No one can predict the future. Even if we can plan and prepare for possible outcomes — like a war in Europe or a historic heat wave in China — there will always be unexpected challenges.
The automotive industry is the same way. The pandemic was unpredictable, and subsequent supply chain issues led to lower-than-usual quality ratings. Even bigger changes are coming soon as the industry shifts its focus to electric vehicles. Suppliers need to be ready, says Gary Vasilash, an editor with Gardner Business Media who has been writing about the automotive industry for 30 years.
In this first episode of a special two-part series of Auto Supply Chain Prophets, we talk with Gary about what the industry looks like today as it gets ready to make the big leap toward EVs and new technology.
Themes discussed in this episode:
- What the aftermath of the pandemic can tell us about contingency planning within the automotive industry.
- The hidden reason behind unusually low JD Power quality ratings.
- What automotive suppliers should do now to prepare for the shift to EVs.
- Why Original Equipment Manufacturers (OEMs) are beginning to “insource” more parts.
- Why improving visibility into your company will help you survive the future of the automotive industry.
At the heart of The Prophets’ vision are “The 24 Essential Supply Chain Processes.” What are they? Find out, and see the future yourself. Click here
Featured on this Episode
Name: Gary Vasilash
Title: Transportation Editor, Gardner Business Media
About: Gary Vasilash has been working for Gardner Business media for 30 years, where he writes about design, engineering, manufacturing and management within the automotive industry. He also co-hosts Autoline After Hours, a weekly podcast for car lovers and auto industry enthusiasts.
Timestamped inflection points from the show
[1:37] Unpredictable: Today’s guest, Gary Vasilash of Gardner Business Media, weighs in on current auto supply chain disruptions and what they say about risk assessment and contingency planning within the industry.
[5:11] An alarming trend: One of the consequences of the pandemic on the auto supply chain industry has been a dramatic increase in recalls alongside poor JD Power initial quality ratings. Gary explains why this happened and what to expect in the future as we move toward electric vehicles.
[7:01] The hidden factor: Gary explains a hidden, non-pandemic reason behind the lower-than-usual JD Power ratings this year: new and unfamiliar technology.
[10:00] Changes are coming: Even before the pandemic, suppliers had a hard time tracking down parts needed to repair conventional ICE vehicles. Will the shift to EVs exacerbate this trend, and what should suppliers do to be ready?
[12:26] The big shift: A major transition to EVs is coming, and suppliers for ICE engine parts should start thinking about transition or exit strategies, Gary says. In this segment, he offers suppliers some advice on how they can be best prepared.
[14:55] Blast from the past: The shift to EVs has come with an unexpected side effect for OEMs: a rise in insourcing for additional parts like seats. Could this mark a shift back toward vertical integration? Gary and host Cathy Fisher weigh in.
[16:36] The one thing: Gary offers his most important piece of advice for auto supply chain leaders who want to regain stability in the supply chain: allow visibility into your company.
[3:14] Gary: “How can you plan for this? I would submit that you just simply can’t. It would be nice to say, yes, if we had perfect visibility everywhere, we wouldn’t have these problems, but you know what? Things happen.”
[4:09] Gary: “The problem with COVID is that no one had a manual that told people what to do. Suppliers and car companies literally had to write those manuals. They had to figure out, how do you deal with a workforce that may not show up on a given day? […] And so you have the companies that knew what they needed to do and how they needed to do it. You had those who are saying, I’m really at a loss here. I need some help.”
[12:13] Gary: “If you’re a supplier and what you’re doing is making parts for internal combustion engines, you’ve got to start thinking about what your strategy is going to be going forward, and that strategy may be an exit strategy.”
[14:11] Gary: “What you’re going to be seeing here is not necessarily a balance of the tier suppliers as much as OEMs taking a look and saying, Okay, what is it reasonable for us to be making? And what that may be in 2022, going forward to 2030, is going to be a whole lot different than it was in 2021 going back to 2010. It’s a different game. So there is certainly an awareness that they need to keep their eye on the outsource part, and the insource part, which is a big change.”
Jan Griffiths: 00:00
Hello, and welcome to another episode of Auto Supply Chain Prophets. In this special two part series, we’ll be going deep into the oldest supply chain with none other than Gary Vasilash. You know, Gary, he’s well respected in this industry for not only his breadth of knowledge and depth of knowledge, but his very unique perspective. In part one, we’ll talk about automotive supply chain in the here and now and in part two, how he sees the future. We ask our guests in every episode, what is the one thing that Supply Chain Leaders can do to prepare the supply chain for the future? So stay tuned. Gary, welcome to the show.
Gary V: 00:45
Thank you, appreciate the opportunity to be on the show today. For those who are not familiar with me, I am Gary Vasilash. I’m the editor of on automotive which is published by Gartner Business Media. I’ve been working for Gartner now for 30 some years, which I’ve been concentrating on the automotive industry writing about design, engineering, manufacturing and management within it. So I am a juror for the North American car, truck and utility of the Year Awards, which means I also review cars. So the process part with my work at Gartner, the product part with my participation in NACTOY. For the last 10 years, I’ve been the co host with John McElroy of Autoline After Hours, which is a webcast that goes up every Thursday afternoon at 3pm.
Cathy Fisher: 01:37
Thank you, Gary, you have such vast experience in the automotive industry. And we are very curious to get your thoughts on the current situation of the automotive supply chain and the disruptions that we’ve been experiencing. Do you feel that these could have been better anticipated and possibly even avoided?
Gary V: 01:56
Well, it’s easy to say yes, but one of the things that occurred to me, I just found out that 80% of the mustard seeds for Dijon mustard don’t come from France, they come from Canada. Canada had bad weather. So the crop was basically wiped out. And consequently, the price has gone up. 3x. Okay, so who would have thought that right? I mean, so this is one of these things that’s completely unanticipated. Right now, in China, because they’re having a heatwave. In Sichuan Province, they have told people that they cannot operate their factories because they need the electricity for air conditioning, who would have anticipated that? Right now, the Rhine River has sections where they can’t take barges through. So again, who would have ever thought that a river would get so shallow you couldn’t put a barge through it. So to think about what’s going on in the auto industry, who would have thought that the pandemic would have been as devastating as it was? Who would have thought that there would be a war in Central Europe, which caused things like wiring harnesses to become a short supply? I mean, how can you plan for this? I would submit that you just simply can’t. Okay. It would be nice to say yes. If we had perfect visibility everywhere, we wouldn’t have these problems, but you know what? Things happen.
Cathy Fisher: 03:28
So I also wonder, do you feel that the automotive industry does the best we can with risk assessment and contingency planning around these types of disruptions? Or is there some opportunity for us to get better at that?
Gary V: 03:42
So there’s basically two answers to that. Okay. First of all, to take the second part, yes. There’s always the chance to get better, we’ve got to think about the Toyota continuous improvement mindset for this. Secondly, we talked about the auto industry broadly. But it’s not a monolith. There are those that are keeping things going fairly well. There are those who are struggling. It especially I think the problem with COVID is that no one had a manual that told people what to do. Suppliers and car companies literally had to write those manuals, they had to figure out how do you deal with a workforce that may not show up on a given day? How do you deal with separating people on the line when basically, you have spent years and years and years of figuring out what the tack time is in therefore, to separate the functions within the line down to the last half second, okay, all of that gets thrown away. All of that is no longer operative. And so you have the companies that knew what they needed to do and how they needed to do it. You had those who are saying, I’m really at a loss here. I need some help. In addition to which we’re having this technology changes in terms of product, electric vehicles, I mean, it’s a great time to be in the industry.
Terry Onica: 05:11
What are the consequences of COVID that you recently wrote about? Was the poor results in the J.D Powers initial quality ratings? And also the alarming increase in recalls? What are your thoughts around this? Do you expect things to stay like this? Will they increase dramatically, especially as we move to the electric vehicle?
Gary V: 05:35
So in terms of the J.D Power situation, again, I think that is primarily predicated on the process confusion, that was a result of how do you deal with a workforce that may or may not be capable of doing the job they’re expected to do? If you think about it, if we go back many years, someone who was working on the line only knew how to do one thing as a result of activities that took places at, and this is going into the Wayback Machine at NUMMI. Which, oddly enough now is the Tesla plant, where people were cross trained. And if you think about it, if you’re doing one thing consistently, you get really good at that. And if suddenly, the person who’s been doing that consistently is not showed up, because they happen to be in quarantine, you’ve got a whole set of issues there that you have to deal with. And so I would submit that the car companies and the suppliers have gotten much, much better at dealing with these unexpected employment issues. I don’t think that there will be more of that, because of the new technology, because again, this is something that has been planned, and there’s a better understanding of what you need to do to get it done.
Cathy Fisher: 07:00
So it sounds like you’re basically saying that what we saw that with this year’s J.D Powers and recalls is probably just a blip that’s reflective of what we’ve experienced because of COVID.
Gary V: 07:12
Yes, there’s another factor that while according to J.D Power, I mean, COVID did have an effect on that. The other thing that has an effect on J.D Power, which has nothing to do with supply chain is simply that because there’s more technology being put into vehicles, you know, whether this is the you know, infotainment systems or advanced safety systems that people are not familiar with that people are not comfortable with that. So when they’re filling out these forms, they may knock a given vehicle, because of this problem that they perceive. I mean, there’s nothing wrong with it, it works as it’s supposed to work, because they don’t know how to use it. They’re saying there’s something wrong with my car. So we got to keep that in mind, they’ll continue to be that because carmakers are putting more and more technology into vehicles. And that’s not going to stop in, people are not going to want to bust out their manuals and say, I gotta read this owner’s manual to figure out how to use this, they’re not going to do that. They’re gonna say, oh, there’s something wrong here.
Cathy Fisher: 08:12
Gary, that’s such a great point, because that’s actually going to bridge us to another question having to do with the dealerships. But I want to ask you something about that perspective, because I think about my parents who are well into their 80s. And they bought a new car a couple of years ago, I think, actually during COVID. And they’re baffled about the technology. And I said, well, didn’t the dealership, or somebody kind of explained and there’s videos on YouTube, and that. What is the obligation of the manufacturers to really make sure that the public, the consumers understand this new technology?
Gary V: 08:46
Well, I guess that becomes an issue of granularity. In terms of saying, do they need to tell you how to turn on your radio? Or did they need to tell you how to charge your vehicle. So I would say that the former, they’re probably not going to get involved to that degree. In terms of the ladder, we’ve seen General Motors recently announced that they have set up a system whereby people can go online and ask questions, and they’ll be shown how to plug their car in for getting electricity, how to operate things.
Cathy Fisher: 09:26
Yeah, I saw that GM had put out that service that I think they just launched it about a week or two ago. And I think that’s phenomenal. That’s that’s really taking leadership or stewardship of bringing the consumer along with us on this new technology road, which is so essential.
Gary V: 09:42
Right. Because there’s basically saying, you know, EVS for everyone, for early adopters are going to suffer and they’re gonna figure this stuff out. They’re gonna do what they need to do to get it done. For the ordinary person buying a vehicle was just like, this is too much. I just, just want to get in and drive.
Cathy Fisher: 09:59
Exactly, yeah. So along the lines of what’s happening at the dealerships one of the other lingering issues that was exacerbated, I would say by COVID, but definitely existed long before COVID hit us is this issue with service parts availability. And I remember it was probably just before COVID, there was a piece in the Detroit News about somebody whose Cadillac was tied up in the dealership for eight months, because they couldn’t get a component to repair the vehicle. So we talked about service parts and making sure that our automotive manufacturers are really planning well for the service parts as part of our 24 essential supply chain processes. What are your thoughts in terms of the tail of service parts for internal combustion engines? How long will that tail extend? And will there be service parts available for these ice vehicles? As EV is really coming on hot? We’re getting a lot of EVs out there?
Gary V: 10:58
Well, there’s a requirement that OEMs have spare parts for 10 years. Okay, so from today, 10 years from tomorrow, 10 years, and this will go on until that particular product goes out of production. And then it’s 10 years from that, I don’t think that there’s going to be a concern in terms of spare parts availability for people who are going to want to hold on to their internal combustion engines as long as they possibly can. Because then you know, you think about it, if there is a demand, and the oh, you know, it’s year 11. The aftermarket is going to take care of that. Okay, so we will not be in original equipment manufactured part, it will be the aftermarket doing that. But yes, at some point, those things are gonna go away. But that point, I think, is further in the future than many people think. Yeah.
Cathy Fisher: 11:53
And I think that that’s really key, what you’re mentioning there, because there is so much anxiety about the shift to Evie, and what’s going to happen to all of the suppliers, especially down here that are supporting the internal combustion engine supply chain. And there’s this stuff some time, yeah.
Gary V: 12:11
Some time, but I wouldn’t say a whole lot. If you’re a supplier in what you’re doing is making parts for internal combustion engines, you’ve got to start thinking about what your strategy is going to be going forward in that strategy may be an exit strategy.
Terry Onica: 12:26
As you had mentioned in one of the recent articles, that a lot of the suppliers are going to go away, they’re not going to be necessary in the EV. What recommendations would you give to OEMs, and even tier ones, on how you manage the shift with the supply base?
Gary V: 12:41
Well, I think one of the things that we’re going to be seeing more of, especially as the car companies begin to make more electric vehicles rather than ICE vehicles is that there’s going to be an increase in vertical integration, meaning that the OEMs are going to do what they used to do once upon a time. And that is they’re making more of the things in house and not be as reliant on suppliers, as they became when they decided might be easier and cheaper to get it done by someone else. So I think what we’re going to be seeing is that, when you get to tier two, and tier three, some of them are going to be absolutely essential, they’re not going to go away, we like to think about big things. And we don’t like to think about little things. And there are lots of springs and fasteners that go into a car. Okay, these are not tier one tier, two sorts of things necessarily. But you know what, he can’t make a car, you can’t make any kind of car without them. Right? So you’re always going to need those. But if we take a look at other large things, seats, for example, once upon a time every OEM made their own seats, then they said, Oh, no, we’re going to outsource this to everyone. Now they’re seeing Tesla, for example, saying, Well, yeah, sure, we’ll make seats. And you’re beginning to see traditional OEMs say, maybe that’s not a bad idea. And they’re bringing that stuff back in. So what you’re going to be seeing here is not necessarily a balance of the tier suppliers as much as OEMs taking a look at and saying, Okay, what is it reasonable for us to be making and what that may be in 2022, going forward to 2030 is going to be a whole lot different than it was in 2021. Going back to 2010. Okay, it’s a different game. So there is certainly an awareness that they need to keep their eye on the outsource part, and the insource part, which is a big change.
Cathy Fisher: 14:55
Yeah, I have a question along those lines, because we’re definitely seeing the automotive of OEMs. Moving back towards a vertical integration. I remember early in my career with General Motors, we used to joke that we would mine the ore, smelt the ore, cast the block, machine the block like it was a complete supply chain. And especially with the V, we’re seeing that kind of moving back in that direction. Is this insourcing going to look a lot like back in the early days of the automotive industry? Or is it a different kind of insourcing a different kind of vertical integration?
Gary V: 15:28
I think the only difference is the difference in terms of what the inputs are. You notice that there’s a lot of discussion now about getting minerals. When did car companies ever worry about minerals? Car companies worried about whether they’re going to get the iron ore? They worried about whether they’re going to get the aluminum? But did they ever think about lithium and nickel and things like that? I mean, okay, so different inputs, they want to have control over that, you were mentioning, one of the early days of General Motors, I mean, go back to the rouge plant, Henry Ford was was having trees cut down in Northern Michigan. So they would have the means by which they could, they could smelt the iron ore, which was being mined in the Upper Peninsula of Michigan, I don’t think we’re gonna go to that degree. So it won’t go all the way back. But conceptually, it’s going to be the same thing. You’re going to want control of all of the things that make sense that you can make money on. And you’re going to be producing that rather than having someone else do it.
Jan Griffiths: 16:36
Gary, tell us, what is the one action that Automotive Supply Chain Leaders must take right now in the here and now? To regain stability in the supply chain? What’s the one thing that they should do?
Gary V: 16:53
I think what they need to do is in many of them are doing this, they’re having digital visibility into their own operations. And I think that what they need to do is to take a second or third step. And those steps would encompass having that same type of visibility into their suppliers, meaning they’re going to have to influence or encourage, to have those suppliers allow them the means by which they can see what is out there, what the problems might be, what the hiccups might be for them going forward. This means that the suppliers perhaps have to become more invested. And when I say more invested, this is going to mean spend more money. But the upside of that is those players that do that are more likely to stay in business. I mean, I think we’re at a point now, where there are lots of companies that think they’re going to be in business, and if they don’t do the right things, they’re not going to be in business.
Jan Griffiths: 18:05
Excellent advice. Gary Vasilash, thank you very much for joining us today.
Gary V: 18:10
Thanks for having me.
Case study from QAD and Penn Engineering
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