36] Matt Pohlman: Well said, Terry. I think there are people coming into these newer places and in the engineering or quality that came from someplace else, and they bring those tools, and they make sure they're being implemented in there. My job is to make sure that the people above them are understanding the importance of those pieces. So, it's good. Well said.

[00:18:54] Terry Onica: One other topic I want to talk to you about is, ESG, Environmental, Social, and Governance. What's going on in that space? Because AIAG is a huge advocate in that space to try to help out the supply chain.

[00:19:07] Matt Pohlman: It's a fire hose. I mean, it's coming right at us. There's so much happening in that space. AIAG is very, very involved in the ESG space. We started in 2008, you may recall, with the Global Working Conditions Guidance piece that initially came out for Ford, GM and Chrysler at the time. And we've been updating that over the last 14 years. And today the industry standard is called the Automotive Industry Guiding Principles to Enhance Supply Chain Sustainability Performance. It's now got 14 OEMs that have tied down and it's part of their requirements for their subcompanies to deter companies to adhere to, but it's written in 11 languages. So, within this, there's data security, there's ethical recruiting, preparedness, you know, what you're doing with raw materials and minerals. You guys talk on your show often about the supply chain risks associated with things. One of the big supply chain risks right now that have just come out and driven by legislation is forced labor, and there are forced labor regulations that are out there. And AIAG, last fall, we created a website specific for that. We want to be in that space. We want to help the industry understand those challenges that come with that. And if you're not prepared. If you're not ready. If you're not looking downstream within your supply chain, your material will be stopped at the border. If there's any chance that's coming from some of the regulated areas. So, we're doing a lot in that space. It's not going away at all. And like I said, we've developed some training. We've developed some training pieces. That'll be an online piece that you can look at and read to understand the problems. We've got a significant legal group that's working with the US government that we're working with that's going to come in, and we're going to have some seminars with them for that legal group to talk to the leaders of tiers and OEMs to make sure that their legal groups are aware and knowledgeable of what the risk is. And then we're also working with our OEMs and tiers. We put together some standard guidelines to make sure that the software that you're looking at, various tools that are out there, can it do that? We're also doing some other things with our steering committees, but we're very involved to make sure the companies are ready and prepared for this challenging area. It's the Uyghur region of China. There's something called the Uyghur Forest Prevention Act, and that's what's causing the delays at the border.

[00:21:43] Jan Griffiths: Yeah. Big, massive impact, bottom line.

[00:21:47] Terry Onica: And right now, I see more than ever a critical priority and I just was talking about this with an internal QAD large group yesterday, is the need to have a good supplier relationship management tool.

You have to understand your first tier now, more than ever, and you've got to drive that down. So, I see supplier tracking. If you're not doing it today, you are going to be in trouble because you won't know where these issues are going to happen. You're not going to know if your suppliers are meeting all of these compliance initiatives in the industry. Do you think the same thing? Do you see that need to really understand your supply base now more than ever?

[00:22:26] Matt Pohlman: I absolutely agree. I think people can get to the next level down. It's three levels down. So, it's down to the people taking stuff out of the earth, if you will. And it's hard to get down to that level. It's extra, extraordinarily hard. And there's a lot of things going on. Jan, you talked earlier in the conversation about technology and some of the changes. The technology that's happening in the risk space is also very relevant. The use of AI, the use of some of the tools within some of the supplier risk management tools are very focused on getting to those things. But I would just end on, Terry, is you can't wait. You can't wait until your company receives notification because if you do, it's too late; it's deterred. And it's not like some of the other customs issues that you have. Something's held at the border because it's, you know, the pallets got bugs in it or something like that. This is something serious. You can't, as the supply chain person, say, 'Okay, call a bunch of my red-hot meetings that you have and try to get something put on a plane, and instead of it being shipped to Baltimore, you're shipping it to LA.' If you do, it's going to get stopped there just as easily because it's on a global warning. You have to find a way to fix it. And the only way to fix it is knowing where that material started from in your supply chain. And you have to be able to prove it didn't come from that region.

[00:23:47] Terry Onica: So, what I think is really important right now is AIAG, as a tier one, provides a lot of tools that you need to use as tier one supplier, but also, I know in MMOG/LE, it's saying now what you should be requiring your supplier to do: ESG, looking at EDI, looking at transportation, all the guidance that you need to be passing down the supply chain. You have to be passing those down right now; otherwise, you're going to be in trouble at some point in time. But the other thing that I think is even more critical and why you have to track your suppliers, and when a lot of companies do is they say, 'Go do it.' But they don't go back and check to say, 'Did that supplier really do it?' Are you out there auditing to make sure they're really passing all these best practices down the supply chain and going and maybe auditing or talking to a tier two supplier and saying, you know, show me your ESG, your Supplier Code of Conduct, you know, show me that you're doing EDI or Web EDI with your suppliers. All these great practices that we talk about. That's why I think tracking suppliers now more than ever is so important, and then following up with an audit because I work with suppliers a lot right now if you don't go out and audit them, they're very good at the start of business, but then as time goes on, it's easy to get fall off the wagon into bad practices or old practices or not follow them. So, really then making sure that they're doing that. So, I just think that's so key today.

[00:25:09] Matt Pohlman: I would say to that, you know, as somebody that's run global supply chains in my past as well. You have to know, and it can't just be, here's the requirement: make sure you're compliant. If you don't know, you're going to get in trouble anymore. So, you have to ask, how do you know? How do you know that it's not from there? You have to ask audit-type questions to know. You need to ask. And your purchasing organizations that are doing those types of things, the reviews, and whatnot, you have to know, the team has to know. There are tools out there. There's many tools out there. You just got to be able to pick the right one. And each one of those tools have many things, whether it's chemical compliance or source compliance or forced labor compliance, just supplier risk. Are you single source? There are so many things that you have to understand. And it's been in without a tool, without an aid, without a tool with some AI built into it. You're going to be in trouble.

[00:26:03] Jan Griffiths: Okay, let's ask our final question. Matt, can you share one strategy or specific insights to our tier one audience? Tier one supply chain leaders; tier one and tier two. What's the one thing that they should do right now that they should start thinking about or putting in place right away to help them prepare their supply chains for the future? What would that be?

[00:26:33] Matt Pohlman: I'm going to give you two; I'm not going to give you one, but I would say the first one, yeah, I think you have to acknowledge that we're in an unprecedented time of change. I think it's really important to understand and what's the cultural impacts that's going to have on your organization, your product lines, how relevant are you going to be in the future. But it's this, it's unprecedented time of change and technological change. So, how do you make sure, as I said earlier of the discussion, what are you doing? Because these updates are happening so much quicker. What are you doing to increase the pace? Not making people work faster, but how are you making sure your processes are such that you're modifying the processes to allow you to go faster? We're doing a lot of things within AIAG around that, but you're going to have to be flexible. You have to have agility. You have to understand how you're being impacted. And you're going to have to shift. Software's taking over the vehicles; how is that going to impact you? How are you involved with that? Understand the legislative and regulations. We've talked about that today. How is that going to change your business? So, you have to understand those things to understand the risk because it's never been higher than it is right now.

I would say, as a commercial, bring your problems to AIAG, not your specific product problems, but your industry problems; bring those things to us. Work with AIAG and be a volunteer. If you're doing those things, you'll hear about the current issues in the industry. You'll learn from peers about the best practices on how to maybe do some things differently. All those things allow you to be part of the solution. And we talked about this today as well. There are standards that exist today that are really good. Don't ignore some of the tried and true standards that are out there, like APQP core tools, IATF; there's things that work. And my final piece that I would recommend to folks because I talked about culture earlier, right? I would highly recommend those of you listening to go out there and purchase a book called Autoculture 2.0: Leading with Gravitas. I had the opportunity to be somebody involved that got to read an advanced copy of that. It was a good read, it was a quick read, and it's relevant to the industry today. So, this is a very interesting book on culture change. I think it's a fantastic thing. And one of the things I am already embracing from that, and I love it, Jan, you had three critical leadership lessons that you gave out of that. And the third one is embracing progress over perfection. I think that's critical for how I'm looking at AIAG. We can't try to do things perfect because it'll take too long, and things are changing too fast, and it's too dynamic. How do we get things? How do we progress? How do we put a standard out there that's relevant for now? And then keep updating it six months or a year from now to make sure we're keeping pace. So, I would say, you know, get out there and get a copy of the book. I'm sure it's available by the time people listen to this and take advantage of the lessons learned by Jan in her book.

[00:29:38] Jan Griffiths: Thank you. Thank you. Well, there it is. Well, it is clear to me that AIAG is no longer your granddaddy standards organization. It is an organization going through massive reinvention. It is an organization with a change agent at the helm. And we can't wait to hear more from you, Matt, as the organization progresses during this period of massive transformation. Would you be open to coming back to us?

[00:30:04] Matt Pohlman: I would love that. I'd love that.

[00:30:06] Jan Griffiths: Okay, thank you.

[00:30:07] Terry Onica: Thank you, Matt. We'd love to have you back again.

[00:30:13] Jan Griffiths: Are you ready to find the money in your supply chain? Visit www.autosupplychainprophets.com to learn how, or click the link in the show notes below.