Summit on Accelerating Innovation to Drive Sustainable Automotive Manufacturing Growth Across North America

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1 to Drive Sustainable Automotive Manufacturing Growth Across North America June 26-27, 2013 Session Outcome Report Background The Summit on Accelerating Innovation brought a diverse group of representatives from across North America together at Oakland University in Rochester, Michigan to collaboratively engage on the topic of accelerating innovation in the automotive supply chain. Participants included major North American automotive manufacturers, a diverse array of their tier suppliers from multi-national corporations to small proprietorships, non-profit partners, university students and faculty, and government representatives from Canada, Mexico and the United States. Led by a Lean facilitation team from SP member company Haley & Aldrich, three Working Groups of Summit participants dedicated their time throughout the event to collaboratively explore barriers presently limiting sustainable innovation within the North American automotive supply chain, and to uncover key opportunities to reduce those barriers and drive innovation through the chain. The Working Groups specifically concentrated on three key focus issues: a) Enabling Innovation; b) Building the Business Climate for Innovation; and c) Securing the Talent Pipeline that creates innovation. The Summit agenda also included remarks from distinguished participants reflecting on the themes of the Summit and opportunities to enhance public-private collaboration, including CEC Executive Director, Irasema Coronado; U.S. Environmental Protection Agency (EPA) Senior Policy Council, Matt Bogoshian; Director of Industrial Relations for Mexico s Secretaría de Medio Ambiente y Recursos Naturales (SEMARNAT), Luis Acevedo; U.S. Office of Recovery for Auto Communities Executive Director, Jay Williams; Johnson Controls Inc. Group Vice President & General Manager and SP Chair, Randy Leslie; and, Oakland University Board of Trustee, Mark Schlussel. At the conclusion of the Summit, representatives of the working sessions presented their working group s collective comments and recommendations for consideration by all participating. This document provides a report on the work and comments of the Summit participants that day.

2 Page 2 Customers of Innovation The Summit working sessions began with a focus on identifying the customers who benefit from and have the ability to significantly impact change in innovation within the automotive supply chain in North America. Participants considered topics such as environmental innovation and the value it creates, the talent pipeline that supports the creation of new innovation, and the regulatory environment in North America in relation to identifying the customers of innovation. Internal Automotive Supply Chain Standard Setters Commercial Building Manager Designer DFE Engineer Energy Managers Engineers Environmental Manager Plant Manager Purchasing Manager Quality Managers Safety Managers Skill Building Trainee Sustainability Directors Sustainability Managers Additive Suppliers Aftermarket Dealers Direct Powertrain Mfg. OEMs Resin Suppliers Suppliers Tier 1's Tier 2's Tier 3's Governments Natural Resource Producers Regulatory Agency/Bodies Standards Organizations The Environment Utility Companies Society in General Corporate Non-Automotive Supply Chain Average Consumers Academia The Individual Public Research and Development Automotive Car Buyer Communities Society University Schools Facility Manager K-12 Economy Board of Directors CEOs CFO Financial Employees Industry Itself Stakeholders Stockholders VPs Consultant Environmental Attorneys Non-Tier Supplier (Non-automotive) Other Industries Subassembly Machined Component Vendor Suppliers

3 Page 3 Key Working Session Feedback Through the Summit, the three Working Groups separately addressed three topic areas relating to accelerating innovation. The key recommendations and agreements of the three groups in each topic area are summarized below. Enabling Innovation Demonstrated examples within the Suppliers Partnership for the Environment (SP) network, and other manufacturing industry organizations, have shown that advanced manufacturing and environmental innovations have the potential to realize significant savings in key indicators such as energy use, materials use and manufacturing costs. However, the potential global impacts of such innovations on business growth and environmental sustainability have not been realized in many cases. In the Summit on Accelerating Innovation, stakeholders came together to explore barriers currently preventing the successful implementation of environmental innovations and to consider strategic steps that organizations in the automotive supply chain might take to identify, champion and drive the implementation of key innovative technologies and processes that improve the environment while providing economic value to the North American automotive supply chain. a. Value of Enabling Innovation First, the criteria that make advanced manufacturing and environmental innovations of value to customers in the North American automotive supply chain were evaluated. The following are the most important values relating to enabling innovation as selected by the Summit participants from those values discussed. Return on Investment (Dollars, Energy, Innovation) Quality Designed for recycling Greener Production Technology Increase Customer Desire Pollution Reduction Reduced Greenhouse Gases Social Responsibility b. Barriers to Enabling Innovation Next, practical barriers associated with creating, delivering and using innovations in the North American automotive supply chain were identified. The most significant barriers to enabling innovations as selected by the participants include: Internal Politics Resistance to Change Lack of Trust Silo Mentality Vision / Strategy Risk Perception Short Term Planning Poor communication along supply chain

4 Page 4 c. Recommendations to Enable Innovation Finally, potential opportunities to remove or reduce those barriers and encourage successful innovation were explored. The following ideas were selected by the participants as having the greatest potential to minimize the barriers currently in place and accelerate successful innovation in the North American automotive supply chain. 1) Create an internal innovation committee to break organizational silos, and share knowledge among multiple departments in an organization 2) Align innovation strategy with sustainability strategy 3) To minimize barriers related to Internal Politics, create a Chief Innovation Officer (CIO) with C- level responsibility for innovation 4) Develop collaborative supplier partnerships focused on driving innovation 5) Use economic metrics to drive sustainability forward 6) To minimize barriers related to reluctance to change, incorporate age diversity upon introducing new technology. Ensure that educational tools are available, and show fun aspects of industry through innovation. Improving the Business Climate for Innovation Several recent government and academic research efforts, such as the Advanced Manufacturing Partnership in the United States, have noted the importance of strong innovation programs in advancing manufacturing leadership and economic development, while at the same time highlighting the impact that a variety of subjects relating to regulation, trade, and intellectual property can have on successful innovation. In the Summit on Accelerating Innovation, stakeholders came together to explore the opportunities that exist to further develop a competitive North American business environment which fosters environmental innovation and economic growth. a. Value of Improving the Business Climate for Innovation Participants first evaluated the value that the business climate creates for their customers. The following are the most important values relating to the business climate for innovation as selected by the participants from those values discussed. Profit Price vs Quality Speed Greener Materials OEM/Supplier Collaboration Global Material Accessibility Environmental Impacts Quality Return on Investment Cost Reduction Brand Image Social Responsibility

5 Page 5 b. Barriers to Improving the Business Climate for Innovation Next, practical barriers associated with creating, delivering and using innovations in the current business climate were discussed. The most significant barriers related to the current business climate for innovation in North America as selected by the participants include: Lack of capital for innovative change Lack of Communication Investment Cost/ Return on Investment (ROI) Stuck in the Past Regulations Fear of Unknown (change) Access to Key Decision Makers Resource Availability Lack of true corporate vision for sustainable innovation c. Recommendations to Improve the Business Climate for Innovation Finally, potential opportunities to remove or reduce those barriers and encourage successful innovation were explored. The following ideas were selected by the participants as having the greatest potential to minimize the barriers currently in place and accelerate successful innovation in the North American automotive supply chain. 1) Establish a budget set aside specifically for innovation with standards and manageable risk 2) Develop a standardized business case for use in sustainability initiatives 3) Create a process for risk related to new innovation to be shared among OEMs, or a 3rd party that would assume the risk 4) Develop an innovation matchmaking initiative that would connect government programs and private investment with innovation and entrepreneurs. Securing the Talent Pipeline The shortage of a skilled workforce to fill the rapidly changing requirements of the manufacturing industry today is an increasing issue for the automotive and other industrial sectors, and one that influences companies potential capacity to respond effectively to innovation opportunities and challenges. In the Summit on Accelerating Innovation, stakeholders came together to explore opportunities to leverage public-private partnerships to further develop the skilled technical professionals required for careers in the automotive sector, and to train and educate tomorrow s industry leaders to embrace innovation and sustainable thinking. a. Value in Securing the Talent Pipeline First, participants evaluated the values that a talent pipeline for innovation creates for customers of innovation. The following are the most important values relating to the talent pipeline for innovation as selected by the participants from those values discussed. Industry / University Collaboration Long-term Competitiveness Tools for Business Analytics Concept Team (Representatives through Chain) Improved Hiring Matching University talent with industry need

6 Page 6 b. Barriers in Securing the Talent Pipeline Next, practical barriers associated with the current talent pipeline that impede innovation were discussed. The most significant barriers related to the current talent pipeline for the North American auto supply chain as selected by the participants include: Human Resources Resources for new ideas Image of Manufacturing Not Attractive to Younger Generation Lack of Education/Training/Experience Challenge between Old Blood/New Blood Lack of Industry-Education Alignment Talent Skillsets Theoretical vs. Practical Experience for Internships c. Recommendations to Secure the Talent Pipeline Finally, potential opportunities to remove or reduce those barriers and encourage successful innovation were explored. The following ideas were selected by the participants as having the greatest potential to minimize the barriers currently in place and accelerate successful innovation in the North American automotive supply chain. 1) Hire like Google (place value on leadership and how you think ) 2) Engage media and develop programs to improve the perception of manufacturing industry in North America 3) Address concerns of theoretical versus practical knowledge in new employees. Bring real world problems into classroom, through opportunities such as co-op programs, corporate sponsorships and providing detailed skill disciplines. 4) Partner with academic institutions in education and mentoring programs related to sustainability and innovation. 5) Include greater student participation in the next Innovation Summit. Conclusion The Summit on Accelerating Innovation brought a diverse group of North American auto supply chain and governmental representatives including Environment Canada, SEMARNAT, US EPA and Labor together to explore barriers related to advanced manufacturing and environmental innovation. Through collaborative forum discussions, participants developed new understandings of the innovation process and recommendations to facilitate the implementation of new innovations that improve the environment and the economy. Included among the recommendations was that the hosts continue the Summit in the future to engage an ever broadening audience in the dialogue and continue to explore further opportunities to drive sustainable innovation in the North American automotive supply chain.

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