Thursday, July 26, 2012

Batteries: AA, AAA or XXXL?

The most common battery size in the US these days is the double-A. We all tend to be quite familiar with battery sizes such as AA or AAA. But when it comes to larger size batteries, like those inside electric or hybrid vehicles, we are in unfamiliar territory… and our service parts organizations certainly are in unfamiliar territory. Compared to the small AA batteries, as an industry, we are wrestling with the monster XXXL batteries in our supply chain.
A group of subject matter experts met at a Carlisle-facilitated roundtable during this year’s NAPB. The purpose was to discuss the challenges around hybrid / electric vehicles, but almost the entire discussion centered on batteries. Four items crystallized in the discussion:
  1. As service-parts organizations, we are still exploring solutions for batteries.
  2. Our attention is focused on logistics, more than it is on sales & marketing.
  3. The group needs to “crack” four fundamental logistical questions for the moment.
  4. There are big opportunities to collaborate in this space.
No Mainstream Solution Yet - We Are Still Exploring

Toyota (due to installed base of Toyota Prius) and General Motors (due to the Chevy Volt) are the most experienced with batteries in the supply chain. But even these two companies are only giants among midgets. As an industry, we are still struggling with operationally executing service parts requirements for hybrids and electric cars. We are still exploring what the best approach is to handling batteries. There is no mainstream solution yet.

Our Attention Is Focused On Logistics, but Sales & Marketing Equally Demands Attention

Our main attention lies on the most immediate issues of how to logistically handle batteries in the supply chain; for example, where to store them, how to ship them, where to repair them. Less of our attention seems to be focused on Sales & Marketing questions, such as: How do we handle declining service and repair needs associated with hybrids / electric vehicles?

Four Logistical “Nuts to Crack”

While the discussion was loosely structured, four sub-questions emerged with respect to how to handle batteries for hybrids and electric vehicles in the supply chain:

  1. Where to store batteries in the network (temperature, degradation, special tools)?
  2. Where to repair batteries (centrally vs. locally, repair vs. replace, some dealers vs. all dealers vs. outsource)?
  3. How to transport batteries (hazmats)?
  4. How to dispose of batteries at end-of-life (remanufacturing vs. refurbishing vs. second life vs. disposal)?
These questions and their facets alone were enough to fill 90 minutes of discussion. Of course, there are additional questions to answer, but these are the main issues at the moment.

Big Opportunities to Collaborate

At the moment, motor-vehicle OEMs do not have much scale on battery issues – the vehicle parc for hybrid and electric vehicles is simply too small. Battery-related tasks are extremely resource and cost intensive at such a small scale. This topic, therefore, lends itself to collaboration (either between OEMs directly, or through third parties that achieve scale by supporting multiple OEMs). Other opportunities for collaboration are simply to share learnings and best practices (easiest), or standardizing designs and approaches for batteries (hardest).

In short, the facilitated roundtable proved useful to participants… not because it provided us all the answers, but because it helped us to get a little way down the path on this complex subject. It highlighted the issues, what OEMs are doing, and surfaced the enormous potential that lies with collaboration.

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