VIEWPOINT | TRANSITIONING POWERTRAIN PARTS TO THE AFTERMARKET

When a carmaker introduces a new vehicle, it stops making repair parts for the previous model. But as the service lives of vehicles lengthens, it becomes more difficult for the automaker and its suppliers to know how many repair parts to stockpile.

The challenge is becoming increasingly complicated today, largely because tighter regulatory requirements are driving the industry toward more sophisticated powertrains at a faster rate, which is shortening the program lifespan of newer designs. Helping carmakers and their suppliers forecast and manage the supply transition to aftermarket providers is the role of Ricardo Strategic Consulting, a service launched by legendary British engineering firm Ricardo plc. Derek Schlonsky, who leads this service from Detroit, describes the challenges and solutions.

How do carmakers usually handle the replacement part question?

When manufacturing capacity is repurposed for new model production, the classic strategy for powertrain and complex parts delivered by suppliers is to estimate the quantity of repair parts that will be needed in the future. Then they produce and store enough spare parts to cover the anticipated need for as long as 20 years. In some cases, this can be millions of parts in total. But if components run out too soon, there can be a critical need to find a qualified supplier to make more parts. Typically it isn’t feasible for the automaker or its Tier 1 suppliers to relaunch such low-volume production.

This isn’t normally an issue for relatively simple components such as trim or stamped body panels. But it’s a very different matter for precise, highly engineered powertrain “hard parts” for engines and transmissions. Usually the original tooling has been scrapped or is no longer suitable. Reverse engineering may be required to recreate the original part. An even bigger challenge is figuring out how to efficiently make parts to their original specifications at much lower volumes.

What makes this a bigger issue today?

For engines and transmissions, a car company historically would use a given design for 10 years or more. Executing a final production run to manufacture and store enough replacement parts for a single powertrain model could cost a company $40 million for a midsize program.

The performance requirements to meet more demanding emission and fuel economy standards are making that option far less practical. To create more efficient powertrains, the entire industry is moving toward transmissions with more gears and engines that are smaller and more sophisticated. Carmakers that formerly introduced one new transmission every decade are now launching as many as three in a single year. This trend increases the number of relatively new but “obsolete” engines and gearboxes still on the road.

The challenge is cross-functional, and there are few incentives for anyone to “own” it. And as the number of new powertrain launches expands, engineering resources shift from replacement parts to new programs.

What happens if supplies run out?

It can get messy. For engineered parts, the process of digging up the original specs, finding someone to produce a small batch of replacements and validating the new part can take anywhere from nine months to three years. This creates an obvious service problem and is extremely expensive for the automaker. There’s the very real risk of customers waiting months to replace the broken transmission in a relatively new vehicle because repair parts aren’t available. In extreme cases, the company may buy back the vehicle.

Critical part shortages also significantly damage customer satisfaction, as indicated by consumer complaints on social media about backordered parts. Enough publicity could result in new government regulations that require the carmaker to guarantee service parts for a certain number of years.

Ricardo Strategic Consulting can help companies implement a strategy to mitigate these challenges by offering  a unique combination of deep engineering and technology capabilities with procurement and supply logistics to address these issues with a holistic solution.

What options does Ricardo suggest?

Determining expected demand for past model powertrain parts is an inexact science because parameters such as failure rates are constantly changing. Vehicles are more durable than ever, and for various reasons, many people keep their vehicles longer. At the same time, carmakers have stepped up the marketing of remanufactured engines and transmissions, which expands demand for older components.

Ricardo helps its clients make intelligent business decisions about balancing cost and customer satisfaction. We also assist in implementing strategies and tailoring them to mitigate the risks and costs associated with the technical and operational challenges that exist. Ricardo will analyze the needed part’s performance, likely demand volumes and desired lead time, then match them with the most cost-effective new production processes and manufacturing technologies.

Ricardo’s unique mix of technical, strategy, and procurement specialists are able to provide a turnkey solution to address and prevent critical part shortages and the potentially costly (financial and customer satisfaction) outcomes they represent.

Click HERE to learn more about Ricardo or HERE to download a white paper about the transition from production to aftermarket.