for the next disruptive event joseph bione Whitehall groupllc September 282017 1 Joseph Bione ID: 743724
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Preparing the Automotive Supply Chain for the next disruptive event
joseph bione| Whitehall group,llc.| September 28,2017
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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)
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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.
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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
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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
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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
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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
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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
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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
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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
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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
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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
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How did we perform today?Slide27
EXAMPLE OF KEY PERFORMANCE INDICATORS (KPI’S) FOR BUSINESS
2. Manage the Business with Data
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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
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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
:
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