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With last year's natural disasters in Japan and Thailand, and the March explosion at Evonik Industries AG's specialty-plastics factory in Germany, magnifying the fragility and complexity of the supply chain, Dana has set out to become more "predictive and proactive when it comes to managing risk."
As the auto industry rises from the rubble of the recession, it's not just automakers that are looking for greater certainty that their supply chains are capable of ramping up to meet growing demand.
In the "ever-changing environment" left behind by the global financial crisis, Tier 1 supplier Dana Holding Corp. (IW 500/136) is making a concerted effort to manage risk within its supply chain and build constructive relationships with its suppliers, Dana purchasing executive Gary Baugh said at the Center for Automotive Research's Management Briefing Seminars.
"Our success as a company is dependent upon having a strong and viable supply base," said Baugh, who is senior director of purchasing for Dana's Power Technologies Group. "Very much so."
With last year's natural disasters in Japan and Thailand, and the March explosion at Evonik Industries AG's specialty-plastics factory in Germany, magnifying the fragility and complexity of the supply chain, Dana has set out to become more "predictive and proactive when it comes to managing risk," Baugh explained.
It's all about trying to get enough actionable "information and indicators to prevent a situation from becoming a crisis," Baugh said.
"The more we can plan, the better cost control we can have, and the better we can mitigate impact to our plants, and most importantly, mitigate impact to our customers," Baugh added.
As part of its process of evaluating and managing supplier risk, Dana conducts a financial-risk analysis of new suppliers -- although Baugh emphasized that "we really don't try to add too many new suppliers."
For suppliers deemed to be a medium or high risk, Dana buyers are required to develop risk-mitigation plans.
Dana looks at its established supplier relationships as well. All public companies are on a credit-risk watch list, Baugh noted, and over 90% of Dana's supply base is under a Dun & Bradstreet risk watch.
"We have a small analytics group that reviews this information and disperses it to our purchasing teams throughout the world so they can act on it where it's prudent," Baugh said.
In the case of privately held suppliers, the onus falls on Dana's purchasing teams.
"Your people who are talking to the suppliers day-in and day-out get a feel for what's going on out there," Baugh explained. "If something starts going on -- somebody's calling about wanting payments, or they're delaying shipments -- those are things that raise your antennae. So those are the things that we instill in our purchasing group to be mindful of."