Supply Chain Transformation

Another component of the Driving Change project was a comprehensive survey of the automotive supply chain in order to analyze the current status and future needs of firms in tiers 1, 2 and 3.

Automaker announcements since 2010 total $4.3 billion in "green" investment in the tri-state region alone. But despite that huge investment and a rebound in sales in 2010, management appears concerned about the rebound's permanence. They continue to hesitate to expand hiring or production at the rate of previous economic recoveries. Management, it appears, continues to operate in a cost-cutting mode. Unfortunately, simple cost-cutting models of survival alone are not viable in the long run. Firms also need to build on the strengths of the knowledge, experience and skills of their workers.

One of our most important research-based conclusions: the U.S. auto supply chain could prosper by adopting a "high-road" production approach in which firms, their employees and suppliers work together to optimize investment, labor, quality and technology development.

What does this mean? That adopting high-road production requires everyone in the value chain be willing and able to share knowledge. Production will gravitate toward decentralization and increasing reliance upon all workers. Our fieldwork found examples of firms that are thriving because they adopted an agile production model—a variety of products for a variety of industries delivered quickly. They use advanced equipment enhanced with cutting-edge information technology; but in addition to changing their product and operations strategies, they have also transformed their human resource policies.