The Supply Chain Matters blog provides perspectives on an emerging supply chain management focused lesson occurring at Rivian Automotive.
Last week our news feed included an exclusive published report from The Wall Street Journal, Rivian Moves More Engineers Near Illinois EV Factory to Speed Up Output (Paid subscription required).
The essence of this report that cites an informed source, indicates that Rivian is about to initiate a manufacturing reorganization that will include the relocation of portions of the start-up’s manufacturing engineering team to be directly resident at the company’s Normal, Illinois production facility.
Noted is that during the Covid-19 pandemic, the start-up recruited engineers wherever they could be found and allowed them to work remotely. The result was engineering resources located across the U.S. and at corporate headquarters in Irvine, California. According to the report, any engineer not willing to relocate will be offered severance and a new hire will be made that is willing to co-locate.
The report captured the attention of this Editor because of its significance and context as a perceived industry start-up aiming to disrupt the industry, comparably to that of Tesla. Similar is the learning in a painful way that certain industry best practices are just that, practices and management models tested by business growth, financial discipline and needs for added supply chain agility.
For business and investor focused media readers, this report would have likely provided evidence that the EV automotive and parcel van start-up is making some progress in its efforts to increase volume production and reduce continual supply chain component shortages. For those in the automotive industry and certainly a wide complement of our readership, the report triggers a response of why it took this long to act.
For many years a key acquired learning in supply chain management focused on high volume discrete manufacturing has been that co-location and collaboration of product design, manufacturing engineering and manufacturing operations is essential for new product introduction and volume ramp-up. When a product is billed as providing breakthrough technology and performance, the stakes are even higher, since the price point is premium on the auto side. Having a very demanding customer and stockholder such as Amazon for EV parcel van fleet deployment is a further dimension of expectations related to output.
In 2018, Supply Chain Matters highlighted how Tesla learned some painful lessons, including Founder and CEO Elon Musk being compelled to camp out on the then Model 3 start-up manufacturing floor to iron out the numerous component and production process challenges that were occurring at the same time, almost on an hourly basis. Musk described the experience as “manufacturing hell” but the reality was a culmination of misaligned decisions among functions and operations. The company’s financial future was then at stake. That resulted in a broad management turnover led reorganization effort. Since then, more management turnover and organizational alignment has occurred.
In one of our most recent updates related to Tesla itself, Supply Chain Matters highlighted the appointment of the EV automaker’s Vice President of Global China and the Shanghai gigafactory production facility, Tom Zhu, being promoted to have direct oversight of all Tesla U.S. assembly plants and sales operations in North America and Europe. Reportedly Zhu garnered management chops during last year’s China wide Covid-19 induced lockdowns that impacted Shanghai and other major cities and manufacturing regions. Zhu reportedly took up on-site residence along with Shanghai factory workers and engineers, to ensure that factory output could continue in some form in order to make expected customer and revenue commitments.
Today, Tesla and many other global auto producers know all too well the critical alignment and collaboration needed between product design, manufacturing engineering and operations for assuring the most flexible and efficient production processes as well as having design for supply chain tenets. For EV related production transformation and supporting supply networks, integration and alignment across mechanical, electrical component supply networks and software systems are added industry table stakes.
Similar to Tesla’s 2018 escapades, including having to on one occasion, the need to air freight an entire automotive production assembly line from Germany to the U.S. in order to meet then new product Model 3 output expectations, start-ups have to be able to overcome supply chain and production start-up challenges better than the competition.
Rivian remains under the looking glass to address manufacturing output in order to generate needed cash. Having burned through $6.6 billion in cash resources last year and with Wall Street analysts anticipating another $6 billion this year, the pressure is mounting. Two rounds of layoffs involving salaried staff have occurred along with the postponement of previous planned new EV models.
If there is just one takeaway from this continuing series of events surrounding Rivian along with other high-profile EV start-ups, we submit that the premise of a wholesale rejection of any existing industry best practices must prevail is unwise when the evidence indicates otherwise. Unlike Tesla in 2018, automotive supply networks and associated production flexibility capabilities reside in a more crowded and growing competitive field. Global suppliers have added choices as to whom to partner with and as to which auto and small truck makers will be the winners in the overall EV industry transformation.
Being the latest cool industry start-up with a more innovative and highly engineered product implies learning the missteps from other disruptor start-ups as well as mainstream participants.
Integration and tight collaboration among product design, manufacturing engineering and production operations has proven to be table stakes in enabling expected business outcomes. That is especially the case when dealing with engineering design product innovation. Customers can have limited patience, especially with other EV options more prevalent.
Bob Ferrari
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