Guest Column: Supply chain risks keep coming and process remains broken

So here we are. Same old procedures and policies which are antiquated and are still being used.

Reported in Rubber News was the fire at BASF's Ludwigshafen, Germany, plant. Mergers, acquisitions, realignments (reference the recent headlines on Continental's re-thinking of their automotive business).

Another recent, less advertised supply chain risk was the force majeure from a polymer company in the European Union that came as a result of a regulatory issue that resulted in a suspension of a family of high-end polymers that are used in automotive engine sealing articles. These range from valve cover gaskets/cover seals, to O-rings, and had the potential to stop engine assembly operations.

It's not that there were no other sources of polymer, just not this one. In fact, it is likely that some rubber article makers are supplying these same components, made with an alternative, competitive polymer already to the same OE engine assembly operations.

In true fashion, the major OEMs were completely predictable. They would not approve or even consider approval of an alternative (even though they may already be getting it from other parts makers) and simply made the entire issue the rubber article manufacturer's problem.

Now what are the article manufacturers to do? Make this stuff out of the air? Seriously, this should have never happened and would not have happened if alternative sources would have been approved during the Production Part Approval Process. But the OEMs won't do that either.

So how should a rubber article maker that is required to be IATF-16949 compliant (or ISO 9001, 22301, 31000, for that matter), address Section 6 Contingency Planning? That sections states that you must:

• Identify and evaluate internal and external risk to all manufacturing processes;
• Define contingency plans according to risk and impact to the customer; and
• Prepare contingency plans for continuity of supply.

How does one do that without the customer? Then again, let's not forget that these OEM customers exempted themselves from IATF 16949. In fact, take GM for example. In September 2002, GM announced that they were ISO 9001 certified. How do they navigate around Clause 6 Contingency Planning? They just continue to roll their responsibility to the supply base or raise prices to ride out the shortages. Do they think that the article maker is supposed to carry enough inventory for the contract life? With the lousy margins on auto rubber components (reported by Bain & Co. on June 21, 2024, to be only 5.6 percent in Q1 2024), this is not likely to happen.

In the past, when these situations occurred, there were experienced and knowledgeable technical resources at the OEMs who you could work with and they would assist. But fast forward to today, and those folks have been packaged out. Now you are largely left with inexperienced folks, who know little if anything about rubber chemistry or technology. As a result, they won't assume any risk, so it's the suppliers' problem.

Too bad. They hide behind specification, which in many cases have nothing to do with meeting function. This statement is validated with NHTSA data for 2023 that shows six vehicle makers with 1.8 million vehicles or more potentially affected by recalls in the U.S. that year.

Honda topped the list at 6.33 million, followed by Ford at 6.15 million, Kia America at 3.11 million, Chrysler at 2.73 million, GM at 2.02 million and Nissan North America at 1.8 million.

So much for meeting the specifications.

This broken process will continue until the risk is respected and Section 6 is honored and taken to heart by the OEMs and their suppliers. But in the meantime, there is vast risk being assumed by every rubber part supplier to this OE industry.

What a business model. You can't make this up.

Walker is a retired rubber industry veteran who now owns his own consulting firm, Elastomer Technologies L.L.C.