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Preparing the Automotive Supply Chain Preparing the Automotive Supply Chain

Preparing the Automotive Supply Chain - PowerPoint Presentation

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Preparing the Automotive Supply Chain - PPT Presentation

for the next disruptive event joseph bione Whitehall groupllc September 282017 1 Joseph Bione ID: 743724

performance business financial disruption business performance disruption financial industry suppliers supply amp bione automotive management manage chain companies 2016 key operations understand

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Slide1

Preparing the Automotive Supply Chain for the next disruptive event

joseph bione| Whitehall group,llc.| September 28,2017

1Slide2

Joseph Bione

Joseph Bione is President and founder of the Whitehall Group with over 35+ years of experience in Transition Planning, manufacturing and restructuring. Mr. Bione’s expertise includes the areas of operations, finance, reengineering, enterprise lean, continuous improvement and supply chain management. The Whitehall Group provides services to companies in transition or trouble.

In industry, Mr. Bione has served as Interim CEO/President for many clients during transition and return to profitability, including CMI Holdings, Venture Industries, Talon Automotive Group, Como Plastics, Detroit Plastic Molding and Kuhlman Automotive Group. He is currently serving as Interim President/CEO for American Special Vehicle Cars, (ASC) where he has won the 2016 Manufacturing Leadership Award (ML100) for Visionary Leadership. He was recently engaged as EVP of Operations at Constar, Inc. a $500MM manufacturing company, working with a team on restructuring the company, where he won the 2012 Manufacturing Leadership 100 (ML 100) Award for Turnarounds. Mr. Bione is on the Governors’ list of potential Emergency Managers and Whitehall has been approved by the State of Michigan as an approved “Turnaround and Restructuring” resource. (Contract # 271B4300019)

Mr. Bione started his manufacturing career in “Erie, PA” at the Jacob Haller Company, AMSCO and then Johnson Controls, where he served as VP & General Manager for both the Automotive Group and Beverage Bottle Division and at the American Sterilizer Company, as Director of Operations for the Medical Products Division. Mr. Bione was also a Partner at Deloitte Consulting in the Automotive, Supply Chain and Restructuring Practices with Global Account Responsibility for DaimlerChrysler and co-leadership of the Global Automotive Practice.

Mr. Bione is a frequent speaker at industry events, including the MICPA Management and Information Business Show, the Automotive News APD Motor Vehicle Metal Resins Conference and the OESA “Best Practices” Regional Meetings. He also contributed two guest columns in both the TMA newsletter and at the OESA Annual Outlook Conference. He participated in Powerplex as a guest speaker, the Automotive Supplier Finance Summit, and Eastern Michigan’s College of Business’ Ethos Week. Besides speaking, Mr. Bione has authored a series of four (4) articles in addressing the “Business Transition Issues” that companies are facing today featured in Business Management Magazine.

Mr. Bione was an Advisory Board Member of Gannon University’s Business & Engineering Programs, University of Detroit Mercy’s Turnaround Management M.B.A. program, Eastern Michigan University’s Supply Chain Management program. He is currently a member of the Erie Chamber of Commerce and sits on an advisory board at the Children’s Hospital of Michigan Foundation. Mr. Bione earned his B.S. in Business Management with a minor in Engineering, an M.B.A. in Organizational Behavior, and the “Distinguished Alumni Award” from Gannon University in Erie, PA. His certifications include the CPM (Purchasing), CPIM (Production Control & Inventory), and is a longtime member of the Turnaround Management Association. (TMA)

2Slide3

The Whitehall Group, LLC.

Management firm providing services to privately held middle market companies in transition

Serve clients through variety of channels

Guided by needs and best interests of the clientServe primarily privately held, middle market companies

Utilize enterprise-wide methodologies for operational & financial improvement

Rapidly improve bottom-line performance

Right combination of experience, expertise, and client side perspective

Drive change and deliver value

Areas of expertise include: Financial reporting, analysis and controlsCommercial marketing, selling and distributionOrganization cultural changes, metrics and communicationOperational evaluating, implementing and improvingStrategic analysis planning and execution

Supply Chain procurement, logistics and distribution

Key differentiator is ability to actively assume operating roles and support

3

WE ARE EXPERIENCED

BUSINESS PEOPLE

WHO UNDERSTAND

THE ISSUESSlide4

Questions Suppliers need to ask

The A

uto Industry is in the midst of its 5th record year but,…..

Is it business as usual or should suppliers be concerned

?

Is there uncertainty once again in the supply chain?Is a disruptive event coming?

Are you prepared for a disruption?

What should you so to get prepared?

What are the key elements that you can control?4No one knows where we are heading and you can only control what’s inside your four wallsSlide5

History- Large Suppliers

Industry collapse 2009

GM/Chrysler Bankrupt- Ford on the edge with the Global Automotive Industry all in declineConsolidation and downsizing at extreme

(Examples: # of OEM’s then to today and # of brands eliminated)Large Suppliers weathered the storm

Leveraged strong balance sheetLean operations

Cutbacks and downsizing

Came out of the situation more lean and profitable while growing top/bottom line

Large investments are being made in new technology

New non automotive giants are entering the gameNew partnerships are being formed5The industry is leaner and profitable but, uncertainty is everywhereSlide6

History –Tier 1, Tier 2 & Tier 3 Suppliers

Industry collapse

2009GM/Chrysler Bankrupt- Ford on the edge with the Global Automotive Industry all in decline

Consolidation and downsizing at extreme (Examples: # of OEM’s then to today and # of brands

eliminated)

Smaller Suppliers mortgaged the farm to stay alive- used balance sheet and stressed itMade significant cuts- “brain drains”- shelved unused equipment and diminished capacity

Those that survived (not sold/merged/closed) started accepting any new business “top line growth”

At what cost? Margins eroded as suppliers could not afford to say “no”

Balance sheets slowly started to improve as suppliers are trying to get back to “business as usual”With “business dynamics” changing, new technology develops new partnershipsNew players are entering the market6Is it business as usual or are we approaching another DISRUPTIVE event?Slide7

What is a Disruptive event?

Define a disruptive event:

WHEN

A

NEW PRODUCT

O

R SERVICE HELPScreate a new marketANDsignificantly

weakens, transforms

, or

destroys an existing

product, market category /

industry

7

C

redit: Clean Disruption by Tony Seba March 17, 2016

Are we headed for our next disruptive event in the auto industry?Slide8

C

redit: Clean Disruption by Tony Seba March 17, 2016

5

th

AVE

NY

C

1900

Where isthecar?

US National

Archives

: Fifth Ave NYC on Easter Morning 1900

8Slide9

C

redit: Clean Disruption by Tony Seba March 17, 2016

5

t

h

AVE

N

Y

C1913

George Grantham Bain

Collection

Where

is

the

horse?

Photo: Easter 1913, New York. Fifth Avenue looking

north.

9Slide10

iPhone vs Technology

10

The iPhone is only 10 years old, can you remember life prior to smartphones?Slide11

Why do we fail to anticipate disruptions?

Why do smart people at smart organizations consistently fail to anticipate or lead market

disruptions?It’s

usually the ‘experts’ and ‘insiders’ who dismiss Disruptive Opportunities

Example:

‘Expert’ Disruption Forecasts

In the mid-1980s AT&T hired McKinsey & Co to forecast cell phone adoption by

the year

2000They were off

by a factor

of: 120X *

11

C

redit: Clean Disruption by Tony Seba March 17, 2016

What about Kodak, Garmin, pagers, day planners and all of the products that don’t exist today?Slide12

Amazon the “GREAT” Disruption to Retail

….and it’s still growing

12

Did anyone see this disruption coming?

*

Does not include

Whole FoodsSlide13

What happens when you fail to anticipate disruptions?

None

of these companies anticipated or prepared for Amazon’s impact on sales

Retail Store Closings

(so far) in 2017

13

These companies didn’t see the disruption Amazon is creating – with more to come Slide14

Disruption in the Auto Industry is here

The

technologies, skills, and organizations of the industrial revolution have

run out of steam

They are being replaced

by the

technologies,

skills, and organizations of the information technology revolutionEnergy StorageElectric VehiclesSelf-Driving Cars

Solar

PV

Image:

©

Copyright Tony

Seba

C

redit: Clean Disruption by Tony Seba March 17, 2016

14

We

will

see

more changes

in energy

& transportation

over the

next 5-10

years

than

we have seen

in

a

centurySlide15

Disruption 1 in the Auto Industry- The Electric Vehicle

15

Every OEM has electric vehicles and is developing more today at an accelerated pace

C

redit: Clean Disruption by Tony Seba March 17, 2016 Slide16

Global Annual EV Sales 2011-2016

16

However, is the market ready for them- skeptics say no, yet global projections are high Slide17

Disruption 2 in the Auto Industry- The Autonomous Vehicle

17

Most cars today have nearly all of the built in capabilities to be self driving today

C

redit: Clean Disruption by Tony Seba March 17, 2016 Slide18

Global EV & Autonomous predicted Sales to 2025

18

Again is the market place ready for a self driving car and what will the impact be on the supply base Slide19

Suppliers on Track for Record Acquisitions

The auto industry's rush to develop self-driving vehicles, connected cars and electric vehicles has goaded suppliers into a feeding frenzy of

acquisitions, completing

a record

203 acquisitions valued at $57 billion

which is nearly

double the value of deals in 2016, according to a study by PricewaterhouseCoopers.

Deal

makers were motivated by self-driving vehicles, connected cars and fuel economy.Chinese buyers initiated 17 percent of the deals, a sign they are globalizing their operations.The big money is in electronics, which generated 36 percent of aggregate deal value.Consumer

electronics giants such as Intel Corp. and Samsung are making major acquisitions in a bid to establish an automotive presence.

North

American suppliers were the likeliest buyers.

While the fundamental technology trends — connected cars, self-driving vehicles and improved fuel economy — are clear, the timing of acquisition activity can be tricky. A number of automakers have announced plans to introduce electric cars and plug-in hybrids, but sales forecasts are a

crapshoot

.

Suppliers are trying to find out what it means for them and

to what degree

they need to change. Nobody

is getting rich right now by focusing on electric vehicles, but some suppliers see the handwriting on the

wall. If you manufacture engine blocks, it doesn’t take a brain surgeon to figure out that 50 years from now, we’re not going to need as many engine blocks.

*

Credit: Automotive News article by David Sedgwick 8/28/2017

19Slide20

When is the next Disruption coming

It is here, its happening now!

It is not clearly understood

It is hard to describeIt could be a big disruption or it could be small

It might directly effect your company or indirectly but, it will effect ALL

No one knows exactly but, investment in disruptive technology is exponential with new players entering the race daily

20

What can a Tier 1-2 Supplier do to prepare for a disruptive event? Slide21

Who will affected the most

Companies that are committed/stuck in old technology or soon to be obsolete products

Companies who are not profitable or have the balance sheet to react or play in the new market

Companies who are not aware of changes around them both at customer and supply chain levelCompanies that do not have any new or innovative technologies to distinguish themselves from their competitors

Companies with a “this is the way it has always been done” mentality or an “it’s not going to change and effect me” attitude

21

Any company that is not prepared for change and can not react quickly will be

affected Slide22

What can you do to prepare your business

Listen/learn- Stay aware of the situation and what’s happening at each level

Your ultimate customers OEM

Tier 1 GiantsNew Technology entrants

Your competitors Your Supply Chain

Control what you can inside your four wallsBe ready and open for change- mindset of both Owners and Employees

Be agile- Prepared to react and make decisions intellectually/quickly

22

Knowing where your company is daily will provide you with the information needed to react quickly when neededSlide23

Keep financials in order – manage cash

Manage the business with data

Know if you’ve met financial / operational objectives

Understand your customers and their contribution

Manage and challenge the entire supply chain

Manage the business in a War Room environment

Change culture, accountability and agility

How to prepare your business

23Slide24

1. Keep Financials In Order

Manage Operating Results

Obtain & evaluate results of operations over time; annual totals can be misleading

Common size to determine fixed and variable costs and drivers of variable cost and resultant cash needs

Budget and actual comparison

Identify drivers of abnormal results and normalize, including seasonality

Accounts Receivable, Accounts Payable and Cash Receipts

Know your customers and vendors payment terms

Utilize database & due date records to forecast cash receipts and needs by week

You cannot carry your customers and your vendors cannot carry you

Liquidation Analysis

What your asset base can support in borrowing

Utilize in negotiations with lenders and trade creditors

Know what your creditors and suppliers see

24

These are the elements you need to manage on a daily basis Slide25

A rolling (13-26) week Cash Flow Analysis is an important tool for

understanding financial

viability and the ability to meet contractual

agreements

need

monthly thereafter for six (6) months

IT

monitors changes in key working capital

accounts

cash

inventory

revolving credit

accounts receivable

accounts

payable

The

results form an actual 13-26 week cash flow of planned receipts and

disbursements by

line item with corresponding balance sheet impact

Highlights

potential out of

formula and amount

of financial resource shortfall

Focuses

on cash drivers

1. Keep Financials In Order

25

What is my cash availability today? What about the next 26 weeks? Slide26

Critical

observation of businesses in transition is the inability to understand both operational and financial performance on a daily basis

Management must identify the key performance metrics which may be aimed at optimizing operations while satisfying customer requirements

Characteristics

of key performance

metrics

Measure

the entire

enterprise

Cross-functional

Owned

by functional managers

Represent

critical cost drivers that can be translated directly to financial

results

Are

applicable at both the administrative and operating floor

level

Visible

to the

organization

Supported

by data, and tracked on a daily, weekly, monthly

basis

Allows

management to evaluate the effectiveness of initiatives or corrective actions

This provides significant

value in objectively communicating with your

management

customers and lenders; helps you understand and

manage your

business

2. Manage the Business with Data

26

How did we perform today?Slide27

EXAMPLE OF KEY PERFORMANCE INDICATORS (KPI’S) FOR BUSINESS

2. Manage the Business with Data

27Slide28

In

general, operations personnel tend to think in terms of units, minutes, %’s,

etc.

In

many cases, operations personnel are not aware whether they are

running profitably or

the impact

of

their decisions

In

general, financial personnel tend to think in terms of $$$ and struggle as to

which operating

initiatives can improve

profitability

It

is imperative all staff members in the organization have a

good understanding

of the cause and effect relationship between

functional performance

and financial performance

Key

performance indicators need to be identified and translated into a daily or

weekly determination

of profitability versus end of the month results (surprises)

3. Know if you’ve met Financial /

Operational Objectives

28

Did we make money today? Slide29

Critical

for all staff to understand the link between

performance in their area to profitability

Daily Key Performance Indicators

MTD Daily

3. Know if you’ve met Financial / Operational Objectives

29

Operations performance needs to be translated into financial performance Slide30

Increased

sales, more customers, or more products don’t necessarily translate

into improved financial or operational performance

Complexity drives variation, variation drives cost and potential for waste

A critical evaluation of your customer base is needed to understand

contribution and complexity

The

“80 / 20” rule often

occurs80% of sales is accounted for by only 20% of your customersAlthough profit margins may be excellent for low volume products or customers, the true cost of their complexity is often unknown or hidden

dedicated

or excess processes

tooling

storage / maintenance

cost

of inventory (raw, WIP, finish)

proliferation

of documentation &

communications

maintenance

of idle processes

tool

or die movement & changes

floor

space

utilization

administrative

workload impact

on Sales

, Purchasing, Financial, Logistics

4. Understand your Customers and their Contribution

30

Do you understand the “true cost” of doing business with your customers? Slide31

Seven key questions need to be addressed for the overall optimization of the business supply chain:

5. Manage and Challenge the Entire Supply Chain

31

How is the supply chain performing? Where can I maximize value? Where am I at risk?Slide32

Performance

needs to be managed on a daily basis, in an

organized environment

A

standardized agenda is determined which defines what

information is

reviewed

Information

is visible, with results posted on functional charts

All

key staff members participate and are responsible and

accountable for

the results in their area

HR

, Sales, Material, Finance, Production, Quality, Maintenance, etc.

Purpose

of

meeting:

Manage

performance as a management

team

Identify

opportunities; cause and effect

relationships

Identify

and track specific corrective actions or continuous improvement

initiatives

Maintain

regiment in focusing on financial and operational

performance

Action

and accountability

6. Manage the Business in a War Room Environment

32

Does “everyone” understand the individual performance required to meet the business objectives? Slide33

War Room

Process

Make

results visible

Review performance as a management team

Identify opportunities; cause and effect

relationships

Identify and track specific corrective actions

or improvement

initiatives

Maintain regiment on financial and operational performance

Action and accountability

Demonstrate understanding to stakeholders

Visual Display of Performance

33

6. Manage the Business in a War Room Environment

Do all employees understand what impact their performance has on the company performance? Slide34

Clearly defined processes

for reporting and communicating the proper metrics and targets at all

levels (plant, division

, corporation) and

links

to insure

alignment

across the entire organization.

Business Operating Metrics

34

7. Change Culture, Accountability and Agility

Metrics, Knowledge, Accountability, Action and Agility drive a companies ability to react to any disruptive eventSlide35

US National

Archives

201

7

C

redit: Clean Disruption by Tony Seba March 17, 2016

THIS

DISRUPTION IS NOT IN THE FUTURE.THE FUTURE IS NOW AND IT IS HAPPENING NOW!ARE YOU PREPARED?35Slide36

Joseph Bione

801 W. Big Beaver

Troy, MI 48084

Office: 248 - 519-1072

Cell: 248 - 227-3436

bione@whitehallgroupllc.com

Visit our website: www.whitehallgroupllc.com

For more information or a consultation

:

36