With U.S. manufacturers increasingly challenged by global rivals, American Axle & Manufacturing's Abdallah Shanti believes that the best way to compete is to collaborate.
[From Supply & Demand Chain Executive, December2003/January 2004] In an industry renowned for its ups and downs, American Axle & Manufacturing (AAM) clearly has seen its share of ups since 1994, the year when co-founder, Chairman and CEO Richard E. Dauch joined with two investors to buy five driveline and forging assets from General Motors. Since becoming an independent company, the tier-one auto industry supplier has seen its top-line revenues rise almost twofold to $3.5 billion, expanded from five facilities to 23, and gone from two customers in as many countries to more than 75 customers in 12 countries. Today AAM is a global manufacturer of automotive driveline and chassis systems and components, including axles and driveshafts for light trucks and sport utility vehicles (SUVs).
Abdallah F. Shanti, AAM's vice president for global procurement and information technology (IT), as well as its chief information officer, shares his company's GM heritage: Shanti began his career at General Motors/EDS in 1984 before going on to serve in various information technology leadership roles for automotive and manufacturing corporations, including, most recently, CIO and vice president of information technology with LucasVarity and general director responsible for systems engineering at GM. Shanti joined AAM as executive director of information technology and CIO in 1999, and he assumed his current position in September 2002.
Supply & Demand Chain Executive recently asked Shanti about the role the company's supply chain has played in American Axle's growth and how the supply chain is helping to improve his company's competitiveness today.
S&DCE: How has the procurement organization contributed to the bottom line at AAM over the past nine years?
Shanti: First of all, AAM was part of General Motors [until 1994], but the procurement function continued to be part of GM until 2000. GM procured all our direct materials not the indirect materials. In 2000, when AAM took over that responsibility, we faced some challenges, one of which was building a procurement organization to support AAM. When we took over our own purchasing, we still had the contracts that General Motors had in place for us with existing suppliers, so we have had to transition those contracts to AAM.
S&DCE: What is your direct materials spend?
Shanti: Our direct materials spend is roughly $1.6 billion. But we buy a big chunk of that internally I would say almost $400 million because AAM is "vertically integrated." We have our own forging division, where we procure such components as gears, axle and drive shaft components, pinions and the like. But we still procure the raw materials, like steel, for our forging operations. We buy approximately 250,000 tons of steel a year, and we're the largest special bar quality steel buyer in the automotive industry.
As far as the procurement organization, I look at my team like any other operational department within AAM. We have our driveline division, our forging division, and I look at the purchasing department as another division. In this case the plants happen to be our suppliers, and we treat them like they are AAM plants or an extension of our plants. That means we try to apply the same methods we use, which helps us internally to gain productivity and to achieve a competitive advantage. We work very closely with our suppliers to improve productivity, and they collaborate with us on product design, manufacturing and tooling development. We try to have a good, solid, collaborative relationship with key, strategic suppliers/partners.