BGA Shutting Down For Two Days

[John]

If one is selling 1,000,000+ F150 pickups, absolutely one can generate enough volume from multiple manufacturing sources with each one having the volume to justify their being a supplier , but say one was making the front lift system for a C8 with an annual take rate of about 50%, so only 10,000 such component system were sold this year. Can we expect that as noted above some manufacturer would create such capacity to be the stand by supplier, or that two different plants would be able to make parts knowing they will sell even in a great year a maximum of 10,000 of the parts for such a system.

What if we are talking about 2021 FE2 component parts with a total take rate of less than those amounts? With 400 unique C8 suppliers, having duplicate providers is a noble idea but not an economic functional reality.

Can we expect two DCT manufacturers for the C8 when it is a bespoke unit for the C8 — with its development costs probably in the neighborhood of $50,000,000 to $100,000,000?

[Mark2021C8]

I certainly am not trying to give GM support here but did we forget there is a problem called Covid19 that is disrupting the entire auto industry? I am guessing you did not predict Covid19 having the impact it has had. As I said, I am not trying to support GM here since the C8 will be the first GM product I have purchased since a new 1993 Chevy Blazer. I have been purchasing new Mercedes Benz vehicles for almost 30 years and let me tell you Mercedes Benz and virtually every auto manufacturer is having the same problem--part supply problems due to Covid19.

Coming from a manufacturing environment during my working life I can see issues regarding single source suppliers but those need to be micro managed. Also just in time deliveries make for good mfg. processes. The difference as I see it here is when you are making widgets you are counting on sales projections. With the case of the C8 GM has fixed (paid) orders for 20,181 cars so they know exactly how many parts and from what suppliers they need to build all of these cars. The supply line should be overfull with parts even if they need to provide for additional warehouse space. What is their supply strategy for 2021 when they need to build 40-50K cars.

[KLZ]

If one is selling 1,000,000+ F150 pickups, absolutely one can generate enough volume from multiple manufacturing sources with each one having the volume to justify their being a supplier , but say one was making the front lift system for a C8 with an annual take rate of about 50%, so only 10,000 such component system were sold this year. Can we expect that as noted above some manufacturer would create such capacity to be the stand by supplier, or that two different plants would be able to make parts knowing they will sell even in a great year a maximum of 10,000 of the parts for such a system.

What if we are talking about 2021 FE2 component parts with a total take rate of less than those amounts? With 400 unique C8 suppliers, having duplicate providers is a noble idea but not an economic functional reality.

Can we expect two DCT manufacturers for the C8 when it is a bespoke unit for the C8 — with its development costs probably in the neighborhood of $50,000,000 to $100,000,000?

You make a good point John. But from what I have read it appears that we are talking about wiring harnesses out of Mexico. If that in fact is the case (no confirmation yet, so it could just be hearsay) then we are not talking about multimillion dollar investment costs. Maybe not all parts can be multiple sourced, but surely a wiring harness could be?

[John]

You make very valid points. Perhaps cost of manufacture? And perhaps Covid had taught many manufacturers valuable lessons. Could we see future GM wiring harnesses and similar non high tech components also be sourced in other lower-cost-to-manufacture countries?

[jagtoes]

I certainly am not trying to give GM support here but did we forget there is a problem called Covid19 that is disrupting the entire auto industry? I am guessing you did not predict Covid19 having the impact it has had. As I said, I am not trying to support GM here since the C8 will be the first GM product I have purchased since a new 1993 Chevy Blazer. I have been purchasing new Mercedes Benz vehicles for almost 30 years and let me tell you Mercedes Benz and virtually every auto manufacturer is having the same problem--part supply problems due to Covid19.

I agree no one could have predicted covid but the alarm should have gone off at GM when they shut down in March. It's a big company and there were different groups working on covid issues as well as potential production issues. That should have triggered how to deal with the supply line. Now it's easy to second guess this whole parts problem now but not knowing what they did to avoid it is part of the concern. So for 2021 the next 6 months will be a continued challenge . Also the virus is not going away and there won't be any miracle vaccine available to all that want it for at least 6-12 months.

[Old Leadfoot]

Coming from a manufacturing environment during my working life I can see issues regarding single source suppliers but those need to be micro managed. Also just in time deliveries make for good mfg. processes. The difference as I see it here is when you are making widgets you are counting on sales projections. With the case of the C8 GM has fixed (paid) orders for 20,181 cars so they know exactly how many parts and from what suppliers they need to build all of these cars. The supply line should be overfull with parts even if they need to provide for additional warehouse space. What is their supply strategy for 2021 when they need to build 40-50K cars.

Well, yes they could overfill the supply line with identical parts but we all ordered our Cars with a lot of choices. There are so many color combinations for the interior and different choices for the exterior. Obviously, as the orders move forward in the process they have to send the individual orders to outside firms such as the seat vendor. I have seen some pictures of interior color combinations that I would think not many buyers would want. But someone did. GM would not want to stock a lot of those because they might get stuck with them so they wait until they are sure the car will be built.

I am sure it was a difficult decision to shut down, just from a PR perspective. The financial decision must have been a hard one too. I did the math quickly and if two days of production would have built about 350 cars at an average MSRP of $75,000 it looks like GM will miss out on about $26 million in gross revenue. That isn't easy to walk away from.

[BIG Dave]

One more thing I’d like to add. We expect a LOT from Corvette, near supercar performance (but at a price point), world class technology (but at a price point), wide variety of options (all priced moderately), 100% reliability , etc. All that for just $60K. And now we’re expecting redundancy in the supply chain (but still at the $60K price point)?

But I’m not opposed to redundancy. Some feel that redundancy is counter to Lean productivity, but redundancy is actually one of the best ways to ensure Lean operations because redundancy is designed to help facilities avoid the significant waste of time, effort and money involved in a system breakdown. It does however come at increased cost (from managing double the number of suppliers, to lessening quantity discounts), and since the Corvette needed be priced at $60K, something had to go.

[meyerweb]

The entire industry, heck ALL industries, have focused on cost control for for decades. Finding the cheapest supplier no matter where in the world that supplier is located, just in time delivery and manufacturing to minimize inventory, cutting employment to the barest minimum to meet demand, and more. And we as consumers have benefitted from that with lower cost products. (We as workers, maybe not so much.)

The system worked great, most of the time, and the occasions when it didn't (the magnesium factory fire mentioned above, for example), the cost savings overall still outweighed the costs. You can't blame GM for adopting the same approach to cost cutting that all their competitors adopted. It's a very competitive industry, and brand loyalty isn't going to keep people buying a Blazer if it costs $2,000 more than an Explorer.

BUT a pandemic is something no one planned for. Should they have? Maybe, but given that the last pandemic that shut the world down was 100 years ago, I think it's understandable that no one did. Should GM have started changing it's approach after March? Maybe, but finding new suppliers, vetting them, getting manufacturing facilities built and up and running, and doing QC on all the new suppliers doesn't happen overnight. Especially when those suppliers are all shut down or scrambling, too. A wiring harness may not be the same level of tech as a carbon fiber bumper, but it's still a specific, custom part, not an off-the-shelf item. And the companies that can make wiring harnesses don't have extra production lines and workers sitting around just waiting for GM to come calling. To think that in the last 6-7 months GM could have come up with multiple suppliers for even a large fraction of its parts, with everything else that's been going on, isn't realistic.

In the longer term, I think many companies and industries are rethinking their approaches to these issues. But finding multiple suppliers for thousands of bespoke parts isn't the same as calling McMaster-Carr when Home Depot doesn't have the fasteners you want.

[Plentyfast]

It's not just the Single Sourcing (if that's true) that is impacting production, it's the Just-In-Time deliveries that will be more of an impact. As a "Planet" we can no longer ignore the Elephant in the room, COVID-19 will be an impact for at least the next year or longer. It's already been proven over and over again, doing nothing doesn't work. Therefore, whatever plans where in place Pre-COVID, will require more agility and a different approach.

[ALF01]

I'm tempted to weigh in on this....and will start by saying that pretty much everyone's viewpoint is valid...there is no right or wrong here. I've got 35+ years of high tech sales in the semiconductor industry, and have dealt with the sole source issue all of those years. Two sides to that coin. And LOTS of variables as it progresses:

Are the development costs shared?
Are there volume guarantees (and length of contract guarantees) on the part of the user to the supplier?
Are the two parts truly identical in form, fit and function? (There is an often misunderstood difference between a "second source" and an "alternate source")
How does the suppliers support change if they suddenly lose a chunk of their business due to another source, and what if the alternate source does not pan out. I've seen users come back with their tail between their legs after a failed alternate sourcing attempt......trying to repair a damaged relationship with the initial supplier....

Again, there are no black and white answers. While it's easy for us spectators to play Monday morning quarterback, the fact remains that these decisions have been looked at carefully before being made. That doesn't make them correct, but it's not as though someone just flipped a coin....

[Heidi]

Post 40
So true. We ran into same issues with 2nd sourcing in Gov. missile production. Thanx AlF01
Heidi
Save the Wave

[jagtoes]

By the way did anyone ever hear what parts were the shortage problems.

[John]

Not officially but every birdie chirped wiring harnesses.