How an aluminum parts auto supplier dealt with the pandemic

Alan Shevela is one of those people who will forever be asked “before or after?” when he tells somebody about joining his current employer.

Shevela, who is based in Southfield, Michigan, is vice president of global supply chain for Aludyne, a die caster that makes aluminum auto parts. 

The “before or after” query relates to when he began his job with Aludyne. It was in 2020 — after the pandemic started.

By November of that year, when Shevela joined Aludyne from Honeywell, problems in various supply chains had begun to develop on their way to the full-blown supply chain crisis of 2021 and into 2022. 

“It was a very interesting time to make a switch,” Shevela said of the process that brought him to Aludyne. “All the interviews were over Microsoft Teams.”

But he got through that process and began to oversee a supply chain that needed to provide aluminum to a network that includes 31 manufacturing locations around the world, 15 of which are in the U.S. Others can be found in Mexico, Brazil, China and throughout Europe. Shevela said the company’s workforce is “north of 5,000.” Aludyne is privately held.

Aludyne’s primary product is the aluminum knuckle, a key component in a car’s steering column.

Shevela shared his observations about what he and his company went through during the supply chain squeeze of the past few years and what he learned from it.

Q: What was the start of your tenure like given COVID?

A: My first five to six months were remote. It was very odd. We didn’t get back to the office until April 2021. My first weeks and months were extremely interesting, trying to make sure we had material in hand and in the pipeline.

Q: We’ll need to introduce the readers to what it is you make and what the basic material is that is used in its production. What’s a knuckle that’s not actually on a human hand?

A: The knuckle is a fairly large casting, and we are a casting and machining company so we buy a lot of raw material. The raw material is heavy so we try to buy it regionally. 

We mostly buy aluminum ingot or sow. (Sow is a form of metal mould made from raw aluminum.) What we buy depends on what our furnaces use. We have 31 different sites around the globe, and we got a lot of them through acquisitions. So a lot of them have different feeder systems.

Q: What were the first issues that developed in your supply chain due to COVID?

A: We had the market shut down so everybody had too much of everything. The auto industry fought like heck to have themselves deemed essential, so once the OEMs started production was about the time when all that earlier inventory was used up. Then we started to see the challenge — oh, we can’t get anything for awhile.

Q: One aspect of your purchasing is that you were buying low on the supply chain. Your purchase of raw aluminum means that there weren’t a lot of earlier manufacturing processes for you to get what you need. Did that help?

A: I think so, when you compare all of our challenges with what the chips people were dealing with. Yes, we are buying raw material. We may buy some components but what we buy is a lot of aluminum, magnesium and scrap steel, so we are getting it earlier in the supply chain instead of being step 50.

For us the challenge is the nonstop gyrations of the OEMs. They are notorious for pulling orders out and dropping orders in. When you’re talking about hundreds of millions of pounds of raw material, that cost adds up pretty quickly. As a tier 1 supplier, you try to navigate through those gyrations. (Tier 1 suppliers to the automotive industry supply their product directly to automotive manufacturers, as opposed to Tier 2 suppliers that provide a product to the Tier 1 suppliers.)

Another challenge for us was the balance of the right amount of raw material. It is not like we use just one alloy. Our customers want different types. So having the right inventory on hand is vital. And we had big time volatility, because we would either have too much inventory of one raw material on hand and not enough of another.

Q: What types of flexibility did you need to deal with?

A: As a good example, the OEMs were trying to produce their highest profit vehicles. So they would often shift and the knuckles for a truck or SUV are different configurations than for a smaller vehicle. We had to try to adjust what they were pulling from us. That got a bit challenging.

Q: Even though you may be early in the supply chain, you still need to deal with supply chain problems that the sellers of metal might have been having. 

A: If there was an equipment failure at any of the producers where they were relying on chips for equipment and they couldn’t keep up with our demand pull, we would have to shift to other suppliers. There was a lot of ballroom dancing or break dancing. There’s lots of juggling. So we all talk about wanting to automate more and digitize more. When you are in a supply chain crisis, artificial intelligence can be a great thing. But in a crisis where there are a lot of people, manual intervention is needed to get things moving and get things where they are needed and  when they are needed.

Q: And if you ran out of a certain type of material?

A: It’s challenging because you never want to have to expedite anything by airfreight. You always want to deliver as much as possible by rail. Alcoa’s production in Quebec all comes from rail. We buy from a lot of secondary aluminum suppliers and a lot of them will come by truck if they don’t have a rail spur close by. 

Q: Did you ever need to shut down or adjust production activities because of a lack of materials?

A: Yes, we did have some situations where we had to work closely with our suppliers and our customers to adjust production schedules at our suppliers, at our Aludyne manufacturing locations and at our customer locations. We continue to navigate through several of these types of situations due to supply chain disruptions.

Q: There are a lot of unhappy rail customers out there. What has been your experience with them?

A: Rail service is definitely challenging. It’s the most economical mode of transportation but probably the slowest and most unreliable. We’re not going to be too mean to the industry but it is a monopoly depending on where you want to move it. It is a challenge because it does cause us to think about carrying a little more inventory. 

And any time there is a threat of a rail strike, it makes us very nervous since we get all our primary material by rail. We did prep for a potential strike. We did have to carry a little more inventory and we had to line up additional trucks. The challenge is you can put 40,000 pounds of metal in a truck versus 200,000 pounds in a rail container so for every container you need five tricks to line them up. That’s been an issue for a long time. 

Q: How do you access trucking capacity?

A: Right now, we’re partnered with one broker, but we do use others as needed. (He identified the broker as RXO, the 3PL spinoff from XPO.)

Q: Were there any unexpected supply chain disruptions that you just could not have seen coming?

A: Magnesium has been on force majeure for two years. (Shevela did not want to identify the supplier by name, but based on his description of the company being the only supplier of magnesium in the U.S., it is U.S. Magnesium.) They had a major equipment failure. They are producing but operating under force majeure, so that allows them to put people on allocation.

Q: What are some of the changes and philosophies that you have implemented during COVID and during your tenure, which as we’ve noted are in alignment. You’ve never been at Aludyne in a COVID-free world. 

A: Something we’re doing differently is we’re partnering with experts in areas, such as energy management. Part of the challenge for any company is that we’re never going to have the head count to address all the issues. We want to have the right people in the right seats but we know we’re not experts in everything. That’s something we’ve gotten smarter about.

Our core focus is manufacturing knuckles and things like cross car beams. But I need a partner with experts in certain areas so we can pull it all together to operate as efficiently as possible.

Q: One aspect of the supply chain crisis that has been mentioned is that executives in the C-suite are more cognizant of the risks of the supply chain than they were previously. Have you seen that?

A: We’ve always felt like we deserved a seat at the head table, and not every company had their head of the supply chain at the head table. A lot of times you had the CEO, CFO and the head of HR, but I think that COVID has taught us all that the supply chain is just as equally important as other functional areas. When Aludyne was looking for their new head of supply chain and found me, I think there was a lot more focus than where there would have been pre-COVID.

Q: What are some areas of focus that have really been elevated in the wake of the last few years?

A: I think the focus in a lot of areas has been a greater emphasis on indirect materials. I am talking about anything that helps the plants run. I am talking about things like cutting fluids and electricity. Those are things that we’re really focused on now that we weren’t as much years ago. 

Q: The price of aluminum like all commodities soared at times during the pandemic. In particular, you are exposed to the Midwest aluminum price published by S&P Global Commodities Insights, the former Platts. How did you deal with those higher prices?

A: We don’t control what is published on the index. There are things we can do to put good pricing mechanisms into place and we’re always trying to align those. We’d like to have a pass-through for our OEM customers, who like to have a consistent price for a lengthy period of time. A lot of smaller producers can’t do that. So it is a balancing act depending on whether you’re dealing with a global producer or a small LLC. 

Q: With those costs rising, how can you compensate for that if you can’t get a complete pass-through on the price of the metal?

A: As far as what we buy, it depends on what it is spec’d out for. The 356 aluminum alloy is a very common product for the Alcoas and Rio Tintos of the world, and we have to run that.

There are different things we can do to control our costs. We need to make sure the design is right and that we’re not wasting too much and capturing what we can in recycling, so we can make secondary material as well.

Q: How did your staff hold up under all this pressure, whether it was your own people or supply chain personnel elsewhere?

A: I think from a people perspective there was a lot of burnout. I did lose some people who chose to either retire or wanted to do something else. They retired earlier than they would have because of COVID. But we’ve grown the team across the globe. In the 2 ½ years I’ve been here, we’ve put supply chain leaders in each region. 

Q: When you look back, what will be the takeaways and lessons from the past few years?

A: There were a lot of bad things that COVID introduced. But from a supply chain professional perspective, it really did put the focus on how important it is. I would say we’re starting to get back on the right track. But I’m not sure if we’re at the point where we can say COVID is truly behind us. But everything I see is we’re trending back in the right direction. 

For 2023, we need to remember the very rough lessons we learned over the last three years and don’t forget the things we had to put in place to survive. We need to make sure those corrective actions weren’t just short term. We need to make sure we can implement and learn because whether it is another COVID or something else, there will be disruption in the supply chain. 

The post How an aluminum parts auto supplier dealt with the pandemic appeared first on FreightWaves.

Source: freightwaves - How an aluminum parts auto supplier dealt with the pandemic
Editor: John Kingston