How GM restored parts production in Japan.
05-16-2011, 10:30 PM
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How GM restored parts production in Japan. http://www.nytimes.com/2011/05/13/bu...0Motors&st=cse
Piecing Together a Supply Chain
Fabrizio Costantini for The New York Times
General Motors mapped its potential part shortages in a windowless conference room that employees call the War Room.
By NICK BUNKLEY
Published: May 12, 2011
DETROIT — Two months after Japan’s devastating earthquake and tsunami, Japanese automakers in the United States continue to struggle with significant supply disruptions.
Jeff Kowalsky/European Pressphoto Agency
“It was pretty tense,” Daniel F. Akerson, chairman and chief, said of the early weeks at G.M. after the Japanese disaster.
Toyota, which gets up to 15 percent of the parts used in its North American plants from Japan, is experiencing shortages of 150 critical parts. The company is operating at about 30 percent of normal capacity in the United States, with full operations not expected before November or December.
But American automakers are mostly winding down their disaster response operations — and though some supply problems remain, they are taking stock of a crisis averted. Analysts said the near-term outlook remained bleak for the Japanese automakers, while their rivals in Detroit, Korea and Europe are past the most difficult period.
The largest American automaker, General Motors, which spends about 2 percent of its parts-buying budget in Japan, identified 118 products that it needed to monitor for shortages but has resolved problems with all but five. The company’s chief executive, Daniel F. Akerson, predicted last week that the Japanese disruptions would have no material impact on G.M.’s earnings.
That is a big change from the early weeks after the March 11 disaster, a period Mr. Akerson described as “white-knuckle time” when numerous plants came close to halting work and just one of the potential supply problems could have prevented G.M. from building 75,000 vehicles.
“It was pretty tense,” he recalled in an interview.
Though G.M. obtains considerably fewer parts from companies in troubled areas than its Japanese competitors, its handling of the problems, as recounted by executives and employees involved in the effort, reveals how closely Detroit teetered toward disaster.
Four days after the earthquake, G.M. had assembled hundreds of employees into a team that began working around the clock to manage what has turned out to be the biggest catastrophe to hit the auto industry’s complex supply chain. G.M. regularly creates contingency plans for supply disruptions, “but nothing on this kind of scale or scope,” Stephen J. Girsky, a G.M. vice chairman, said. Through what it called “Project J,” General Motors briefly idled two plants to conserve supplies but otherwise found alternative sources for some parts and helped many suppliers get back online quickly enough to keep car and truck assembly lines running. The outstanding problems are essentially limited to semiconductors and other electronics. Because these devices are widely used in vehicles and substitution options are generally limited, G.M. executives said they were not entirely in the clear.
“We still have issues,” said Robert E. Socia, G.M.’s vice president for global purchasing and supply chain, “and the issues we have now are getting tougher to solve.”
General Motors has coordinated its disaster response from three “crisis rooms” at its Vehicle Engineering Center in Warren, Mich. Early on, dozens of people crowded into two windowless, seventh-floor conference rooms — one of which is devoted solely to monitoring the many critical electronic components that G.M. buys from Japan — while engineers filled a room in the basement.
Maps and dry-erase boards on the walls track the status of each affected supplier, the parts G.M. buys from them and the plants that need those parts to stay open. Using a color code, suppliers out of commission were labeled in red. Any that were unscathed but lacked reliable power and water supplies were labeled in yellow. The goal was to turn them all green.
The team, which requested and quickly received portable air-conditioners to fight the heat created by working long days in close quarters, ultimately identified the 118 problematic products, Bill Hurles, the executive director of G.M.’s global supply chain, said. Issues with 33 of those did not become known until early April, mostly because they involved disruptions at sub-suppliers that G.M. rarely interacted with directly.
“We’ve just never had a disaster to this magnitude,” said John Hoffecker, a managing partner with the consulting firm AlixPartners who traveled to Japan to see the quake’s effect on the auto industry firsthand. “It’s not just the assembly plant that needs to run, it’s not just the direct supplier. I’ve got to understand the steel plant, I’ve got to understand every piece at a second tier, a third tier and a fourth tier below that. We’ve never had to do that before.”
Executives monitored the supply chain’s status on “white space” charts, in which green bars represented various vehicle platforms and white gaps showed the length of time before all the parts would be available to build those vehicles. Any bar not fully green meant a product line was in jeopardy.
Shortly after the quake hit, G.M. discovered that the supplier of an electronic controller used in some of its most popular and important vehicles was knocked offline, Mr. Hurles said. The Japanese supplier, which G.M. declined to identify, sustained damage to its plant and the equipment inside, and it had no water or power.
The problem had the potential to force a shutdown at up to eight G.M. plants, halting production of the Chevrolet Silverado pickup truck, the Chevrolet Traverse and Buick Enclave crossover vehicles, and other models. That shortage alone could have prevented General Motors from building 75,000 vehicles.
Developing a solution with the supplier took several weeks, but eventually the company temporarily shifted some production to other sites, a process that can be time-consuming and complicated by the need to avoid quality problems.
On April 15, when General Motors confirmed the supplier would resume making shipments, a cheer went up in the crisis room, Mr. Hurles said.
In mid-March, when deliveries of mass airflow sensors from Hitachi became uncertain, G.M. shut a plant in Shreveport, La. — the first auto plant in North America to close as a result of the disaster — that makes slow-selling, small pickup trucks, and redistributed the 2,200 sensors on hand in Shreveport to plants building higher-margin vehicles. The plant was reopened the following week because Hitachi resumed production.
“Our objective was to help the suppliers get back into production, not to re-source the parts somewhere else,” said Ronald Mills, G.M.’s executive director of engineering and program management, who headed the operation in the engineering room. “We like the parts we had.”
In the early going, with only sparse information available from many suppliers, G.M. rounded up more than 40 employees who volunteered to fly to Japan. There, they could visit suppliers and determine the extent to which shipments of parts would be interrupted, as well as offer help getting vital plants reopened.
One supplier could no longer obtain the hydrogen peroxide it used to process electronic components, and another was unable to get the steel it needed. G.M. arranged new sources in Korea for both companies.
The visitors were greeted skeptically at first but insisted that they were there to offer assistance and speed up testing in cases where equipment had to be moved or recalibrated, not to punish suppliers who were out of commission.
“The culture of the Japanese is they don’t want you to come into their home or their workplace unless things are running well, so they were really resistant to have us come and see their facility in bad shape,” said Carl Kevwitch, the manager of G.M.’s tactical operations team, who spent three weeks in Japan, taking trains and buses to visit up to 10 suppliers each day.
Because G.M. has been able to keep most of its plants running, analysts project that it will probably surpass Toyota to become the world’s largest automaker again. Mr. Akerson said it would be a hollow distinction until the Japanese auto industry got back on its feet.
“I want to win in the marketplace, but I want to win against a healthy and vibrant Toyota and Honda,” Mr. Akerson said. “Next year, we’ll put the gloves back on, and I’m sure they’ll go right back at us and we’ll go back at them.”
Piecing Together a Supply Chain
Fabrizio Costantini for The New York TimesGeneral Motors mapped its potential part shortages in a windowless conference room that employees call the War Room.
By NICK BUNKLEY
Published: May 12, 2011
DETROIT — Two months after Japan’s devastating earthquake and tsunami, Japanese automakers in the United States continue to struggle with significant supply disruptions.
Jeff Kowalsky/European Pressphoto Agency
“It was pretty tense,” Daniel F. Akerson, chairman and chief, said of the early weeks at G.M. after the Japanese disaster.
Toyota, which gets up to 15 percent of the parts used in its North American plants from Japan, is experiencing shortages of 150 critical parts. The company is operating at about 30 percent of normal capacity in the United States, with full operations not expected before November or December.
But American automakers are mostly winding down their disaster response operations — and though some supply problems remain, they are taking stock of a crisis averted. Analysts said the near-term outlook remained bleak for the Japanese automakers, while their rivals in Detroit, Korea and Europe are past the most difficult period.
The largest American automaker, General Motors, which spends about 2 percent of its parts-buying budget in Japan, identified 118 products that it needed to monitor for shortages but has resolved problems with all but five. The company’s chief executive, Daniel F. Akerson, predicted last week that the Japanese disruptions would have no material impact on G.M.’s earnings.
That is a big change from the early weeks after the March 11 disaster, a period Mr. Akerson described as “white-knuckle time” when numerous plants came close to halting work and just one of the potential supply problems could have prevented G.M. from building 75,000 vehicles.
“It was pretty tense,” he recalled in an interview.
Though G.M. obtains considerably fewer parts from companies in troubled areas than its Japanese competitors, its handling of the problems, as recounted by executives and employees involved in the effort, reveals how closely Detroit teetered toward disaster.
Four days after the earthquake, G.M. had assembled hundreds of employees into a team that began working around the clock to manage what has turned out to be the biggest catastrophe to hit the auto industry’s complex supply chain. G.M. regularly creates contingency plans for supply disruptions, “but nothing on this kind of scale or scope,” Stephen J. Girsky, a G.M. vice chairman, said. Through what it called “Project J,” General Motors briefly idled two plants to conserve supplies but otherwise found alternative sources for some parts and helped many suppliers get back online quickly enough to keep car and truck assembly lines running. The outstanding problems are essentially limited to semiconductors and other electronics. Because these devices are widely used in vehicles and substitution options are generally limited, G.M. executives said they were not entirely in the clear.
“We still have issues,” said Robert E. Socia, G.M.’s vice president for global purchasing and supply chain, “and the issues we have now are getting tougher to solve.”
General Motors has coordinated its disaster response from three “crisis rooms” at its Vehicle Engineering Center in Warren, Mich. Early on, dozens of people crowded into two windowless, seventh-floor conference rooms — one of which is devoted solely to monitoring the many critical electronic components that G.M. buys from Japan — while engineers filled a room in the basement.
Maps and dry-erase boards on the walls track the status of each affected supplier, the parts G.M. buys from them and the plants that need those parts to stay open. Using a color code, suppliers out of commission were labeled in red. Any that were unscathed but lacked reliable power and water supplies were labeled in yellow. The goal was to turn them all green.
The team, which requested and quickly received portable air-conditioners to fight the heat created by working long days in close quarters, ultimately identified the 118 problematic products, Bill Hurles, the executive director of G.M.’s global supply chain, said. Issues with 33 of those did not become known until early April, mostly because they involved disruptions at sub-suppliers that G.M. rarely interacted with directly.
“We’ve just never had a disaster to this magnitude,” said John Hoffecker, a managing partner with the consulting firm AlixPartners who traveled to Japan to see the quake’s effect on the auto industry firsthand. “It’s not just the assembly plant that needs to run, it’s not just the direct supplier. I’ve got to understand the steel plant, I’ve got to understand every piece at a second tier, a third tier and a fourth tier below that. We’ve never had to do that before.”
Executives monitored the supply chain’s status on “white space” charts, in which green bars represented various vehicle platforms and white gaps showed the length of time before all the parts would be available to build those vehicles. Any bar not fully green meant a product line was in jeopardy.
Shortly after the quake hit, G.M. discovered that the supplier of an electronic controller used in some of its most popular and important vehicles was knocked offline, Mr. Hurles said. The Japanese supplier, which G.M. declined to identify, sustained damage to its plant and the equipment inside, and it had no water or power.
The problem had the potential to force a shutdown at up to eight G.M. plants, halting production of the Chevrolet Silverado pickup truck, the Chevrolet Traverse and Buick Enclave crossover vehicles, and other models. That shortage alone could have prevented General Motors from building 75,000 vehicles.
Developing a solution with the supplier took several weeks, but eventually the company temporarily shifted some production to other sites, a process that can be time-consuming and complicated by the need to avoid quality problems.
On April 15, when General Motors confirmed the supplier would resume making shipments, a cheer went up in the crisis room, Mr. Hurles said.
In mid-March, when deliveries of mass airflow sensors from Hitachi became uncertain, G.M. shut a plant in Shreveport, La. — the first auto plant in North America to close as a result of the disaster — that makes slow-selling, small pickup trucks, and redistributed the 2,200 sensors on hand in Shreveport to plants building higher-margin vehicles. The plant was reopened the following week because Hitachi resumed production.
“Our objective was to help the suppliers get back into production, not to re-source the parts somewhere else,” said Ronald Mills, G.M.’s executive director of engineering and program management, who headed the operation in the engineering room. “We like the parts we had.”
In the early going, with only sparse information available from many suppliers, G.M. rounded up more than 40 employees who volunteered to fly to Japan. There, they could visit suppliers and determine the extent to which shipments of parts would be interrupted, as well as offer help getting vital plants reopened.
One supplier could no longer obtain the hydrogen peroxide it used to process electronic components, and another was unable to get the steel it needed. G.M. arranged new sources in Korea for both companies.
The visitors were greeted skeptically at first but insisted that they were there to offer assistance and speed up testing in cases where equipment had to be moved or recalibrated, not to punish suppliers who were out of commission.
“The culture of the Japanese is they don’t want you to come into their home or their workplace unless things are running well, so they were really resistant to have us come and see their facility in bad shape,” said Carl Kevwitch, the manager of G.M.’s tactical operations team, who spent three weeks in Japan, taking trains and buses to visit up to 10 suppliers each day.
Because G.M. has been able to keep most of its plants running, analysts project that it will probably surpass Toyota to become the world’s largest automaker again. Mr. Akerson said it would be a hollow distinction until the Japanese auto industry got back on its feet.
“I want to win in the marketplace, but I want to win against a healthy and vibrant Toyota and Honda,” Mr. Akerson said. “Next year, we’ll put the gloves back on, and I’m sure they’ll go right back at us and we’ll go back at them.”
