How are suppliers and aftermarket manufacturers adapting to the world of AI and electrification? In this episode of the Mile Marker podcast, we speak with Collin Shaw, COO of MEMA, The Vehicle Suppliers Association, to get his perspective on opportunities for suppliers in the near and long term.
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Angela Simoes:
You are listening to the Mile Marker Podcast where we explore trends and innovations and fleet automation and shared mobility, helping fleet-based businesses make better informed decisions and achieve full digital transformation.
Hello and welcome everyone to another episode of the Mile Marker Podcast, my name is Angela Simoes. And today we are speaking with Collin Shaw, Chief Commercial Vehicle Officer of MEMA, the Vehicle Supplier Association and Chief operating Officer of the MEMA Original Equipment Suppliers.
As MEMA’s CCBO, Shaw continues to advocate for the commercial vehicle supplier industry and in his new role as the MEMA OECOO, Shaw leverages his extensive experience with OEMs and tier one suppliers to advocate the interests of this vital MEMA member group through programming, events, research and government relations.
You’re a busy guy, Collin. Welcome, Collin. To start, please give us a brief overview of the work that you have been doing and since MEMA’s annual vehicle supplier conference just wrapped up last week, would love to hear your observations from the show as well. So what are the hot button issues suppliers are focused on? Anything new pop up?
Collin Shaw:
Yeah, so the fall is quite a busy season for us. We have Apex, which we’re heavily engaged in. We had a vehicle supplier conference. But even before then we had some very impactful meetings with our heavy duty CEO council, our commercial vehicle sales executive leadership council as well as our technology council.
And we got a wide-ranging amount of topics in those. We had CEOs from the OEMs, we had industry experts, we had fleets, we had dealers, and there were a number of things that they talked about. And the overriding thing, which I think was also a theme at the vehicle supplier conference is, I think, profitability is the number one thing that suppliers are really concerned about right now.
There’s a number of things that they’re fighting with and really trying to balance. I don’t think many of the suppliers had fully recovered from COVID, especially on the light vehicle side. The heavy vehicle side has been a little bit different. There’s been a lot more activity and it’s been quite a year for the commercial vehicle.
But on the light vehicle side with the work stoppage, with trying to restart from that, understanding how the new contract is going to flow into the supplier base and that’s going to be from both the light and the commercial vehicle. I think suppliers are really trying to make sure that they’re in good position here for the next few years as they are.
They’ve come out of the cost increases that were associated with COVID and now they’re going to be looking at labor and really trying to understand where that’s going to go and how they adjust to that cost and working with their OEM partners to make sure that they can recover that. So that’s probably the number one thing that we’ve been hearing and talking about lately.
Angela Simoes:
And not only cost increases, but also do they need to do things differently? With new EV models and vehicles being made differently now, are they going to have to change up their offering? Right. So what was your sense of suppliers that had taken these last couple of years as they recovered and figured out, okay, how are we going to recover? Are we going to continue to do things as we were and try and just recoup by business as usual?
I imagine some at least said, okay, how are we going to engage in this new world? And for those that have had those conversations, what have you observed that they’re doing about that?
Collin Shaw:
Yeah, there’s probably been a couple of different themes. One of those is automation in manufacturing. And this is an area that can be tricky at times to pull off for suppliers because it requires a completely different training of the workforce. So as your manufacturing operations become more automated, your workers need to become more skilled.
And so it’s a balance of, I don’t think suppliers can bite off everything all at once. It’s slowly building upon one piece at a manufacturing plant, then adding another one and continuing to build and train our workforce. So that’s been one area where suppliers have really tried to increase their ability and capabilities.
The other one has been consolidation. There has been quite a bit of consolidation in the industry. You’ve had a number of suppliers purchasing other suppliers. There’s been even some spin-offs. So looking at their more profitable divisions, there have been spin-offs for those to build capital so they can invest in future technology.
Also have seen a little bit of some of the suppliers saying, “Hey, I’ve got this expertise in this one area. How can this be applied to other industries?” So in cases where suppliers can branch out without adding much capital or stress on the workforce, we’ve started to see that as well so that they can be a little bit more insulated from just the automotive industry.
There has been also quite a bit of suppliers looking at, say I’m a light vehicle supplier, let’s look at the commercial vehicle market and vice versa trying to diversify. Because sometimes those markets last little bit. Commercial vehicle had a banner year and the light vehicles still coming back from COVID, interest rates, high prices of vehicles have been right around the 15 million and change mark for light vehicles, whereas commercial vehicle class, it’s been about 330,000 this year. So that’s a pretty amazing year. So they’re all looking at where they should go.
Angela Simoes:
And so when you talk about automation, and this is part of the digital transformation conversation, right? Are they using those terms? We’ve been talking about digital transformation for decades and the meaning has sort of changed as we’ve gone along. Are people still talking about… Are they still using that term and are they thinking about that or is it really bigger than that and they’re just thinking… Or more targeted and just like, I need to just figure out how to survive in this new automotive world?
Collin Shaw:
Well, there’s a number of things. Plants that are greenfield operations. So we’ve had several of our members that are building new plants. Those plants naturally come with a higher amount of automation and they’re looking at when they build those, how do I set up for the long term to be a lot more automated? They can plan for the workforce, start training from the beginning.
But then there are operations that are already in existence. So one of the things is how do they use vision systems to improve processes in the plant, catch things. And those vision systems can then be built in with things like AI or different processes to pick up on how things move through a plant where it could be more efficient.
So yeah, those kind of things that are making their way and it’s going to be a long-term process. It’s not going to be done overnight. And I think what we see are those that are successful with it, just do it in chunks but are very steady and consistent. I look at it like marketing. You don’t just do one commercial and you’re done.
Angela Simoes:
And you’re done, correct.
Collin Shaw:
You have to be consistent and you have to do it over time and it’s got to build. That’s how automation works in a lot of these facilities. It builds and it works over time and then five years go by and you have a facility that is highly automated. You have a workforce that’s highly skilled and trained, and that’s usually the best way. Not taking all on at once. That can really backfire in some situations.
Angela Simoes:
Okay. So we’ve talked a little bit about the manufacturing side and how automation is finding its way more prevalently into that side. What about the aftermarket side, maintenance and everything there, supplier parts? What are you seeing happening there and how are fleets? I think in our pre-conversation, we had talked about how fleets are getting their parts a little differently or that’s starting change.
Collin Shaw:
Yeah, I think the number one issue right now that we are engaged on is right to repair. So insuring and suppliers and workshops all have the same access to the ability to repair vehicles. That is probably the most important issue right now that we’re facing the aftermarket is making sure that is locked in for the future of vehicles.
Outside of that, there’s a number of things happening on the digital front and whether it’s e-commerce or prognostics or getting better information into the fleet hands, they’re all affecting things. And again, they’re just compounding on one another. And it really starts with getting good information as to what’s happening on your vehicle. So you’re starting to see the truck you’ve had for many years, very good diagnostics, whether it be the powertrain or braking systems.
Truck is full of a lot of information. Starting to see that now flow into the trailer, you’ve got a lot of information coming off trailers. And so fleets now have access to much better information are starting to learn how to process that into a better understanding of their operations and where to put the parts. So once you get the information, now you know where to put it. Now you know where are the frequent issues, what do I need to stock, where geographically do I need to have the products.
What that then does is you can then work with the distributors and vendors and have more clarity given to them about where they need to keep things. And so as things become more digital now you can start ordering those parts digitally. You don’t need to make a phone call to say, “Hey, normally I’ve got this amount of trucks in this area, we’re going to need this many brake pads or filters.”
That information can be shared so the ordering can take place more digitally. And that is the flow through of what is happening. Everybody’s becoming a little bit more digital. And so as it becomes more connected, you’re able to get the right part at the right time in the right location to maximize your asset and that’s really what it’s all about. It’s not making sure trucks are on the road.
Angela Simoes:
And so is that happening now or is that what people are talking about where they want to get to?
Collin Shaw:
A little of both. You have many distributors that are making the investments into e-commerce and to give that information to the suppliers to deliver as well as the suppliers to order. You have a lot of suppliers making that investment. And one of the things that we’re working on with our heavy duty e-commerce council is to really make sure that suppliers understand what distributors and fleets need that they’re looking for, what format they needed in, and really to help dispel some of the myths that this can be a very costly endeavor to give all of the information.
That’s one thing I experienced previously in my career was looking at all of the parts we had and say, how do we digitalize everything? And it’s about just again, being consistent, taking it over time. These are the highest runners, let’s get product information, let’s get pictures, let’s get a description of the product out there so when people go to order it, they know exactly what we’re doing. You do that over time.
Again, it builds on itself and then you have an entire digitalized portfolio that becomes very easily searchable and orderable. So those are the things that we are trying to help the supplier community understand, especially some of the smaller suppliers that in COVID people became less brand loyal just because they were looking for parts, and so they branched out a little bit and started to see that if you had digital information out there, it was easier for it-
Angela Simoes:
Easy to get. Yeah, for sure.
Collin Shaw:
You’re starting to see that again, continued to roll and it’s about making these continued and sustained investments into these types of solutions.
Angela Simoes:
Has there been talk about how to apply AI to this process? Because as you’re talking about when things are more digitalized, you can figure out, again, like you were saying where more parts are needed. If you’re in a cold climate, you’re going to need more of a certain type of part versus a warm climate, that sort of thing.
And while telematics and vehicle information has been available and you can see it still requires somebody to place the order, something like that. So what role are people looking at AI to play to take things to the next level?
Collin Shaw:
So I think a couple of the really cool areas that AI really helps in is, AI is incredibly good at taking vast amounts of information and giving you good insights into how to plan your operations. So pricing consistencies, going through your entire order book and looking at, hey, what about pricing consistencies. Forecasting, looking at the past and saying, hey, over time or with seasonality, these are where and when you’re going to see these kind of parts pop up.
So it helps you with not only forecasting for financials, but demand planning. It can help go through your catalog, look at marketing descriptions, look at product information, understand if there’s discrepancies for similar kinds of parts. I think in the future, you’ll start going through images and making sure that all your images are of the same or it’s the right part that you have an image of.
And I can go on then to the distributor. Distributor can, or a fleet can use that kind of information to say, “Hey, here’s an image of this product, I need to find all the other ones like this.” Or I can take a picture of it on my truck and bam, here it is, and here’s everybody who supplies it where it is. So those kind of things are what AI is very good at and that’s very time-consuming for people.
What I think people are great at is, once they have that information is making a decision. So it’s all about getting the right information and then making a decision. And that’s what I think AI will take a lot of the mundane work about getting all the information together. It will help come up with recommendations and ultimately, a human can make the decision of, okay, this is where, when and how I need to order products.
Angela Simoes:
Just talking about automating the mundane decisions. So at Right Cell things that we like to talk about are, for example, a vehicle engine light goes on, so the system automatically identifies what the issue is. If there’s a part that’s needed, this automatically orders the part. And so by the time the vehicle gets back to the depot, everything’s been taken care of and the driver doesn’t have to do anything, right?
And maybe the system even says, hey, leave this car at the depot, go get the other vehicle and continue your route because you’re going to need to swap out. But it’s all automated and AI played a major role in that. I think that’s an ideal scenario that we’re trying to help companies get to.
Collin Shaw:
Absolutely.
Angela Simoes:
Let’s talk about the commercial vehicle side, and you’ve talked about that already a little bit, but let’s dig in a little bit more. What are some of the biggest changes happening there?
Collin Shaw:
I think there’s a number of areas still trying to figure out how the market moves with powertrain. It’s still not decided, and I don’t think we’ll be for a while in the commercial vehicle market of which powertrain wins out and it’s really going to be more application-based. And the reason this is important is the supplier community has to start making capital investments.
And when you’re looking at, okay, how do I plan for the next five, 10 years, my manufacturing footprint, my supply chain, it’s still not certain what role is hydrogen going to play? Is it going to be fuel cell vehicles? Are there going to still be internal combustion engines that operate on alternative fuels like hydrogen? What’s the tail of diesel? I think one thing that is probably more certain is that diesel is going to have a long tail and it’s going to be around for quite a number of years.
What is less certain is how big is battery electric vehicle going to be? Is it going to be relegated to more of the regional type products or will advancements in battery actually make it applicable for long haul? And these are some of the questions that I think the supplier community is grappling with is how to plan for this. Some suppliers, it doesn’t make a lot of difference. You’re doing body panels or something like that.
Angela Simoes:
Yeah, it doesn’t matter.
Collin Shaw:
In terms of all of your core systems like powertrain, air management, braking, steering, all these things it has an impact on. And so that’s probably the number one area that people are looking at. The other area again, is the supply chain and labor. When we talk to the CEOs, when we talk to our member companies looking at the long-term workforce of hourly salary, how do you look at leadership in the future? How do you bring in enough workers and train them to operate in a more highly skilled environment?
This is an area that when we bring everybody together, it’s an area we spend time on when we have our round-table discussions, really trying to understand and learn from one another what they’re doing for success. Because I think when you look in the future, whether you have operations in Mexico, the United States, other areas abroad, there is going to be a lot of demand and competition for labor, no matter what. And really thinking about how do you make the best of that is really vital to the future success of your organization.
Angela Simoes:
Two things that I thought of as you were talking that we actually hadn’t talked of before, even before this reporting. One is about materials manufacturing and the other was the issue of labor that you brought up. The first question I had was, yes, a supplier may make body panels, but the OEM may come back and say, listen, I need you to completely revamp whatever material you’re using because it has to be stronger and lighter and all these kinds of things.
And if you’re a relatively small supplier, do you have the resources to go research what material is that? So is AI playing into that at all to help suppliers figure out a better way? Even just asking what’s a stronger, lighter material that I can consider using? I mean, you think about a smaller supplier who made most of the workforce is just the guys who make it right. Do they have the engineering?
Collin Shaw:
So this is where human ingenuity still plays a role, and this is what AI is very good at, is novel solutions. AI is great at a lot of data and paring it down and saying, this is what I see and trends and here’s how you can make a better decision. What AI is not very good at is, like I said, novel solutions. And when you are looking at trying to create something new, it can only take and make a decision from the information it has.
And if you want something new or novel, that’s where human ingenuity has to come in. And that’s where we as an organization feel that it’s still very important that trade associations exist because we help foster some of that. We help foster the community, we help foster connections and networking. And through that, people start doing business together and partnering.
I know many of our suppliers and even some of the OEMs feel that partnership is the name of the game right now. And whether you’re a large supplier or a small supplier, you need to find great partners that you can work with to develop things. And that’s where you’re going to see a lot of advantages as a smaller company of working with somebody.
Maybe they’re equal size in a different capacity, maybe they’re bigger, but you need those connections because doing something new is going to take human ingenuity. And I don’t think that’s… Well, from all of the information I have and listening to not only experts in the automotive industry, but other podcasts from other scientists is that’s just not what AI is good at. It’s just not good at coming up with new solutions.
Angela Simoes:
Okay, interesting. And then on the labor side, you mentioned that labor, they’re going to have to be more skilled or have a different skill set. So what are suppliers doing either to retrain their workforce or are trade associations or other schools changing up their curriculum or how do you find that workforce with the new set of skills? What are suppliers doing to fill that gap?
Collin Shaw:
So there’s a number of things, and I think it’s not just on the supplier community, but there is a responsibility we have as a trade association as well as the government’s going to need. I’ve seen some really cool programs from some of our suppliers where they’re bringing in high school students and teaching them from the beginning, what is the skill trade, how is that functioning now in a world where you need to understand computers and you need to do basic programming, you need to understand how to 3D print.
So some of those kind of things that the supplier community is doing is not only providing early opportunities for people right out of high school or even providing some early college, but also giving them the opportunity to show how skilled and technical some of these roles can be. They’ve always been skilled and technical, but now it’s a different kind. It’s digital. It’s taking those things you could do with tooling and things like that, but also understanding how to write that into a computer or things like that.
The other area that’s really needed is working with governments to provide funding for training, understanding what opportunities are in local areas. I think right now it’s not just a four-year degree. People are looking for trade schools, those kind of things. And this is where the government can come in and help benefit and fund some of these, but there’s also a lot of talk around immigration.
This isn’t a topic that is easily divisive among people, but when you talk to leaders of businesses, it’s an important topic because they need more people to come and work. They need immigration to bring in skilled people, to bring in a new workforce because there’s just not enough out there right now in the United States. And so that’s another issue where we as a trade association and our supplier members are working with the government, not going to say anything’s going to happen, but it’s an area where the three of us have to work together to try and make some improvements.
Angela Simoes:
Yeah, that’s a big problem to solve, for sure. Well, and speaking of things that are going to happen, why don’t we wrap our conversation up by you looking into your crystal ball and what are some things that you see will happen in the coming year, any predictions you have?
Collin Shaw:
One area that I love is the trailer. When it comes to commercial vehicles, you’re going to see a lot more communication between a truck and the trailer. You’re going to start seeing them communicate back and forth information going to the truck from the trailer. That’s one area that I think is really cool. The other area on probably a little bit more the passenger car right now, is a software-defined vehicle. So a passenger car is going to have zone or one massive computer that can then control a lot of the other components.
And what this means for suppliers is your product may actually have less chips or things like that and may be “dumber,” but it’s taking orders from a higher level system that’s looking over the entire vehicle. So that’s an area that suppliers really need to understand is how is the software-defined vehicle going to affect my products where maybe I’m writing the code into the product today, that may not be what’s happening in the future.
I may be writing code, but still it’s going through a different computer. And so there are IP concerns and risks and challenges to think about there. The other area that I think will start coming back around is ADAS and safety. Autonomous driving is still a challenge, and you’re going to see more and more talk around ADAS because we have seen growth in vehicle fatalities.
And that, to me, is unacceptable when we have this kind of technology out there that can save lives. And so adopting more safety equipment, whether it be on a passenger car or a heavy commercial vehicle is, I think, really ought to be one of the top focuses that we have as an industry of committing to reducing those vehicle fatalities. Because growing them right now when we have this technology available is totally unacceptable.
Angela Simoes:
Couldn’t agree more. And I think you’ve hit on three pretty key areas that we will definitely see some development in in major innovations happening in the next year. Well, thank you so much for your time, Collin. This has been really insightful. Clearly, lots of change happening but lots of opportunity. So it feels very exciting. Or scary, I think too, probably for some, but also historic, right?
I think we’re in a really historic time in the automotive and transportation industry. So really cool stuff happening. But thank you so much for your time. Really enjoyed the conversation.
Collin Shaw:
Thank you, Angela. Appreciate it.
Angela Simoes:
Thanks for listening to the Mile Marker Podcast. If you liked what you heard today, give us a like, share this episode on social media and even take a minute to give us a review on iTunes or wherever you listen to your podcasts. Be sure to subscribe to our channel so you can join us for future episodes full of insights and ideas to keep the mobility industry moving forward.