Assessing Product Development Capability of Foreign Suppliers for the US Automotive Industry

1. Assessing Product Development Capability of Foreign Suppliers for the US Automotive Industry Author – William Phillips Jr.

2. Overview • Business and Process Background • Theoretical Background • Process Description • Assessment Results • Lessons Learned What does it mean when we say that a supplier knows what to do and we assess that they can do it?

3. Business and Process Background • Possible Outcomes • Assess as fully capable. Integrate supplier into normal business practices. • Assess as unacceptable. Document findings and go to other suppliers. • Assess as not yet ready to stand alone. • Identify gaps between current / demonstrated capabilities and desired future state. • Create relationships that will enable Global, remote and usually asynchronous teamwork.

4. Business and Process Background • Automotive OEM Business Practices • OEMs usually work with a few big suppliers that have roles from defining customer needs through analyzing field returns. • China viewed as an opportunity to reduce cost • Large supplier of after-market radios used to mitigate risk • Potential supplier already has factory with sufficient volume • Don’t obscure meaning by being too abbreviated • Supplier Point of View • Business opportunity - Expand role to work directly with U.S. OEM • Sell themselves - Willingness to learn OEM mandated disciplines • Goals of the Project • Assess potential ability of potential supplier to work with team • Make recommendation to management • Set groundwork for ongoing working relationship • Develop Process that can be used to assess other suppliers

5. Theoretical Background:Views of Communication • Communication Theory – Shannon et. al. • Make sure that we can exchange information correctly. • Mathematical Theory of Communication (1948) Claude Shannon • Information transferred from sender to receiver through medium with some noise. • Communication as Coordinated Action • Make sure we mean the same things and deliver what is expected. • The Tree of Knowledge (1987) Maturana and Varela • Knowledge is evidenced as coordinated action. • Organizational Learning • Creation of a new product. Integration of product design and manufacturing into complex systems: design, validation and manufacturing. • Fifth Discipline (1990) Peter Senge

6. Theoretical Background:Issues in Communication • Two Types of Gaps • “Where they are” and “Where we expect them to be”. • Our stated objective is to evaluate this gap. • “What we say” and “what they hear/do” (and vice versa). • Aspects of the 2nd type of gaps • Chinese vs. English (language) • China vs. US (cultural) • System vs. Component views • Manufacturing vs. Product Development • OEM vs. Aftermarket – “Our name is on everything in the car.” • Methods for dealing with 2nd type of gap – Carlile’s Framework • Transfer Information across Syntactic Boundaries • Translate Knowledge to bridge gaps in Semantic Boundaries • Transform Knowledge to bridge gaps in Pragmatic Boundaries

7. Visualizing the Gaps • Application of Carlile’s Framework for assessing the complexity of a knowledge boundary. Increasing Novelty and Uncertainty New Supplier PRAGMATIC Transforming Knowledge SEMANTIC Translating Knowledge SYNTACTIC Transferring Knowledge Established Suppliers OEM

8. Detecting the Gaps Pragmatic: If we told you that the Craftsmanship of the radio is unacceptable. How would you handle that problem? (common definition of craftsmanship vs. OEM definition of Craftsmanship, distinguish between component and system issues, “ownership of solution” vs. “responsibility for the problem”) Semantic: Describe how you would communicate to your manufacturing organization our requirements for process capability. (understanding our requirements, understanding manufacturing’s current methods, explaining the process to meet and the intention behind our requirements) Syntactic: When we communicate a new requirement to you, how will you communicate it to the people who need to know? (who needs to know, when do they need to know and how do you assure that they get the message)

9. Process Description • Assessment of Potential • Assessment of current capabilities but also ability to create the future state. • Not assessment or audit to specific standards. • Assessment of ability to work together successfully. • Capabilities • Current Manufacturing Practices • From sub-suppliers through shipping • Current Product Development Practices • Sub-suppliers of design work? – software, key assemblies • Standards and Future State • Many future standards, processes and disciplines required • ISO and QS9001, Q1, APQP, Six Sigma • Problem Identification, root cause ID and resolution • Assess ability to work together • People to people skills, integrity and commitment / continuity. • Future state can come in stages

10. Process Description • Define Key Domains • Design and Release • Software • Quality, Reliability and Robust Engineering • Manufacturing • Purchasing • Use People who will be responsible to implement. • Augment with more impartial view. • Define Key Characteristics (disciplines and principles) for each Domain • Prioritize the characteristics • Define a method to rate each characteristic • Product Development Capability Maturity Model? • Similar but … • Decide if the evaluation criteria are to be shared in advance. • Pro - correct evidence can be available • Con – a “spin” can be developed

11. Assessment Process • Our approach: Share the Evaluation Criteria but not the weighting factors. • Assure that we see the best evidence that they have of their abilities during our relatively short trip. Make sure that they know we are evaluating the present and their ability to get to our desired future state. • See what they feel is important. Understand their priorities.

12. Assessment ProcessWho do we bring and who do we talk with • Product Design • Program management, change control, electronic design, layout, performance measurement, etc. • Software • CMMI Criteria • Quality and Reliability • QS 9000, Q1, APQP, supplier quality management • Manufacturing • Capacity, process capability, gage R&R, training • Purchasing • Supply chain management • Ethical standards and other terms and conditions

13. Assessment Process • Face to face meeting at our location • Provide Agenda and expectations for our visit • Meeting at their Design Center with visit to current manufacturing facility. • Interviews with key personnel. • Witness examples of same or similar processes. • Clarify differences between their current practices and our expectations (define gaps). • Follow-up discussions to determine how they expect to close the gaps. • OEM private team meeting to develop consensus. • Initial report-out • Followed by report to OEM management and then official report-out.

14. Assessment Process • Each Domain was intended to stand alone so we did not try to normalize the number of questions or the weighting factors from domain to domain. • Thus the Manufacturing Domain could have 20 key characteristics and a total possible number of points of 120 but that would not mean that it was more or less important than a Software Domain score of 150 based on 18 questions. • This allowed us to determine the type and extent of support needed from the OEM to assure a good relationship.

15. Assessment Method • Each team member created a spreadsheet for their domain designed to capture key characteristics (disciplines or principles) in words. Each characteristic was given a weighting factor and a method to numerically rank the capability of the potential supplier. Examples: • Domain: Product Design; sub-domain: PCB Layout • Characteristics – PCB layout tools meet performance standards (library of rules), support specified output formats, rules used to assure manufacturability and EMI performance. • Domain: Quality; sub-domain Failure Mode Analysis • Characteristics – Data on field failures, mfg. Failures, root cause analysis, methods used

16. Assessment Results • Process calibrated to a Best-in-Class (BiC) supplier and typical suppliers by each domain team leader prior to use. • Process used on 2 Chinese and 2 Korean potential suppliers. • Management decision to select 2 of the suppliers and work with them at the level of support recommended by the team.

17. Assessment Results • Each team member asked to see evidence specific to each characteristic. We compared what we saw to our knowledge of evidence from best-in-class suppliers. • When an answer came back that they did not do something we rephrased the question to ask how they addressed the general principle. • Thus if the potential supplier replied that they do not use the “8D Process” for problem solving we asked them to describe how they found the root cause of a recent problem and how they kept it from recurring.

18. Lessons Learned • Evaluating a potential working relationship is more than just evaluating capability. • Working together involves understanding “Intent” and not just conforming to specified requirements or procedures. • Quantification helps sell the process to management. But building quality relationships will make the work easier. • Open-ended questions to evaluate qualitative understanding allows the team to develop an opinion on whether the companies can work together successfully. • Understanding communication theory and identifying the two types of gaps that can exist allowed the team to go beyond assessing capability to creating a successful working relationship. • Overall goal – creating a new relationship (not just making an assessment).