John Haupt: Speed, Results, and Relationships: How CNH Accelerates Performance with Manufacturing Intelligence

John Haupt:

I’m honored to be here with you again today and to share my presentation. Speed, results, and relationships are hopefully themes that come out of what we’re going to talk about today. I’m sure you’ve heard this from your leadership: How do we get results faster? How do we get quality, delivery, and cost delivered in the right way so that we can maintain our relationships with our customers, and even more than that, our relationships with our key suppliers and internally as well? Again, thank you, Stephanie, and your whole aPriori team for letting me talk today about how aPriori has contributed to CNH’s speed, relationships, and delivering the results that we need.

I’m going to jump in. I’ve already introduced myself, so let me introduce CNH. We have 35,000 employees across 69 different countries. We are a global agricultural powerhouse, and we are very significant in the construction equipment industry as well. That’s a little bit about CNH.

But why are we here today? We’re going to talk about how CNH accelerates performance with manufacturing intelligence. Again, speed, results, and relationships drive the transformation. We’re going to talk about the journey from having a very fragmented approach. We’re an amalgamation of many different mergers and acquisitions over many years. But we’ve got a vision to streamline and bring our data more and more together, break down those silos, and drive better business results together. We’re going to talk about the partnership and how that’s unlocked value for us as CNH with aPriori. We’re also going to talk about the future of our autonomous, connected decision-making.

So let me start with why this moment matters. These are some snippets directly from our last presentation from Gerrit Marx, our CEO. He talked about our main highlights and challenges that we have in the down ag industry today. We’ve got an ag trough. Our farmers are faced with low sentiment because of rising input costs. Anybody familiar with rising diesel fuel costs? These are dramatic inputs and impacts on our farmers. They’re looking to us to say, “CNH, what are you doing to give me more productivity, give me lower machine costs, help me control my input costs, and make me profitable once again?” Part of that, of course, is making sure that CNH is a sustainable producer and manufacturer of the goods that we produce. That’s really why this moment matters and why, in the down cycle, we have to continue to transform.

Before our transformation and how we embarked with aPriori, we had everything that you heard this morning: many instances of silo thinking, design decisions made in a vacuum or within a silo, then throwing it over the wall so that purchasing could hopefully eventually find a supplier who could make this part. Then eventually it lands in our factories and someone says, “Well, gee, if you had designed it this way, I could have manufactured it much more easily or received the parts with less dunnage.” This was CNH five years ago. It’s much less so today because of the transformation.

In terms of our journey, and this is absolutely a journey, one of the questions I asked Chad was, how far did you get with institutionalizing the use of data-driven decision-making? We’re not there yet either from a CNH perspective. But we’ve got some really interesting pockets and teams that have bought into the process. They’re running with it, and they’re the ones who are being more successful than the teams that haven’t yet. One of the key things that we did as part of our transformation was appoint change agents who are our super users in costing, purchasing, and design, to be able to teach others. That’s part of our journey.

But what we said was that we need to have deterministic intelligence, the physics-based costing for sure, integrating all this data across our systems. We need those continuous insights as well into every program. Then it needs to be actionable. What are you going to do differently with the data once you have it?

This requires leadership. You can’t just say, “Yeah, this is what we need to do. Here you go. Here’s a tool. Go do it.” Even in this room, we’ve got a lot of leaders. If you’re convinced this is the right thing to do for your business, I assure you, you will generate better results. But you’re going to need to lead it. You’re going to need to show people how to deliver those results. You’re going to need your technical experts, your buying experts, and your manufacturing experts. Get them in a room and lead them with the data. That’s my call to all of you leaders. Make sure it’s happening. It only happens if you ask for it. If you want to generate better business results, you’ve got to ask for it.

So this is our journey. This is what we saw as part of our needs. One of the key turning points, and I mentioned it a little bit at the beginning in our coffee talk, is in the upper right-hand corner. I apologize that you can’t quite see it. In 2024, we launched our biggest program ever at CNH for our next-generation combines across both brands, New Holland and Case IH combines. We received lots of accolades for the performance and productivity of these new combines. These new combines have between 30 and 50 percent more capacity than our previous largest combines. We have to do that. We’ve improved our total cost of ownership for our farmers by 15 percent. They can’t afford to keep their old ones because they have to go to this level. There are no more people, no more labor going back to farms to work, and they have to feed the world. They’re feeding all of us.

So this was our journey. We learned a lot from our successes, but we also learned some things from our failures. One of our failures was that we weren’t fast enough on getting our cost information updated through the program. I swore that once we learned this from our failure, we’re never going to do this again. We have to bring in the tools, the outlier analysis, the bulk costing, the should-costing activities, and sit down with our key suppliers face to face to drive these transformations. Going from what we learned to be reactive, siloed, manual, and late, we have to change our mindset. We have to shift left. We have to be more proactive, more unified, more automated, and, like I said before, involved in the early stages. That’s also why we created our early supplier engagement process and strengthened that. We’re on a new journey at this turning point.

As I mentioned, this intelligence layer is absolutely critical for us to be able to use the data to identify where the key outliers are. Here’s a fair cost for these components. These are not fair prices and quotes that we’re getting back from suppliers. Where we’re getting the rest of the quotes that are fair, awesome. Give those suppliers and manufacturing plants a pat on the back and say, “Good. You’re making parts at a fair price, a fair cost for us.” Our buyers are going to focus on where we have the outliers and where we have leverage. Sometimes we don’t have leverage with some key suppliers. But at least you open the door to find out how much they can partner with us. I’ll go to one example here in a couple of slides.

But again, how is CNH using aPriori today? We’re using it for our cost impacts at the PLM check-in. We are using it for early design for manufacturing and identification, whether you have a high, medium, or low score. It’s like a golf score. You want a low DFM score. Where you have the highs is where you want to attack. That’s where you want your design engineers to say, “You have more work to do here on these high DFM scores.” We use it to validate and look at supplier quotes. All of this data, having the right data upfront, saves us time in the end.

I’ve heard this before, and I was a design engineer for six years. I said, “I don’t have enough time to design this right now. I don’t have time to focus on cost.” Well, guess what? I don’t have time to go back and redesign it again to hit the cost target later on. That needs to be part of the mindset that we have to address as leaders as well. It’s got to be part of the daily operating rhythm, and we’ve embedded that.

Lily is going to follow me here. She helped us look at our mapping of how we work and said, “This is the most efficient point where you insert the use of aPriori data and where you run the analyses.”

Lastly, but not least, establishing real negotiation floors and preserving the relationships. Now that I’m back in purchasing, it’s so painful to have to resource away from an incumbent supplier to a new supplier. The new supplier probably doesn’t know you, doesn’t know how you work, and certainly probably doesn’t know your customers’ applications. So you should invest in your incumbent suppliers and build a transparent relationship. Say, “Look, your costs are too high. Here’s what we think they should be.” Let’s have an intelligent conversation.

“Our cost modeling is showing that your cycle time is too high. You’re probably overpaying for your material. How can I help you with your material acquisitions? We can do that as a big purchaser of raw material as well.” These are the types of collaborations that we can use this data for and drive transformation in the business.

The change that we’ve driven across our data intelligence layer is helping engineering, purchasing, and manufacturing. Again, identifying our DFM scores early, not going back and redesigning to fix the cost later, and therefore speeding up our development cycles. We talked about true cost floors, physics-based negotiation, empowering our buyers, and manufacturing. We’re trying to identify issues so that we’re not having late supplier surprises, reducing our rework, and increasing collaboration in that team.

What you see on the screen here was an example where we did that on what we call the feeder house of the combine. It connects the main unit to the large header that does the cutting and receiving of the material into the combine. We partnered with Lily. Lily was actively part of our negotiations. We used the tools to identify what the should-cost should be for these critical castings, and we went to our Chinese casting suppliers and talked about why there were differences. We used the cost breakdown to understand what’s different in their processes, what’s different in our assumptions, and how we can get to a better price floor that we’re willing to pay.

We found that some of the machining time was too slow. We found ways to speed that up. We found ways to change the design so that we had less investment in CapEx as well. We were able to get about a $440-per-unit cost reduction from these castings. Multiplied by the volume, it’s a million-dollar savings. These are the types of wins where we walked away with our incumbent relationship intact, and we quickly delivered the results that the project needed.

Speaking of the relationship, we mentioned a little bit about the transformation that we’re doing with our supplier sourcing program. We’re absolutely moving from the squeeze approach to partnership. Our CEO, my boss, the Chief Supply Chain Officer, and our Chief Technical Officers were all part of the presentation of this material two weeks ago in Amsterdam to about 800 suppliers that we hosted there. To reemphasize, it’s not only about cost. It’s about value to us. We talked about all the elements of quality, delivery, cost, and whether they have design capabilities. We want those types of partners to partner with us. This was a major part of our transformation at CNH.

Another example, I think I already mentioned it, but we saw the need to get better alignment between the functions. We’re a very large organization, 35,000 employees. We’ve got roughly 800 just in the central global purchasing team alone. We needed to get more clarity on making sure that the roles aren’t overlapping. So we did some RASIC exercises to make sure we know who’s responsible for driving what, who’s accountable for things, who’s supporting it with resources, and who’s being consulted and informed when they need to be.

We did that process, but we also brought in aPriori and said, “Here’s our process. Please tell us where we’re missing some opportunities. We want to design the very best process that we possibly can.” For years, I’ve always admired Toyota. Anybody from Toyota here? Toyota had a mantra. I don’t know if you know it, but they said, “We have average employees working in excellent processes.” Maybe that’s not a flattering comment about their employees. Maybe there’s a translation there from Japanese to English. But that’s the gist of the takeaway. It also takes excellent people to design excellent processes. Let’s face that.

So that was one of the things where we brought in aPriori. We want to be the best. How do we develop our process in the best way? This was really where the relationship has helped us identify how we can go faster and generate better business results.

The other thing was that it was very easy for me to get involved when we were doing the beta testing with aiSource to better equip our buyers. Exactly as you heard this morning, to do better technical negotiations, use data-driven decision-making, and get that in front of the team. That was another really good example of the relationship that we have with aPriori to help us generate better speed and results.

This was also another slide out of our quarterly reporting on the activities that we’re doing in strategic sourcing at CNH to drive our productivity and drive our margin recovery. We’re not just sitting back and waiting for the markets to come back. We have to do this level of activity better than we’ve ever done it before so we can be more sustainable in the future.

Wave Three is about $1.1 billion of spend that we’re addressing. It’s everything from cab components to weld and fab to powertrain components, and we put that out as a market test. Speaking of benchmarking and baselining, what can the industry come back to us with? But then behind the scenes, we’re also going to be doing the should-costing and understanding where we still have outliers relative to the quotes that have come back. All of these things are pointing us toward cost reduction, redesign, stronger supplier relationships, and faster program launches.

I think this is my last slide. I know we’ve gone a little bit fast here, but autonomous intelligence is the way of the future. We’ve talked about AI. We’ve talked about how important that is to making us all more productive in the future, using agentic orchestration and getting our workflows better connected. The continuous monitoring that we talked about before, we need to strengthen. All of these things are leading up to how that impacts our lives and the daily work of our employees, and what skill sets we need to buy.

I love my buyers who are not engineers, just for the record. The power of diversity is very important to us as well. But for sure, this data-driven decision-making and technical aptitude is something that we’re all going to have to grow in.

We had a discussion yesterday on AI. Everybody in this room and outside this room in the future is going to be a software developer. You’re going to have an agent that you’re going to be developing and doing work for you. That’s something that personally I need to learn how to do better. That’s the enablement for us as leaders. We need to create that environment for people to thrive.

Autonomous intelligence, autonomy, and automation are really part of CNH’s DNA. Thankfully, we’ve been able to lead a lot in autonomous and automated harvesting. For example, we’ve used AI as part of our solutions for years. We can see how we apply those same types of learnings to the way that we work at our desks every day. That’s the journey that we are on.

So that’s the overview. That’s our transformation journey. Faster, smarter, more collaborative, and more autonomous is how we want to move forward in this transformation.