A team of students representing Miami University were chosen as the winners of the second annual GM/Wayne State University Supply Chain competition, held at the Renaissance Center in downtown Detroit this past weekend. The event featured presentations by teams from 16 universities that were based on automotive supply chain challenges written and judged by companies supporting the event, including General Motors, Delphi, Lear, Bridgestone, Ryder and the AIAG.
The competition, which was organised by Wayne State University’s School of Business Administration, based in Detroit, was also used as an opportunity for recruitment and education in the automotive supply chain and logistics industries. The two-day programme included a plant tour at GM’s Lake Orion assembly plant as well as speeches by notable supply chain executives.
With the expansion of the North American automotive industry and the continuing globalisation of markets and the supply chain, executives at the event made it clear that there were real job opportunities in supply chain management, despite a sluggish economy and high unemployment in the US.
“Job demand in supply chain is 90-95% right now,” said Bill Hurles, executive director for supply chain at General Motors. “Supply chain specialists are in high demand right now at GM and in the auto industry.”
GM’s Christine Krathwohl, executive director of global logistics and supplier diversity, who gave the keynote address, also made it clear that she was at the event because her team had job openings that she was looking to fill. “We need to be talking to these students and we need to be selling them on the benefits of working for GM,” she said.
Analysing total supply chain costs
The competition was structured into two rounds of presentations. All 16 universities were given details of a case several weeks in advance of the conference. They were split into four regional divisions to present their cases to panels of judges made up of supply chain and logistics executives. Four regional winners were selected after the first day and given a new case in which they had only one night to analyse and present their recommendations the next morning.
The competition was structured into two rounds of presentations. All 16 universities were given details of a case several weeks in advance of the conference. They were split into four regional divisions to present their cases to panels of judges made up of supply chain and logistics executives. Four regional winners were selected after the first day and given a new case in which they had only one night to analyse and present their recommendations the next morning.
In the primary case, the students were told that GM was considering pulling forward the launch date of the 2014 Chevrolet Malibu Eco from its original July 2013 date in an effort to gain market share and to increase profitability relative to the previous model. The case included a range of constraints, cost and lead time data from which the students were required to assess and make recommendations on when would be the most feasible and cost effective date to pull forward production, including a shutdown period and conversion costs for lost production, supplier changes and logistics cost.
The case was notable for its close approximation to real business problems (GM actually did pull forward the launch of the 2013 Malibu Eco) and to the accuracy of costs and data provided to students. For example, tyre manufacturer Bridgestone was said to have options for two different rubber polymers with which to manufacture tyres for the new Malibu: one from Japan that would be ready immediately, and another from North America that would not be ready until later. The Japanese polymer would allow a faster start time for production, but would also require more logistics and inventory costs as well as longer lead times.
Furthermore, the Japanese polymer had a 20% chance of not being validated for production, necessitating a $500,000 cost for testing. Students needed to consider every cost, strategic and profit factor.
In another of the case’s factors, GM was faced with two different factory sites for its seat supplier, Lear: a brownfield site located around 10 miles (16km) from GM’s Detroit-Hamtramck plant, where the Malibu is built, and a new plant that would be built more than 100 miles away. The per-unit costs of the new site would be lower, but again the factory would not be ready until April. Likewise, the students also had to consider the logistics and inventory carrying costs of supplying the sites from much further distances.
Although the case was a simplified version of the thousands of supplier considerations that would go into changing a launch date, it nevertheless struck at the heart of the range of complexities that exist in making supply chain decisions. Some university teams, for example, opted for a dual sourcing decision for the rubber polymers, while others eliminated the Japanese polymer altogether based on validation risks. In some instances student teams chose to eliminate the Lear brownfield factory once the new facility came online, while others determined that the risk to just-in-time manufacturing and the effects of logistics and inventory cost would render the closer factory more cost effective.
Judges based their decisions more on the students’ analysis, presentation and critical thinking rather than on making ‘correct’ sourcing decisions or production start dates. For example, the four regional winners – Howard, Miami Ohio, Michigan State and Penn State – each selected different start dates. One of the judges and authors of the case, Derrick Mitchell, responsible for supplier development and diversity at Lear, pointed out that each of the selected dates had a valid justification.
“I went into this competition thinking that March 4th was actually the date to pull forward production, but after listening to each presentation, I realised that they could all be right,” he said.
Logistics consideration were complex
Although there were effectively no wrong answers, the judges revealed that logistics and inventory considerations should have played a significant part in the students’ considerations. Another judge and case author, Jeff Kosloski, Ryder’s group director for customer logistics, pointed out that, in the case of the Lear seat factories, the extra 100 miles in transport should have been viewed as critical.
Although there were effectively no wrong answers, the judges revealed that logistics and inventory considerations should have played a significant part in the students’ considerations. Another judge and case author, Jeff Kosloski, Ryder’s group director for customer logistics, pointed out that, in the case of the Lear seat factories, the extra 100 miles in transport should have been viewed as critical.
“We wanted the students to understand the important of just-in-time production and logistics,” he said. “Many were eager to use that facility 108 miles away, but the costs of moving the seats that distance adds up very quickly.”
The judges also revealed that logistics should not stand in the way of sourcing decisions either. Bill Prince, a purchasing manager from GM, pointed out that the polymer from Japan would be worth the validation cost to enable production to start sooner. The shipping costs could be mitigated as well by a full container load solution.
The winning approach: alternative transport and business continuity
The final case, presented to the four semi-finalists, was less specific and data driven than the first, and depended more on students’ own risk assessments. It stated that Delphi’s factories for numerous components to the Malibu, including wiring and instrument panel harnesses, are single sourced from different locations in Mexico. Considering that there have been “supply chain disruptions” in the country, students were asked to consider the risks, advantages and disadvantages of this supply chain, as well as to give recommendations for the Mexican-made production. The potential for engineering changes of each product was given, as well as pallet quantities, dual tooling investment costs and weights per commodity.
The final case, presented to the four semi-finalists, was less specific and data driven than the first, and depended more on students’ own risk assessments. It stated that Delphi’s factories for numerous components to the Malibu, including wiring and instrument panel harnesses, are single sourced from different locations in Mexico. Considering that there have been “supply chain disruptions” in the country, students were asked to consider the risks, advantages and disadvantages of this supply chain, as well as to give recommendations for the Mexican-made production. The potential for engineering changes of each product was given, as well as pallet quantities, dual tooling investment costs and weights per commodity.
In contrast to other presentations, which recommended dual sourcing or even shifting production out of Mexico to avoid disruptions related to drug-related violence, Miami’s winning case took a more measured assessment of the risks, with research suggesting that the impact to Delphi’s production was not high enough to warrant shifting location. Rather than investing in dual tooling or warehousing that would compromise Delphi’s ‘lean strategy’, the team opted to maintain current production and to mitigate risk by introducing air freight shipments where necessary. This approach was coupled with a “business continuity plan” that would include GM working more closely with Delphi in areas of supplier communication and crisis management.
According to John Taylor, associate professor and chair of the Department of Marketing and Supply Chain Management at Wayne State, the judges selected Miami Ohio thanks to the team’s extensive research and the “viability” of its plan. “The judges noted that the team had carried out very extensive and considered research on Mexico and Delphi,” he said. “They presented a very viable solution that judges expected would also have the lowest cost.”
The winning team was made up of Christine Buehler, a junior (third year) from Omaha, Nebraska; Xianwu (Ken) Lin, a junior from China; Caleb Harshbarger, a junior from Botkins, Ohio; and Daniel Ruffley, senior (fourth year) from Cincinnati, Ohio.
The team said that they had made their decisions based on a close assessment of the actual risks posed by the violence in Mexico versus the substantial costs of dual tooling. “On a daily basis, it is more realistic to rely on alternative transport than to change your production locations,” said Christine Buehler. “Sometimes you have to call your 3PL for a truck or a plane. It is more realistic than building a $2m warehouse in which something negative still might happen.”
Caleb Harschbarger agreed that a focus on supplier relations and communication could yield more positive and realistic benefits than shifting supply from Mexico. “It’s better to have good communication with your supply chain and, if push comes to shove, shift to an air charter if you need it.”
Indeed, Miami’s careful consideration for the value of lean, just-in-time logistics and its understanding about the high costs involved with dual tooling may have been one of the major factors that put it ahead. “Everyone wants dual tooling but nobody wants to pay for it,” said Rick Birch, responsible for global production control and lean at Delphi. “It’s actually very difficult to arrange the flow and cycle times for dual sourcing as well.”
Shared values
The event’s aim was to both provide students with the opportunity to network with industry leaders, as well as to showcase Detroit and the automotive industry to young graduates. GM’s Christine Krathwohl told students that careers in the automotive industry and in logistics would help prepare them to take on any almost any job. “I love my job and this industry. You just can’t make up the challenges that we have to face every day.”
The reaction among students towards the idea of working in the automotive supply chain sector was overwhelming positive. Daniel Ruffley, from the winning Miami Ohio team, and a previous participant in the event, said that he agreed with a speech given by Ryder’s Tom Jones, general manager of supply chain solutions, about the opportunities in the automotive logistics sector. “I have to agree with the Ryder manager, Mr Jones, that there is a lot opportunity for supply chain graduates to be put in development positions,” he said. “These companies are seeking younger people with fresh ideas.”
“I would say that the auto industry has taken on an attitude more similar to that of a start-up,” said Travis Smith, a junior from Howard University. “They are much more willing to take new ideas and see how they work out. In that respect I would see it as a really attractive industry for myself and for my peers.”
GM executives themselves were keen to convince students that the company was no longer a “sleeping giant”, in the words of Krathwohl, and that it was now a dynamic and exciting employer. She added she wanted students to feel inspired to work for her team because they felt “we share the same values”.
It was clear that in the competition for top talent, an emphasis on certain values in the supply chain does play an important part in attracting students. Ruffley and his teammate Ken Lin, for example, put a considerable focus on a desire to see innovation, diverse opinions and considerations for ethical business and sustainability.
“No matter where a company is doing business, whether Mexico or China, they should be considering the values of their customers,” said Lin. “These values might seem secondary to business, but you can see the risks from companies like Nike, which did a horrible job on [ethical supply chains] and it took them ten years to rebuild their reputation.”
Bill Hurles, who said that Wayne State first approached him with the idea for the competition in April 2011, when the carmaker was in the middle of managing through the crisis following the Japanese tsunami, said that it was a “win-win” for GM to get the chance to hear new ideas as well as for students to gain experience. “It’s also an opportunity for GM to give something back to the community,” he said.
Krathwohl said that she was “blown away by the level of creativity and quality of analysis” among the students. She strongly urged the students to consider GM and the automotive logistics industry in their career focus, pointing to an increasingly complex and global supply chain, with new factories and supply hubs opening in Indonesia, Vietnam and Russia.
“We have a tremendous amount of responsibility in our roles,” she said. “If you took on its own the logistics budget that I control, which does not include our JVs in China and Asia, as a stand alone company, its revenue would rank 270 on the Fortune 500 list.”
Pictured: Case Competition champion Miami Ohio with GM's Bill Hurles
