Electrifying the Auto Supply Chain

Auto Supply Chain Prophets

Paul Eichenberg has his finger on the pulse of the automotive industry. With an engineering background and three decades of automotive experience, the former Vice President of Corporate and Strategic Planning at Magna Powertrain, Inc. is now the head of his own consulting firm, which advises auto executives around the world on how to make the most of an era of disruption and the rise of electric vehicles. In eight years at Magna, Paul was responsible for three times growth and says this role put him “at the forefront of the major disruptions” taking place in the automotive industry today.

In this episode, Paul talks about the unique set of supply chain obstacles that Internal Combustion Engine (ICE) and Electric Vehicle (EV) organizations face, the unexpected speed of progress in new battery technologies, and the type of supply chain leader that the electric vehicle industry demands.

Themes discussed in this episode:

• Significant advantages that new entrants into the EV market have over traditional automakers who are entering the space.
• The challenge that the complexity of new EV technologies presents for executives in ICE organizations
• How operating without historic ICE supply chain systems creates challenges for EV organizations
• Why non-automotive electronics manufacturers entering the EV market are at a disadvantage and what they can do to help bridge the gap
• Why ICE and EV components are “an apples-to-oranges comparison”
• Automotive leadership for the EV age

At the heart of The Prophets’ vision are “The 24 Essential Supply Chain Processes.” What are they? Find out, and see the future yourself. Click here

Featured Guest:

Name: Paul Eichenberg

Title: Managing Director, Paul Eichenberg Consulting

What he does: Paul turns technology into growth by helping executives across North America, Europe and Asia navigate the operational, systemic and strategic issues this disruptive time in the automotive industry presents.

Connect: LinkedIn

Episode Highlights

Timestamped inflection points from the show

[1:05] Electric avenue: Paul describes his 30-year career trajectory in auto manufacturing and how it led him to the frontlines of innovation and disruption in the industry.

[2:17] A new paradigm: Automotive executives have been conditioned to see continuous improvement as their chief management responsibility. Electrification presents them with a whole new set of challenges and complexities that most of them are unprepared for, Paul says.

[5:18] Deceptively simple: Building an electric vehicle requires only 60 percent of the manufacturing footprint of a gas-powered car. Yet EV manufacturers do not have the luxury of the business systems developed in the past few decades to support ICE vehicle production.

[6:53] ETA unknown: Paul says that forecasting vehicle release dates are a “huge problem” for EV manufacturers because they don’t have the value chains that their ICE counterparts do to make forecasting reliable.

[7:50] Joining forces: Companies like Panasonic benefit from years of automotive experience on top of their other verticals. Paul points to the collaboration between LG and automotive component manufacturer Magna International as an example of players without this experience connecting to an organization in the automotive field as a way to compensate.

[10:24] Raising the power bar: Ten years ago, the industry’s goal was less than $1000 per kilowatt hour for battery technology. Paul says progress on this is way ahead of schedule; today the goal is less than $100 per kilowatt hour.

[13:18] Apples and oranges: Of the 550 parts typically found in an ICE, only 300 of them are involved in the manufacture of EVs. Because so many EV components are not found in ICEs and are not mechanical, they form a completely new value chain.

[15:05] The one thing: The one thing Paul says is essential for leaders in the automotive industry is to recognize that it requires more than just delegation. “If you're not really willing to lead this from the top, and start to recognize that the future positioning of your organization — the future growth, the future success — really resides with you and solving this problem, then, frankly, you're not the person for the job. You're not the person for the organization, because this is the type of leadership that's required today.”

Top quotes

[2:32] “Our industry has been driven by one thing and that’s continuous improvement, lean thinking, lean value chains, etc. So any automotive exec that’s in a leadership position today, what have they been programmed to do? Oh, I’m continuously improving what I’m doing.”

[3:18] “If we take, for instance, the value chains associated with a battery pack or battery cells, the engineering around these systems hasn't even started to be optimized. The focus is really, how do we get the technology into vehicles? They have very different value chains. Where is all the battery technology being developed today? Really, it's at the center of the consumer and industrial electronics industry. And where's the home of those industries? Well, that's in Asia. You have a whole set of the technology that's not being developed here like you would expect a water pump for an engine.”

[5:12] “You start dealing with these new entrants and these new organizations and what you find is, these organizations like Tesla and Rivian really having huge advantages.”

[7:07] “The name of the game is disruption. Part of [what EV startups] bring is a whole new approach to building vehicles, but those value chains haven’t spent the 30 years of optimization like you’ve seen at your traditional OEMs, and I think that’s really one of the challenges that exists.”

[9:12] “The traditional supplier has to grant these new entrants some grace to understand, Hey, it's going to be a bumpy road. They haven't spent 30 years optimizing how this should operate, and thus, we're going to have to be just as much of a coach as a willing participant because of the opportunities that they bring and how they're really positioned to win.”

[13:40] “As you look at the EV, the types of components are just very, very different [from those in an ICE vehicle]. These aren't mechanical components. These are transistors, capacitors. They're IGBT modules, which are really power semiconductors. It's cell chemistry that's not used anywhere else in a vehicle, so it's an apples-to-oranges comparison when it comes to the types of components and technologies that go into it.”

[15:20] “If you're not really willing to lead this from the top, and start to recognize that the future positioning of your organization — the future growth, the future success — really resides with you and solving this problem, then, frankly, you're not the person for the job. You're not the person for the organization, because this is the type of leadership that's required today.”