How supply chain excellence continues to boost A123 Systems’ fast-growing footprint

One of the jewels in Michigan’s vast manufacturing crown, A123 Systems has brought battery and energy storage expertise to the market since 2001 – and the business hasn’t stopped innovating since.

Following a string of high-profile collaborations to create bigger and better lithium-ion solutions, the business is blossoming, and currently has plans to grow between three and five hundred percent. This ambition led Troy Zerbe, SVP Global Supply Chain & Quality, to find himself drawn to the business by the opportunity to be, in his own words, “part of something great”.

The role was a perfect match for Zerbe’s background, allowing him to start making impactful changes to the business right from the beginning. On stepping into his role, he discovered that he was becoming part of a passionate, dedicated team that was ready to drive the substantial growth A123 was forecasting.

Zerbe set about transforming and streamlining the company’s supply chain, which was no small task, but first he had to fully understand the entire company’s processes.

“We touch everything from nose to toe,” he explains. “We start with R&D, which we’re very involved in with regards to technology development and new battery cells – it’s a very IP-rich environment. During the cell development especially, it’s important to have the right suppliers engaged, so we have purchasing experts and commodity experts involved in R&D, with the purchasing team and suppliers coming in to help develop the technology needed for our products.”

The concept of a ‘flawless launch’ is taken very seriously by A123 and Zerbe, so the business utilizes every type of expert at its disposal, as well as tracking the execution of the development of programs to ensure all quality checks are in place, both from a supply chain standpoint and a material supply standpoint.

A commodity management team oversees procurement – including supplier strategy, sourcing, negotiation, and contract management – which is another aspect of the business where A123 expects perfect parts with zero defects.

“We also manage all our lean logistics and material handling, so we really are involved from beginning to end,” says Zerbe. “The supply team is an integral part of the business and we are engaged in almost all aspects of our operations, managing the quality, technology, cost, and delivery of our supply base.”

While it is truly impressive that A123 is so involved in every single aspect of its own operations, this in-depth and far-reaching approach can only work with every affected party’s involvement. Knowing this, Zerbe put together an executive-level supplier council shortly after joining the company, which reached all the way to the A123 CEO.

“We get together quarterly and the items that we talk about are key supplier strategies, who are the suppliers that can help us along the way, and how they can help us with our growth strategies,” Zerbe explains. “We talk a lot about commodity pricing – such as the costs of cobalt, nickel, copper, and aluminum – and risk mitigation plans, putting in place strategies around how we manage that to minimize financial risk to the business. We also discuss the KPIs I’ve put in place because it’s important for the leadership team to understand them. That illustrates the continuous improvement we’re achieving month over month.”

This level of communication is vital for A123. “Nobody likes surprises,” Zerbe says, and ensuring the team is aligned is the best way of staying on course. That open dialogue also extends through the supply chain to vendors and suppliers; it is essential to keep them close too, due to the complex nature of A123’s technological products, as well as them being vital to the business accomplishing its goals.

Zerbe and his team have spent a lot of time working on the organizational alignment of the supply chain.

“We’re making sure we have the right people with the right training, and the right development in the right locations of our growth,” he explains. “We’ve done some adjusting. The majority of the electronic component requirements today are in China, so we’re making sure we are staffed up appropriately there. We’re growing significantly in Europe and are building a team there with a Michigan expert to lead the supply chain operation. We’ve also done a lot of internal alignment around engineering, procurement management, cells, and operations.”

This is also where Zerbe’s KPIs fully come into force, to track a baseline of how A123 is performing and what continuous improvements need to evolve or be implemented. Many procedures have been introduced to ensure perfect execution and better development of supplier relationships.

Suppliers, partners, and staff form A123’s most valuable commodity – people – and are the most important element of the business.

“I’m a strong believer that supply chain is a team sport,” says Zerbe. “We have to continue to work internally with engineering and procurement management to make sure that we’ve got a cohesive team working on all supply chain initiatives. Of course, we also have to continue collaborating with our suppliers, developing them and having them help us achieve what we want to achieve.”

Michigan is swimming with technological and engineering talent, fortunately for A123, and the business has close relationships with higher education facilities to ensure a skilled pool of workers for years to come. With product development and supply chain evolution constantly improving and in flux, fresh eyes in and on the industry are vital. It is part of what enables A123 to stay nimble.

“We have to be flexible to what’s going on in the market,” says Zerbe. “We’re a nimble and quick company because we’re fairly young, so we can react quickly to industry needs. What that means for us, from a supply chain point of view, is that we have to continue developing our team, working with our supplier base, and making sure those suppliers want to collaborate with us and help us develop the technology we need to be competitive.”

The swift time to market practiced by A123 gives the business an edge when it comes to customer demand – something that changes and increases constantly. Expectations are higher than ever, especially in the demand for higher density batteries with more energy, and a lot of innovation has to be poured into that.

So how does the future look for A123?

“We’re working very closely with several suppliers on innovation and technology developments around anode and cathode powder, for example,” says Zerbe. “Separators and electrolytes are also a key ingredient in our formulations, so we’re working closely with them. Electronics are a significant portion of our buy and we’re aligning ourselves globally so we have a worldwide supply base, and this is all set to create a need for faster-to-charge, more powerful, lighter products. Innovation requirements are going to be high for the next few years.”

With all the natural advantages A123 has as a fast-growing group of experts in a competitive market, suffice to say it’s been a rewarding year for the business, and Zerbe is deeply proud of what has been accomplished.

“We have made significant improvements on KPIs; the dedication to improving our systems and processes has been something that we’ve really focused on, as well as collaborating globally with the A123 group in making sure we’re behaving as a global team, and continuing to nurture those close relationships with suppliers,” he concludes.