Tag Archives: Auto Manufacturers

Has the trend passed about caring for the environment and preventing harmful emissions?

Despite the fact that GMC is touting its new, 2024 Hummer EV SUV, starting at a cool $80,000 with a 329 range on a full battery charge, Reuters is reporting that the demand for electric vehicles isn’t keeping up with expectations. In October 2023, Honda and General Motors announced they were ending a $5 billion partnership to develop lower-cost EVs. GM says it’s to “enhance the profitability of our EV portfolio and adjust to slowing near-term growth.” Ford, too, just announced it pushed back its EV production timeline because of slower customer demand. Investors are taking notice. Automakers are thrown for a loop.

It’s not for lack of desire for electric vehicles by consumers, auto manufacturers and climate activists alike. Reducing the sting at the gas pump while helping the environment? Bring that on. Indeed, Cox Automotive Report tells us EV sales exceeded 300,000 units in the U.S. in Q3 2023. That’s record numbers.

So, what’s going on?

There are vexing factors swirling around this marketplace, colliding into a miasma of toil and trouble for auto manufacturers.

High interest rates = slowing demand

The current demand slowdown reflects the uncertain economy and the looming shadow of high interest rates (Will they go higher? Will they come down?) driving up the price of the already-expensive EVs. It’s a one-two punch. For most people, the decision to buy a car depends on the affordability of the monthly payment combined with other factors affecting their household budget. The vast majority of us are not rushing out to spend $80K on that Hummer. Maybe a more affordable model? Sure, but with sky-high interest rates driving up the monthly payment of already-expensive vehicles at the same time a pound of ground beef costs upwards of $8, people are taking a wait-and-see attitude. Maybe a gas-fueled car is a better bet right now.

Raw materials shortages for batteries = supply chain issues

As The Buzz EV News recently put it so succinctly, the raw materials that power EV batteries, namely lithium and cobalt, “aren’t exactly littering the landscape.” This, coupled with the fact that 90% of the supply chain for EV batteries runs through China, makes it difficult for U.S. auto manufacturers to realize efficient, profitable production. No one in the industry wants a repeat of the auto microchip shortage during the pandemic.

How is it all affecting auto manufacturers, and what can be done about it? At USCCG, we have a half century of experience dealing with the effects of supply, demand and the economy on many different industries. We work across the entire battery supply chain from mining to metals to battery manufacturing plants. Here’s how we see the issues playing out currently.

Auto manufacturers are doing a 180 (for now), so…

Based on the changing demand, automotive manufacturers are pulling back from EV investment right now and putting it back into traditional auto manufacturing. Even though the industry’s goal is still moving towards a 2030-2035 conversion to EVs, consumers are still buying gas-powered vehicles. Automakers need to maintain production to satisfy the demand.

…Demand and schedule planning is crucial, but…

Automakers’ backlogs need help — they have the orders and demand for gas vehicles, but are struggling to fulfill this demand and fill those orders. At USC, we happen to be the specialists in wrangling schedules, planning for demand when those sands keep shifting, and adding horsepower to teams just when they need it the most. It’s an all-hands-on-deck situation for auto makers, except…

…The skilled labor shortage is real

The new UAW contracts are driving labor costs throughout the industry, even in non-union facilities.  Couple that with the ever-shrinking skilled workforce, and it puts auto makers behind the eight ball just when they need to find and retain quality, reliable employees. At USC, we’ve been focusing on this issue, helping employers train their people on best practices and optimal processes. It’s crucial now, like never before.

EV issues aren’t going away. It’s time to reshore now

Yes, the demand is slowing. For now. But auto makers are still on track for conversion to electric vehicles, and the public still wants them. But these battery and supply chain issues are still plaguing the industry.

A few facts entering into this mix: The current Inflation Reduction Act included billions of dollars in government loans to fund EV battery plants in the U.S., and also included a $7,500 tax credit to people who buy U.S.-made EVs. It also allocated $7.5 billion to fund a network of charging stations around the U.S. (That, in itself is exciting for logistics nerds like us.)

Gov. Brian Kemp of Georgia is taking advantage of this trend, creating a push for EV jobs, major manufacturers including Hyundai and Kia located in the state, and pledges to make Georgia the “electric mobility capital” of the country.

TechCrunch+ says the U.S. is in an EV battery factory construction “boom” as a result of these initiatives. In 2019, there were just two battery factories here in the U.S. Today, 30 are either planned or under construction.

What does it all mean? It means auto manufacturers need to meet current demand while keeping an eye on the future. USC can help you do that. Contact us today.

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The automotive manufacturing industry has been traveling a strange and bumpy road over the past couple of years. The pandemic created a traffic jam in the supply chain. At the same time, demand for new cars dried up. Who was driving? Everyone was at home during the lockdown. And on the heels of that, interest in electric vehicles began to surge. According to research by the International Energy Association, the demand for EVs is expected to rise 35% by the end of 2023 after a record-breaking 2022.

What did it all mean for auto manufacturers? Demand for traditional vehicles lowered as demand for electric vehicles grew, forcing auto manufacturers to do a delicate dance of balancing the type of production they’ve always done with the new processes and systems needed to produce EVs. The moving target of demand coupled with shaky supply brought about inventory uncertainty — how much was enough, but not too much? And then, there was (and continues to be) the labor shortage, with seasoned workers retiring and younger ones not exactly flooding through the doors.

Improving processes is paramount for the automotive manufacturing industry now. Here are a few ways you can do that:

Lean Six Sigma. If there ever was a need for auto manufacturing process improvements like the ones Lean Six Sigma can produce, it’s now. LSS is the blending of two efficiency methodologies, Lean and Six Sigma. It’s a bit ironic, because the Lean methodology, which focuses on efficiency and eliminating waste, was developed back in the day by Henry Ford… or at Toyota, depending on who you ask. It got its start on the auto manufacturing line, with the intent of eliminating the “seven deadly wastes”: overproduction, waiting, transporting, processing, inventory, excess motion and defects. At USC Consulting Group, we’ve added an eighth waste. People. Specifically, not using them to their fullest, not seeing untapped potential in great workers, and not training and developing people to rise through the ranks. Lean is about eliminating waste to produce more product quickly and efficiently.

Six Sigma, the other side of the Lean coin, is about quality control. Minimizing flaws and defects. But it’s deeper than that, rooted in data. The goal is to improve cycle time while eliminating or reducing defects.

SIOP. It’s difficult to achieve careful, accurate planning for the future when the road ahead contains so many bumps. That’s why we take the usual sales and operations planning (S&OP) process to a different level by adding inventory to the mix. The goal is to look ahead, anticipating the inventory you need while also coordinating with sales, marketing, and finance to involve the entire organization in this process. A key to SIOP is using inventory as a strategic tool to help offset variation in either demand or production issues.

Predictive Maintenance. Yes, it sounds extremely basic, but we find that heading off trouble before it starts can eliminate the risk of bogging down your entire production line to fix what’s broken.

Skills Training. Investing in training is playing the long game, but in light of your best people on the line retiring and fewer people to take their place, it’s paramount. Training has advantages in addition to the obvious — your people being more skilled on the job. It also demonstrates in a very tangible way that you are committed to the growth and success of your employees. You gain loyal workers and create a pipeline for advancement. It’s a win-win.

Technology Investments. USC Consulting Group is not about coming in and asking manufacturers to invest in the latest and greatest technology in order to become more efficient. No, efficiency takes harder work than just installing a new machine. However, in some cases, it’s necessary to level up. Legacy technologies don’t have the same features and capabilities as newer models. And in the auto manufacturing industry, you’re dealing with producing an entirely new product with electric vehicles. It may be time to look at your technology and decide if it can take you into the future or keep you in the past.

Doing business in the automotive manufacturing industry is like driving a manual transmission. You are constantly shifting gears to keep pace with traffic – in this case, the consistent change of consumer demand. Operations consulting helps companies improve their processes and be prepared for what’s coming down the road. We help manufacturers become more efficient and profitable in this or any economy.

Is working with operations consultants an untraveled road for you? Please get in touch. We’d love to talk with you about it.

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When looking into the trends for the automotive industry, there’s really only one headline. Electric vehicles. EVs are no longer “the future” of the industry. The future is now. It means many changes for the automotive industry, including changing demand, supply chain and inventory (which are all connected) and workforce challenges, in addition to the specter of new facilities to handle new assembly lines. For auto manufacturers, it means a heightened focus on efficiency, which we at USC Consulting Group are all about.

Electric vehicles (EVs) aren’t dominating the market. Yet. But they’re on the road there. According to research by the International Energy Association, the demand for electric vehicles is surging and is expected to rise 35% by the end of 2023 after a record-breaking 2022.

“Surge” is a good term for it, but “tsunami” might be even better. The EV market share in the worldwide automotive industry was hovering at around 4% in 2020, jumped to 14% in 2022 and will hit 18% by the end of 2023. It shows no signs of slowing down. By 2030, the EV market share is projected to rise to 60% in the U.S. and the EU.

It feels like we’re on the cusp of a great societal change with the surging EV market, the likes of which we’ve seen during the first and second industrial revolutions, the dawn of the internet and the day, back in 2007, when Steve Jobs stood on a stage in front of the world and introduced Apple’s new invention, the iPhone.

Yes, society will be impacted, but perhaps no sector more than auto manufacturers. It means great changes in demand, new challenges with supply chain and inventory, the urgent need for increased employee education, expertise and training, and changes on the line. It’s a whole new world out there for auto manufacturers, from the C-suite to inventory management to the production line, even extending to the dealerships.

How EVs are impacting automotive manufacturers

Here’s a look at the ways EVs are impacting the auto industry today, and how USC can help.

Changing demand

A good analogy for what’s happening in auto manufacturing right now in regard to changing demand is what we saw in the food processing industry during the pandemic. If a company was mainly supplying produce to restaurants, its entire market dried up when the restaurant industry was shuttered. Many processors shifted and began supplying grocery stores — two very different markets. Companies that were agile, lean and light on their feet (so to speak) were able to shift quickly in response to the shifting demand. So, too, with automotive today. Demand for traditional cars is lessening as demand for EVs is rising. It requires auto manufacturers to do a delicate “just in time” dance, which also involves supply chain and inventory.

For more info on how to roll with changing demand, read our eBook, Strategies for Meeting Increasing Customer Demand.

Supply chain

To state the obvious, EVs require different components, technologies and parts than traditional cars. Batteries, electric motors and other types of electronics, to name a few. On a higher level for auto manufacturers, it means developing new relationships that may be outside of the current supply chain, including battery manufacturers, those who deal with raw materials and microchips, and more. Supply chain woes that began during the pandemic are still bedeviling manufacturing operations in many industries, including automotive. New and unforeseen snags in the supply chain are sure to pop up as well. Solidifying while also diversifying your supply chain, with an eye toward reshoring, is critical.

Inventory

With shifting demand and supply chain challenges, this is an especially tricky time for the auto industry, inventory managers especially. It’s important to focus on inventory and output, ensuring a balance between too much and too little. To wrangle all of these issues, demand, supply and inventory, savvy auto manufacturers are employing a methodology we call SIOP: sales, inventory and operations planning.

S&OP is a time-tested business management process that involves sales forecast reports, planning for demand and supply, and other factors. The goal is to help companies get a better, more clear look at their operations and create better-informed strategy decisions, allowing them to deliver what clients need in the most profitable way. We’ve found a lot of our clients do not include inventory as a strategic tool in their S&OP process. Therefore, they leave the “I” out of SIOP. That’s a mistake, especially now for auto manufacturers. The key to SIOP is to emphasize inventory as a strategic tool to help offset variation in demand or production issues.

To find out more about SIOP, download our free eBook: “Sales, Inventory & Operations Planning: It’s About Time.”

Workforce

Ramping up EV production or even transitioning to EVs is going to require a lot from your workforce. In some cases, your best people who have been on the production lines for their entire careers will start to feel obsolete. It means reskilling and retraining of your current people, and hiring workers with expertise in EV technology.

Infrastructure

As the demand for EVs grows, the production line will need to grow with it, shifting from traditional engine vehicles (combustion) to the kind of specialized production that EVs require. It may mean new facilities and new technology.

All of these changes for the automotive industry require a sharp focus on efficiency to meet current demand and planning to gear up for future demand. If there was ever a time for Lean Six Sigma (a methodology involving less waste, greater efficiency and consistent quality) it’s now. Lean was developed back in the day for the auto industry, and it couldn’t be more pertinent today. At USC Consulting Group, we have decades of experience helping our clients navigate changing tides in their industries. To learn more about how we can help, contact us today.

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