The automotive industry plays an important role in the growth of a nation’s economy and also contributes significantly to the global economy. As the manufacturers designs vehicles globally, the supply chain process gets more complex. This creates an impact on the profitability, untimed production schedules, accumulation of inventory across the chain of supply and lengthy cycles of demand. The melting down of the global economy caused pressure on the executives of the automobile industries to take decisions that would help in the better performance of their supply chain. For increasing the organizations competitiveness in the highly challenging environment an efficient strategy of supply chain is must (Anklesaria, 2008). This will also help in meeting the different demand patterns of the consumers. In this essay, we study supply chain management of three renowned automotive companies i.e. Saturn Corporations, Ford Motors and Toyota Motor Corporations. The whole delivery process is represented in the following paper. The overall analysis gives a vivid picture of the process of supply chain that is followed in most automotive industries.
Case study on Saturn Corporations: General Motors wholly owned subsidiary is Saturn Corporations. The company was into the development and marketing if motor vehicles in the United States. The plant started its operation in Spring Hill, Tennessee. The reason to choose this location was the proximity to the potential customers and the availability of transportations.
Operations: The manufacturing stages and the operations have three major steps: power train, body systems, and vehicle system. In case of power train operations, onsite is where the transmissions and the engines are produced. Body system includes fabrication of the body, painting and stamping plant (Arnold, Beauchamp & Bowie, 2013). The third operation that is the system of vehicles is located in between of the other two operations to improve the flow of materials.
The logistics practices: The company’s inbound logistic was considered as bold and innovative from its inception. The logistic service to the company was provided by Ryder Dedicated logistics (Zsidisin, Panelli & Upton, 2000). The logistics for the outbound process the company used the truck or the railway facility to get its product delivered to the retailers. The company sees that the vehicles are shipped perfectly at the place of the retailer, unlike other automotive makers where they leave it to the responsibility of the carriers (Moradeyo, 2012). The staging and the loading process of the company are done on the same premises where the assembly plant is being monitored. The outbound logistics related to the truck facility is provided by Quality Automotive Transport (QAT), and the rail facility is provided by CSX.
Processing of Order:
For the production and the deliverability of vehicles, the company follows the order processing system of GM. Event codes of GM to tame the process. The system starts with six months prior to the production wherein the marketing department predicts the number of retailers compared to the previous sales (Mentzer, 2001). These predictions are then conveyed to the retailer. The retailer has at least three weeks time to confirm it. When the order gets finalized and reaches the production control, no further changes can be possible. Next involves the production sequence. During this time, a vehicle identification numbers are provided to the vehicles. This number is used by the company t track the vehicle from the time of production till its dispatch (Bereriche & Ait-Kadi, 2015).
The process of Delivery:
The process of delivery begins at the stage of production control. The record of the order is transmitted to the logistic information system of the GM. From the system, we can get what mode of transport and which route to be taken for delivery. This information is then conveyed to the QAT. Within a radius of 500 miles the company uses the truck deliverability and for the other retailers it avails the railway facility (Lamprecht, 2000).
Control of delivery and coordination: the process of controlling the delivery is limited to the retailers. The combined effort of the various organization helps in the deliverability of the final product. The control mechanism is strongest when there is on-site activities, the vehicles to be dispatched is easily monitored by the GM systems and QAT. CSX helps in providing the trace for in-transit vehicles (Morris, Donnelly & Donnelly, 2004).
Case study on Ford Motors:
Background: The Company Ford Motors is based in Michigan. It is among the largest corporations in the world. It has employees more 370000. The revenue earned by the company is more than 144 billion. The company has been operating across 200 countries. The core business of the company is the manufacturing and designing. The company also has subsidiaries related to financial services (Bowersox, Closs & Cooper, 2002). The maximum revenue for the company is accounted from car manufacturing.
Help of six sigma in helping supply chain management for the company:
The company mainly aims at forming a lean supply chain. To ameliorate the operations of supply chain, Ford has teamed with Penske Logistics and used the processes of Six Sigma. The three main goals that are defined are:
- The logistic network of Ford to be centralized.
- Initiative to improve the performance of carriers and suppliers.
- Availability of accountability of the finances and logistics.
Consolidated shipments and Centers for dispatch:
About 20 assembly plants in the North American region of the company were catered by its logistics before the partnership with Penske Logistics (Rozemeijer, Weele & Weggeman, 2003). This has led to high cost on the part of the company because small loads were picked and taken to plants in trucks that were under-filled. This inefficiency was reduced with Penske establishing ten centers to dispatch orders. This helped in the consolidation of plants and systems, the centers later were trimmed to for to compensate the changes in shipping (Burt, Starling & Dobler, 2003). The logistic firms noted that when shipments were carried to and from the company the trucks were filled with 95 % capacity. The inventories were also seen to lessen by 15 percentages.
Technologies for logistics and procedures:
To streamline performance, the company needed to use new technology. The Penske’s system of logistic management used reporting systems that were internet based and also software that helped in the tracking of order. To get real time updates, the drivers are given PDA scanners and electronic log (Iyer, Seshadri & Vasher, 2009). The dispatch centers of Ford also have scanners that help in monitoring the delivery process.
In case of a supply chain, there should be accountability at all levels. The logistic company Penske gave more specification on technology, driver certification, time management, safety, and pieces of equipment. To ensure quality performance standards, the logistics company established the delivery windows and fifteen minutes pickup. Penske carefully monitors the loading and unloading process to see that the orders are made correctly, and there is any damage due to freight.
Recognition of the efforts of Supply Chain:
The logistics company has helped Ford to reduce its inventories, improve deliver and shipping procedures and saving cost. This was only due to the six sigma procedure that helped the company to gain a centralized network. The efforts by both the companies to introduce lean supply chain have brought them instant recognition (Chiarini, 2013). The companies were awarded the Logistic excellence award in Europe in May 2012. With the initiative of Ford-Penske, the European Logistics Association noticed there was a fall in the green house gas emissions (Simons, 2011).
Case study on Toyota:
Company Background: Toyota Motors is a Japanese automotive company whose headquarter is located in Toyota, Japan. The multinational corporation employs about 338875 employees over the world (Wanke & Correa, 2012). It was among the largest automobile industry after General Motors and the Volkswagen group. The main aim of the company is to deliver the customer’s the vehicles in the quickest and the most efficient way. The automatic loom of the company was established by Saki chi Toyoda.
Overview of the supply chain process:
The production system of Toyota is seen to be the yardstick for the base for lean thinking. The supply chain processes extend way beyond the walls of the factory. The supply chain for an automotive industry is very complex (Chopra & Meindl, 2007). To understand the process we look into the following questions:
- What is the product that is being manufactured?
- Who are the target customers?
- What distribution models that arise?
The specifications of vehicles are generally made at a hierarchical method. The hierarchy is defined by make, models, body style, grade, options, and accessories. Apart from this the exterior and interior colors are also quantified. The vehicles are generally built on ‘Build Combination’. To reduce the cost due to building combinations, Toyota sold its vehicles by sales area (Donath, 2002).
The company needs to see who the potential customers are. The company gets maximum profit from retail sales. The customer identification is very necessary for the company. There are serious buyers and serious shoppers of the product. The company’s employees also purchase products at discounted rates.
By distribution model, we mean the way the vehicles are transported from the warehouses to the dealers. There are different models adopted by the company in different countries (Skipper, Hall, Hazen & Hanna, 2014).
Local Inbound Logistics:
For the company to operate a lean supply chain management, the parts are to be transported from the supplier at the most efficient way. Toyota has limited third-party logistics provider relationship to provide the services of logistics. The company forms a cluster of the suppliers according to the geographical location (Ferrara & LaMeau, 2012). The parts from the suppliers are picked by trucks and delivered to the regional cross-dock. In the cross dock, the parts are carried out to the Toyota delivery plants. The trailers are unloaded only when the production process begins. With the help of network logistic, the company efficiently operates its inbound logistics.
Planning the Route:
Planning the route is very crucial as operations effectiveness and efficiency depends on it. This is done once in a month and is based on the production plan for the next month. The daily schedule of logistics and its repetition for the entire month was only feasible levels of production and part planning. The route plans are created by the simulation of computer systems (Frick & Laugen, 2012).
The main function of outbound logistic is to deliver the final product to the retailers. The distribution in North America and Europe is completely different ('Special Topic Forum on Power in Supply Chain Management', 2015). The parties of outbound logistic differ from the inbound. To transport vehicles from the assembly plants to the dealers, the company generally depends on the truck, railroads, and the carriers.
Qualitative Analysis Of The Case:
The advantages and the disadvantages of the delivery options gives a vivid picture that there is no solution that is simple to help resolve the problem. The locations are to be reviewed to have an understanding of the cost and the levels of services.. The damages that accrue and the stakeholders claim in the entire case. The biggest challenge is to make a clear analysis the important factors in the process prior to making the decision of delivery. A rating system that is categorical would help in conducting an analysis on the information that is available. By using the simple gradation system both the delivery system’s current and anticipated way in the key areas is evaluated (Handfield, 2006). The grades are often satisfactory, unsatisfactory or neutral. These grades would be given numbers like + 1, -1, 0 respectively for the development of composite performance in the carrier. The process is generally termed as intuitive involving less data on performance, the lesser cost involved, and the structure is ver simple. When this technique is kept in mind and the bunch of information on performance in the hand, the transportation vehicle team can then decide on the method of delivery that is the best serve to the retailers (Tomlin, 2006). The entire automobile industry has to face this dilemma so a proper approach can be made to resolve the delivery of good through rail, truck, airways or any other mode of transport.
Circumstances And Supplementary Information:
There may emerge uncertainty in many cases during the supply management process. These are the factors that the firms may generally face:
Uncertainty due to an environment: According to Paulraj and Chen, environment uncertainty plays a very important role on the proper implementation of the supply chain management plans. The outsourcing activities have led to the increased awareness on the strategic supply management .under this there were three categories environment, uncertainty from the overseas, and the support by the government.
Environment of the company:
This represents the relation of the company with the suppliers and its employees at the different level. The demand of the company is sometimes supplemented by imports even though working with foreign countries may lead to uncertainty. With a strategic relation with the supplier, the uncertainty can be reduced and this will help in enhancing the performance of the company (Handfield & Nichols, 2002).
Support from the government: The government helps the company to import raw materials from the overseas. For this, the state has also made reforms and certain guidelines. There also arises some uncertainty like barriers related to language, exchange rates, and tariffs.
Overseas uncertainties: For material outsourcing there may arise a situation of uncertainty like political uncertainties that may increase the risk of the suppliers, this may lead to low investment and changes in the strategies related to business.
Through contingency plans in the supply chain management, a company can save the business. A minor disruption of 10 dollars can hold back an order. The staffs and the employees can help to identify the differences. There should be three to four levels of action that should be defined clearly. The staffs should also be proactive. Due to uncertainties in weather there may be the delay in the deliverability of the vehicles by the producers. The staffs should be trained to convey the delay of the product when they know that a storm is approaching. The effect will be felt only after three to six weeks later (Hartley, 2000). This ensures enough time to respond. If storms have a true impact, the delayed materials may be delivered through airway services. If cost through downtime gets dearer, then the delivering through air freight is beneficial. The company should in the system of quality management include circumstances of vendor approval and parts approval. The resourcing of SKUs of more than hundreds in a matter of sixty days may have a devastating effect on the already overburdened workers (Hiraoka, 2011). A plan is made to help customers out. The preliminary plan includes lists of Stock Keeping Units and their current costs. The suppliers then are conveyed to check their inventories and work in progress. The next is the SKU’s identification of bill of material levels and also match the inventories.
Q1. When selecting the outbound transportation, there are some issues that need to be sorted to develop an integrated supply chain management. The issues that need to be sorted are as follows:
- Decisions are not taken on the long term: The transportations managers at the highest levels should make sure they understand the process of the total supply chain and can apply it in network design. During this time, long-term decisions are made on the availability of modes of transportation. The manager needs to understand what type of transportation is required for the outbound logistic.
- Lane operations: this tends to outbound consolidation, vehicle consolidation and temporal consolidation
- Choice of Carrier: Managers generally go for the integrated mode of the transport system. The shipments are to be examined based on the criteria of service.
The producers selecting outbound transportation is benefitted when the cost of transportation is less. The consumers are also benefitted in the process if the outbound transportation helps deliver the orders to their destination at the correct time.
The other factors that are needed to be considered are:
- Costs: Cost plays a very crucial role when deciding on the outbound logistics. The main aim of a business is to keep the costs minimum.
- Capacity: when deciding on the outbound vehicles the management should consider the size of the outbound transportation.
Vehicles in Production Plant
Flow chart for truck delivery:
Vehicle departs to the Retailer.
Sanction of freight bills in the shipping office
Final Inspection by the logistics provider
Vehicle loaded in trailer
Checking of VIN of vehicles
Vehicle carried to truck loading yard
Flow Chart delivery of Rail :
The freight documents are prepared by QAT and then signals inter rail for dispatch.
After inspection by ITS, QAT is signaled that load is ready.
The cars are secured by a nylon wheel strap
Actual loading is done by Premier Employees
The other contractor inspects quality at the staging area.
Inter rail inspects the empty rail cars
The logistic company (rail) contracts with two other companies
Vehicle carried to the rail loading yard.
Vehicles in Production Plant
Q3. The two delivery options truck and the rail have its respective advantages and disadvantages. The delivery option by truck is more expensive compared to rail. The advantage, on the other hand, is that the vehicle gets delivered at the door step and also involves a shorter period of delivery. Between pickup and delivery, there is no transfer, as a result, there exist low fixed cost. In case of deliverability by train it is considered time-consuming. The capability to carry the heavy load and a competitive structure of price makes it an ideal logistic service provider.
After analyzing the advantages and the disadvantages of the modes of delivery, a new retailer would minimize the cost on each vehicle through the delivery of vehicles by rail. This mainly because more vehicles could be delivered through rail, where as trucks carried a limited number of vehicles.
Q4. Truck offers point to point service where as rail offers terminal to terminal services. The cost of carrying vehicles through a railway service is less, but the transit time, and the service’s frequency are very low. In case of Saturn Corporation, we saw that the performance of arriving on-time and the average of the transit time suffered as there is an increase in the distance. The rail loads that are delivered on time is generally less than 80 percentages and transit time exceeds 7.5 days
To minimize transit time and transit consistency the new retailers should used the truck delivery system in case of outbound transportation.
Q5. The damages due to delivery are examined on four various comprehensive scenario. The strength of the vehicle damages is measured by the cost per claim in transportation. The claim resulted due to damage and by valuable party gives an insight on the redesign of process and efforts for damage prevention. . in case of the Saturn Company a little less than 1 percentages of the overall vehicles is subjected to the claims of the transportation retailer. The damages due to truck was about 45 percentages, while the rail delivery associated damages was 92 percentages. When the impact of financial claims is revised the average cost of damage by truck was 204 dollars and average cost of damages in train is 119 dollars.
Therefore, to minimize damage due to delivery truck option would be suggested.
Q6. The delivery option that I would suggest to a new retailer would be railways. This is because the cost of operation is less and bulk delivery option is also available. The stakeholders who are likely to benefit by this decision are the rail company the retailer and finally the consumers. Within the radius of 500 miles the delivery was done by truck, while other retailers received their vehicle by rail transportation.
Anklesaria, J. (2008). Supply chain cost management. New York: AMACOM, American Management Association.
Arnold, D., Beauchamp, T., & Bowie, N. (2013). Ethical theory and business. Boston: Pearson Education.
Bereriche, Y., & Ait-Kadi, D. (2015). Contingency Design for Reliability in a Supply Chain.International Journal Of Risk And Contingency Management, 4(2), 31-44. doi:10.4018/ijrcm.2015040103
Bowersox, D., Closs, D., & Cooper, M. (2002). Supply chain logistics management. Boston, Mass.: McGraw-Hill.
Burt, D., Starling, S., & Dobler, D. (2003). World class supply management. Boston: McGraw-Hill/Irwin.
Chiarini, A. (2013). Lean organization. Milan: Springer.
Chopra, S., & Meindl, P. (2007). Supply chain management. Upper Saddle River, N.J.: Pearson Prentice Hall.
Donath, B. (2002). The IOMA handbook of logistics and inventory management. New York: J. Wiley and Sons.
Ferrara, M., & LaMeau, M. (2012). Innovation masters. Detroit: Gale, Cengage Learning.
Frick, J., & Laugen, B. (2012). Advances in production management systems. Berlin: Springer.
Handfield, R. (2006). Supply market intelligence. New York: Auerbach Publications.
Handfield, R., & Nichols, E. (2002). Supply chain redesign. Upper Saddle River, NJ: Financial Times Prentice Hall.
Hartley, J. (2000). Collaborative Value Analysis: Experiences from the Automotive Industry. The Journal Of Supply Chain Management, 36(4), 27-32. doi:10.1111/j.1745-493x.2000.tb00083.x
Hiraoka, L. (2011). Reconfiguring Supply Chains for a Global Automotive Industry. International Journal Of Information Systems And Supply Chain Management, 4(4), 1-17. doi:10.4018/jisscm.2011100101
Iyer, A., Seshadri, S., & Vasher, R. (2009). Toyota supply chain management. New York: McGraw-Hill.
Lamprecht, J. (2000). Quality and power in the supply chain. Boston: Butterworth-Heinemann.
Mentzer, J. (2001). Supply chain management. Thousand Oaks, Calif.: Sage Publications.
Moradeyo, A. (2012). Supply Chain Disruptions and Best-Practice Mitigation Strategies. International Journal Of Risk And Contingency Management, 1(3), 45-58. doi:10.4018/ijrcm.2012070103
Morris, D., Donnelly, T., & Donnelly, T. (2004). Supplier parks in the automotive industry. Supply Chain Management: An International Journal, 9(2), 129-133. doi:10.1108/13598540410527024
Rozemeijer, F., Weele, A., & Weggeman, M. (2003). Creating Corporate Advantage through Purchasing: Toward a Contingency Model. The Journal Of Supply Chain Management, 39(1), 4-13. doi:10.1111/j.1745-493x.2003.tb00145.x
Simons, R. (2011). Operations management. Oakville, Ont.: Apple Academic Press.
Skipper, J., Hall, D., Hazen, B., & Hanna, J. (2014). Achieving Flexibility via Contingency Planning Activities in the Supply Chain. International Journal Of Information Systems And Supply Chain Management, 7(2), 1-21. doi:10.4018/ijisscm.2014040101
Special Topic Forum on Power in Supply Chain Management. (2015). J Supply Chain Manag, 51(2), 98-98. doi:10.1111/jscm.12076
Tomlin, B. (2006). On the Value of Mitigation and Contingency Strategies for Managing Supply Chain Disruption Risks. Management Science, 52(5), 639-657. doi:10.1287/mnsc.1060.0515
Wanke, P., & Correa, H. (2012). Supply chain management and logistics complexity: a contingency approach. IJLEG, 4(4), 239. doi:10.1504/ijleg.2012.051414
Zsidisin, G., Panelli, A., & Upton, R. (2000). Purchasing organization involvement in risk assessments, contingency plans, and risk management: an exploratory study. Supply Chain Management: An International Journal, 5(4), 187-198. doi:10.1108/13598540010347307