During the September 9th AIAG Supply Chain + International Trade Summit, Dave Leich, GM’s executive director, global supply chain, spoke candidly about the challenges of the past 18 months.
“There has been unprecedented volatility and uncertainty across the supply chain,” he said, “including a world pandemic, semiconductor crisis, raw material shortages, shipping delays, natural disaster events, and drastic swings in automotive demand.”
Not surprisingly, Leich focused much of his remarks on the semiconductor challenge. He said GM activated a semiconductor crisis team in late Q4 2020 when tiered supplier constraints were identified. These conditions were exacerbated by the Texas winter storm in February 2020 that shutdown key semiconductor suppliers, an earthquake in Japan that also impacted several semiconductor fabricators, a major semiconductor supplier fire in April 2020, and Southeast Asia COVID-19 surges that forced supplier shutdowns and production restrictions.
“Global semiconductor production reallocated to consumer electronics during the COVID-19 shutdown, but the long-lead capacity was oversold, and the unplanned demand surge led to an industry crisis like no other in our history,” Leich said.
To take on the challenge, GM assembled an extensive cross-functional crisis team. As the situation escalated throughout the value stream, GM implemented engineering alternatives and substitutions. “We did a remix of vehicle options and trim levels,” said Leich, “allocating available semiconductors to our highest-demand vehicles. And we regularly communicated with suppliers on our key priorities.”
Leich said GM’s semiconductor crisis toolbox includes:
“We had a cross-functional approach with no siloes,” said Leich. “The commodity teams took a CEO approach for each commodity. The supply planning team led the remix alternatives, while manufacturing led the Build & Park alternatives. The quality team did robust work on semiconductor retrofits. Purchasing facilitated critical supplier escalations from Tier 1 to Tier N, and the supply chain team executed an allocation strategy and made production planning decisions.”
Rounding out the effort was a communications team focused on strategic messaging, emission and compliance teams analyzing GHG and Café risks, logistics securing extra capacity for intercontinental or domestic delays, engineering identifying alternative supply or revised module functionality, and government relations influencing the industry’s “essential” status across regions.
Leich said the COVID resurgence in recent months has significantly compounded semiconductor risks, noting that Southeast Asia has a high semiconductor footprint, but low vaccination rates. “The U.S. automotive industry total vehicle stock fell to about 1.236 million vehicles at the end of July 2021, the lowest U.S. inventory level on record going back to at least 1975,” he said.
Leich said the key to working our way out is for greater collaboration with Tier 1s and the sub-tiers to find solutions. “In a crisis situation like this, relationships matter,” he said. “We have to communicate more frequently and with transparency, including three- and four-way discussions with OEMs, Tier 1s, semiconductor suppliers, and the wafer fabricator. We must create specific priorities for semiconductor suppliers and Tier 1s and extend volume visibility to suppliers to secure commitments.
“We also need to keep an eye on your employees’ mental and physical health and their stress management,” Leich concluded. “Remember, with this continual bad news cycle, composure is key. This is the most complex crisis our industry has ever seen. Normalizing the supply chain will be a long-term challenge and enhancing your supply chain resiliency should be a top priority.”
Registrants to the 2021 AIAG Supply Chain + International Trade Summit can access speaker presentations at www.aiag.org.