I recently began work on a new benchmarking study in the automotive industry focused on the tooling business, and opportunities that exist for manufacturers, suppliers and the industry in general as it faces increased competition from low-cost country sources, which are stealing market share but not necessarily delivering the same value of tooling. During my research and discovery, what I found was nothing short of amazing, particularly from a young engineer in his 30s who has spent years working for companies to document their tooling cost and improve their performance. I thought it was important to share his story.
Twelve years ago, I was a pup in the world of automotive engineering. I was quickly moving my way up in a thriving stamping company, taking every opportunity thrown at me. In an afternoon staff meeting I was asked to provide support on a customer mandated tooling audit effort. I immediately said "YES," as I had said to every possible project that was put in front of me. After spending weeks auditing a few programs, I was staring at my Excel spreadsheet, scratching my head in awe and disbelief when the results were compiled. How could we have made that much money? How had we slipped that much by the seasoned purchasing agent? How do they not know we didn't even build this tool or make this change? How can I ethically defend this argument?
I put the results in a presentation and walked into my managements' office with a legal pad full of questions. After presenting my findings I was met with countless stories about the godfathers of automotive. They rallied about the good old days when tooling, and especially engineering changes, had been an extremely profitable business. Millionaires were made, marbled offices were built, through multiple markup levels and finders fees in the tooling arena. I was then directed to develop two sets of records for tooling. One set of records that represented the real numbers, and one that represented the audit results that we were to explain to the end customer. Obviously, the good old days were becoming more difficult to defend and the OEMs were getting smarter.
This experience drove me to find out the whole story. I left the company and began working for tooling companies and Tier1s as a consultant. Now after a decade of tracking and auditing tooling programs throughout the automotive supply chain, one truth has become clearly evident: in many cases, companies don't know where their tools reside, their current state of value, or if they even exist. The most alarming result of these audits was to find high-cost tools had been paid for and they don't even exist. The fact is, many OEMs can't provide an accurate inventory location of all of their tooling for many vehicle lines in production. This information should be available at a moment's notice but, in reality, it would take an army of auditors to validate.
We studied automotive stamping tooling initially and then moved to injections molds, welding tooling, assembly equipment, check fixtures, CMM gages, and machine tools. The same symptoms were everywhere we turned. We would search and find nothing. We would search and find tools were combined with capital expenditures or were grossly over valued or had been moved to or built in Mexico or India without the customers' knowledge. We compiled the data and found that seven to 14 percent were recoverable tooling dollars that immediately affect company bottom lines. The puzzle became more complex as OEM and Tier 1 companies started to become creative with purchasing practices and outsourcing plans. Ideas of amortizing tooling dollars into piece prices, categorizing tooling as capital equipment, offshore competition, and enforcement of new audit guidelines all added extreme complexity to the issue. We captured enough data over 10 years to realize that missing, over-valued, and miss-located tooling was chronic and did not single out to any particular OEM or Tier 1 supplier. However, the problems are much greater for the Domestic Three, mainly due to multiple platforms that don't have common components and have a very deep supply chain.
Isn't that an amazing story? Now, for many of you who live this every day, it is not shocking at all, but for others the practice is astounding. As we sit in today's automotive market in North American with our Domestic Three losing share every day and costs rising it's amazing that these practices still exist. But no wonder these companies are losing to global competition. With all of the supporting data, and countless physical witnesses to these issues, we at Harbour-Felax Group believe the industry must get to the root cause of this problem and change this behavior. The superpowers of automotive manufacturing are spending billions of dollars on tooling each year. The first question they should ask themselves is "Where are my tools?" We are convinced the answer will be "I'm not exactly sure." Can an OEM provide an accurate list of tools by location for any single platform today, or even just tools $100,000 and up in value? In a time when automotive global competition is climbing every day, OEMs and suppliers must eliminate waste. We have focused enough on manufacturing performance. It is time to close the loop on tooling and the poor practices of the industry.