The Perfect Launch

Engineering the perfect new-vehicle launch takes cooperation and communication between the OEM and supplier — plus a great deal of trust, agree executives from suppliers, consulting companies and an auto maker on hand for a special roundtable discussion.

All emphasize the need for better upfront planning to ensure vehicle programs are launched on time and hit quality and cost targets. The Original Equipment Suppliers Assn. convened the special session during the recent Society of Automotive Engineers World Congress in Detroit.

Consultants McKinsey & Co., in releasing for the first time highlights from a new study examining supplier-OE interaction on new-product development, say 80% of the waste in the process occurs at the earliest stages.

A poor program setup accounts for 65% of the root cause of supplier-OEM interface waste, says Hans-Werner Kaas, co-leader of North America for McKinsey. Only 35% is a result of poor execution, he says.

“The perfect launch requires the perfect setup,” says Kaas, whose firm studied a few dozen suppliers from around the world in compiling its report. “The best programs make engineering changes early in development. The worst programs are still making changes after the start of production.”

That means suppliers and OEMs have to work to get specifications right and produce realistic development and validation timetables. And they have to be willing to share information.

In a survey of supplier executives, consultants Ernst & Young say parts makers are frustrated with their level of communication and collaboration with OEMs.

Suppliers often are afraid to tell the OEM of developmental problems, because auto makers often are more focused on who to blame than how to solve the problem, suppliers say in the survey.

Suppliers also say they often don't have enough information about other components on the vehicle that could affect the performance of their part, and they say OEMs often change engineers and product managers midstream, making program management more difficult and risking quality and profitability.

Kaas says the McKinsey study indicates there is big potential to cut costs by reducing parts complexity. “The strong performers minimize proliferation,” he says, pointing to one worst-case example in which an auto maker had specified 30 variations for a component, 11 of which never were used.

He also says there's an opportunity to cut costs 20% through global sourcing, but cautions “the answer is not always China. You have to be more systematic” in determining the right sourcing location.

And he reminds global sourcing can have its pitfalls. Companies that don't handle it well often face 20 times the extraordinary costs managing the supply chain as those that do it well.

The McKinsey study also reveals those suppliers and OEMs that don't have a good relationship or do their homework upfront, spend an inordinate time — and money — negotiating price.

The best of the companies studied spend about 655 hours talking price over the lifetime of the component, Kaas says, including 267 hours initially and 398 hours in annual price-reduction negotiations. The worst examples require 10 times that amount, including 1,335 hours initially and 4,853 hours in annual price-reduction talks.

He says the stronger OEMs and suppliers consistently have perfect launches, while the worst companies suffer inconsistent, often flawed rollouts. And the best of the OEMs and suppliers tend to attract each other, leaving the worst of the bunch to work together, perpetuating the problem.

John Knappenberger, vice president-administration for Dura Automotive Systems Inc., says suppliers also have to be more proactive and have “product up on the shelf so we're ready when the customer comes.”

“If we wait for the bell to ring and the mouth to water, we'll never get there,” Knappenberger says.

Lori Queen, vehicle line executive-small cars for General Motors Corp., stresses the need for parts validation to occur as early as possible in the vehicle development process.

“When you start off with things not on time, it gets worse and worse,” she says. “We had one issue with the Cobalt (launch) in which one part was late getting validated and then caused problems with others and created a failure.”

Suppliers say one bad program launch can damage a company's reputation, and cost it future business, says Ernst & Young's Hanley.

“Good launch management is expected,” he says. “We know of several suppliers who were awarded programs after others struggled and failed to meet timelines.”