CLA Series: AV Production Tip #2 – Optimize Your Manufacturing Strategy for Flexibility

Full Transcript:

Welcome to the Capital Light Assembly Podcast brought to you by Edison Manufacturing and Engineering. Edison is your contract manufacturing partner focused on the capital-efficient assembly of complex mobility and mobility-adjacent products that are not well suited for highly automated production. I’m Brandon Bartneck, vice president and general manager here at Edison, and you’re listening to part of a special series here focused on how to reliably scale the production of autonomous vehicles.

So, how can you execute and scale that production? Building autonomous vehicles is part of our core business. It’s an area where we have a lot of experience and expertise. We’re using this series as a way to share some of that knowledge with anyone who’s going through this process, so I hope you enjoy it. There are seven tips total and seven episodes here, so check out the ones before and after this, and please enjoy!

The next tip is to optimize your manufacturing strategy for flexibility. This is a volatile space. The autonomous vehicle industry at large has a pretty high degree of volatility. Well, it's a dynamic space of this volatility here, right? And it's on several axes, right? It's things within the control, theoretically, of a given entity or an autonomous company but also things outside the core, right? So things like interest rates. No one person has a direct say, but also those are going to impact, and they have impacted, and will continue to impact adoption and the ability to get access to capital that is required to scale production. Also, things like safety incidents from companies that are not your own, right? We've seen it recently here. One big mistake in the autonomy space has ripple effects, and that hurts consumer perception and public perception, and there’s possibly going to be regulatory issues and kickbacks. These are things outside of the core scope of influence of any given company that can introduce volatility in the system. That can impact the timing, rate, and final volume of production that comes with it because of the market adoption rate.

So, there are several different variables here that are subject to change. And that doesn't even account for the fact that there are design changes that can take place. This is a technology that's been proven in some space but not at scale. No one has produced real production and deployed real production autonomous vehicles at a large scale yet.

So, there will be growing pains there for the industry and probably for every company. And things that are going to come up and changes that are going to take place from a design perspective, from a timing perspective, and again, the rate and the volume perspective. So, you have two options there: You either plan and optimize for the best-case scenario and hope everything goes well, and you're out of luck if it doesn't, or you build a robust, flexible system that is prepared for these changes. And that's highly recommended from my perspective.

So how do you do that? So, the first thing, and it ties to the name of this podcast, is that I have a strong belief in capital efficiency. Being capital light, and being efficient with capital is really important here.

Trying to, so in a world of change and uncertainty, optionality is at a premium. It's very important, and you should prioritize this. Or even if it means paying for it in the short run with higher piece costs or inefficient processes, like optionality and the ability to defer your big bets is invaluable because as things you can wait longer to see how things play out - how you're design is, how the market and how the technology plays out - and then place your big bets. You can't always do this, and there's a limit to how far you take it, but being efficient with capital and having a general mindset of, let's deploy capital intelligently and effectively and wait to make those big bets, is highly, highly recommended here.

And then you also pair that with a manufacturing system that is built around flexibility. It's like change management, critical. Make sure that you're capturing design changes and implementing them in a reliable, repeatable fashion into the assembly line and accounting for that appropriately. And design, you're likely designing scalability into the production system. So, you might design a process that is not necessarily optimized for repeatable production, but there's more variability. So, you might have, for example, two parallel assembly lines rather than one long one. It doesn't necessarily make sense in all cases, but at times, it makes sense to have a second assembly line that you can turn on and off to throttle, or you have sub-assemblies that you can turn on and off, you have things that you can move around so that you can optimize for flexibility and volume changes, whether that's up or down.

I guess the overarching theme here, then, is that you're applying some of these tactics, which is helpful, but ultimately, you need to have a high degree of trust that whoever is executing the production, providing the manufacturing, whether it's an internal or external partner, is prioritizing flexibility alongside you and is on your side of the table, facing these challenges that inevitably will come up. So the best plans are a great place to start, but the ability to navigate through challenges and to have the product and the company, the AV company's best interest, in mind as you go through it, it's invaluable because that's how you're going to make it through the difficult time. So ultimately, the message is, right, optimize your manufacturing strategy for flexibility. This is a dynamic world, and it will continue to be one. Hopefully, it will become less dynamic over time. But for now, it is, so choose flexibility.