Automobiles industry is one of the sectors which contributes immensely to the economic development of many countries all the world. The sector has benefits which cannot be ignored such as the provision of labor to many people in the world hence helping to improve the living standards in many countries. The sector also contributes to the majority of exports by some countries and this generates foreign exchange which can be used in improving terms of trade for many nations. In United Kingdom and many other European nations, car manufacturers have been making huge losses. This has led to mass lay off, factory shutdown, collapse in sales and bankruptcy (Amin, et al.2012). This has forced many car manufacturers to endure rough times as financial institutions are not willing to offer credit due to a low stream of incomes. The car manufacturing firms have lost consumer confidence and this has led to stiff competition from cars imported from other nation leading to reduced sales (Ghosh, 2012). This report is written to highlight the influence of Japanese car manufacturers on Renault, challenges, and pressures faced by Renault in dealing with supply chain vulnerabilities and make recommendations which can be taken to improve Renault car manufacturing process and remain competitive.
Influence of Japanese car manufacturers
Japanese over the past years has enjoyed enormous success in the car manufacturing sector. This has led to increased exports which have led to improved foreign exchange. The sector has helped to revive the economy of Japan and also has won the consumer confidence and the sector values consumer satisfaction. The success of Japanese car manufacturers such as Toyota can be attributed to various factors which the company has decided to put much emphasis on such as efficient supply chain management, lean thinking, and quality leadership (Myerson, 2012). There are various lessons which can be learned from the case of Japanese car manufacturing sector which can be used to help improve the operations of Renault in the quest to start making profits again. The aspects include;
Lean thinking in the sector involves focusing more on customers, removing wastes and increasing customer value. External aspects of the business which comprises of customers and stakeholders are given priority. The car manufacturers in Japan strive to ensure that customers are satisfied with the products unveiled to the market. The consumers should get value for their money. Many cars from United Kingdom and Renault is not spared have various faults such as poor seats and quality problems. This has led to the loss of consumer confidence (Myerson, 2012). As the European cars car manufacturers lose credibility for providing faulty cars, the Japanese counterparts are utilizing the golden opportunity by manufacturing cars of high quality which has enabled the sector to compete favorably.
Lean thinking in the Japanese car manufacturing sector has also resulted to waste removal in the process of manufacturing. The car manufacturers strive to ensure that the manufacturing process is smooth. This is facilitated by ensuring that companies manufacture the cars which clients want so as to avoid wasting limited resources on cars which will spend a lot of time in warehouses and lead to increased warehousing costs such as insurance and security costs (Stone, 2012). Leaning thinking in Japanese car manufacturing should be emulated by Renault as the sector only focuses on what the customers want. The Japanese sector has adopted pull manufacturing system which involves manufacturing cars which will meet a certain demand. The sector does not practice push manufacturing system which is practiced by Renault and other car manufacturers in the UK.
Lean thinking has enabled Japanese car manufacturing industry to have a lot of influence on Renault as the method has proved to be successful. Pull manufacturing system ensures that the company is able to manufacture what the customers want and this will result in increased sales (Chauhan, & Singh, 2012). Push production system manufactures the car in advance in hope that customers will like the manufactured cars and lead to high sales within a short period of time. This method relies on probability and with the changing dynamics of the car manufacturing industry and constantly changing needs and preferences of consumers, push manufacturing system has no place in the car manufacturing industry (Nordin, Deros, Wahab, & Rahman, 2012). Lean thinking in production has also enabled the Japanese car manufacturers to be able to produce quality products as the process of manufacturing is smoothed and very efficient.
The Japanese car manufacturing sector has embraced quality leadership and this has enabled it to have a huge influence on Renault car manufacturing company. Quality leadership can be attributed to lean thinking and lean manufacturing. The Japanese car industry has focused more on customer satisfaction which entails products which satisfy the needs and preferences of the customers (Tapiero, 2012). The sector focuses more on research on what the consumers what and this has resulted in learning companies which are trying to improve on themselves. Removal of waste has led to increased efficiency in the manufacturing sector and this has resulted in the production of high-quality products which satisfy customers. This enables the Japanese car manufacturing sector to have a lot of influence on Renault cars as the Japanese cars compete favorably while Renault cannot. Quality leadership is ensured by streamlining the manufacturing process starting from the suppliers of the input products for the car manufacturing (Shim, & Steers, 2012). Japanese car manufacturers ensure that there is a close relationship with the suppliers so as to ensure quality raw materials are supplied all the times. Renault on the other hand imports raw materials from suppliers who are unknown from other countries which offer the materials at a lower cost.
Lean manufacturing practices in Japan has also enabled the industry to have a lot of influence on Renault cars. The process involves companies identifying the activities which add value to the final products and then focus on them. The companies then eliminate activities which do not add value to the final product and this gives the Japanese car manufacturing companies a chance to increase customer value in the products. This results in high-quality products which fetch high market in international markets and prevent Renault cars from meeting the target revenues (Kotter, 2012). Japan has also invested heavily in technology and innovation which has also contributed immensely to the production of high-quality cars in the market. Renault and various car manufacturers in Europe has been faced with a lot of scandals due to manufacturing cars with different quality problems. Japan culture in the manufacturing sector also calls for continuous improvement in order to provide the needed quality products to consumers (Zhang, Irfan, Khattak, Zhu, & Hassan, 2012). Renault Company has a lot to learn from the Japanese car manufacturers as the companies are committed to ensuring continuous improvement in the quality of the cars availed to the market.
Supply chain management.
The supply chain in any organization should ensure that customers have access to the company products at the right time, place, quantity, specifications and quality. If the company supply chain cannot supply the needed products by customers, the company will lose a lot of revenue and customers’ loyalty will shift to other brands (Hines, 2012). Renault supply chain management is faulty and has contributed to the majority of the problems experienced by the company. Renault practices global sourcing of products from suppliers from low-cost countries. This is not the case for the Japanese car manufacturing companies such as Toyota which has a close relationship with the suppliers of products to the company. The Japanese car manufacturers supply chain as efficient as the companies identify suppliers of their choice to supply the needed manufacturing material (Moyano-Fuentes, & Sacristán-Díaz, 2012). This has enabled the industry to have access to quality supplies which translate to high-quality cars which perform well in the international market. Lean thinking in supply chain management is one of the reasons why Japanese car manufacturers have a close relationship with the suppliers. The suppliers help the companies to eliminate wastes and also provide materials which will increase the customer value.
Japanese car manufacturers such as Toyota engages in capacity planning so as to determine the order of raw material to be made. This has enabled the country to cut a lot of costs associated with storage of surplus material in the warehouses. The capacity planning also enables the companies to plan to manufacture according to the existing demand to avoid overproduction which will result in slow-moving products due to low customer demand as customer preferences and needs keep on changing (Zimina, Ballard, & Pasquire, 2012). With the close association with the suppliers, the Japanese car manufacturers are able to practice just in time delivery so as to avoid storage costs. This enables the Japanese cars to have a lot of influence of Renault cars as the quality Japanese cars are sold at lower prices because of reduced operational costs (Dües, Tan, & Lim, 2013). This enables Japanese cars to compete favorably in the competitive automobiles industry than Renault.
Challenge and pressures to deal with supply chain vulnerability
Global sourcing has led to increased vulnerabilities in the supply chain of Renault Company. Renault Company faces a lot of challenges in supply chain management and that is one of the reasons the company is not able to compete favorably in the global market. The supply chain vulnerabilities have been fuelled by various factors which include,
Imports from low-cost countries
Globalization has given low-cost countries a chance to participate in the international markets and have additional markets for the exports of the various countries. The imports are cheaper and this forces Renault Company to adopt the use of the global sourcing so as to enjoy the low prices for the needed raw materials (Murtaza, Gupta, & Carroll, 2004). The imported raw material does not give much attention to the quality of the supplies and this has resulted in Renault Company producing low-quality cars which cannot compete favorably in the global market. With the declining business for Renault, the company is trying to cut costs so as to supply products in line with the market leader or below market leader so as to improve on the sales revenue. This has forced Renault to use global sourcing mechanism which provides low-quality supplies leading to poor quality cars with a lot of quality problems.
Global sourcing technique does not give much attention to lean manufacturing or lean thinking. This leads to the supply of raw materials which have plenty of wastes and does not support the goals of the organization which is to provide quality cars which add value to the customers (Lee, 2012). The leaning down in the supply chain has resulted in greater risk in the supply chain as the strategy does not focus on customers or smoothening the supply chain activities. This makes it very hard for Renault to produce cars which can compete effectively with other car manufacturers who have lean supply chains.
With continued decline in car manufacturing supplies in Europe, car manufacturing suppliers in Europe charge high prices for their products. This forces Renault to import cars which are then exported to other countries. The imported cars as a result of the global sources do not meet the quality criteria adopted by Renault (Morris, Donnelly, & Donnelly, 2004). Renault has no financial ability to purchase supplies from the well know suppliers and manufactures quality cars. With the continued collapse in sales, the company will just import cars and export the imported cars so as to avoid running out of business because local sourcing is very expensive and will lead to increased operational costs which will translate to high prices for the cars and low demand.
The company has lost consumer confidence due to the manufacturing of cars with quality problems. The global sourcing is the reason behind the faulty manufactured cars. Distribution and marketing of the products have become very hard and a lot of resources are consumed in the advertisement in order to build the image of the company again (Boons, & Lüdeke-Freund, 2013). Distributors are reluctant to be associated with the company because of the misleading statements which propose for quality cars and cars with quality problems are delivered in the market. The poor public image is making it very hard for the company to address the existing supply chain vulnerabilities.
There are various strategies which can be employed by Renault Company to help address the problems facing the car manufacturing sector in the United Kingdom. The strategies will help to revive the sector and enable it to compete favorably in the international market. The recommendations include
Environmental conserving cars.
Every nation is fighting to ensure the production sector achieves environmental sustainability. Environmental conservation will enable the company to redeem the damaged reputation as firms which practice going green have enjoyed success in the recent past. This will involve manufacturing cars which conserve the environment by emitting fewer fumes to the atmosphere. This will help in to reduce global warming and environmental degradation (You, et al.2013) The environmental conserving cars will be able to attract large market as people want to be associated with cars which do not pollute the environment. Such a move will help to revive the sales of the company and be able to increase sales. Environmental conserving cars usually are priced at high prices than other cars. The sale of the cars will enable the company to be able to purchase quality supplies from suppliers with a good reputation and who practices lean supply chain management.
Shift the attention to high-end cars
Renault Company engages in manufacturing of low end and medium end companies. The raw material for the manufacture of low-end cars are limited and that is the reason many companies including Renault engages in global sourcing strategies. The low end and medium end car manufacturers are very many and this has led to stiff competition in the market (Zhu, Cordeiro, & Sarkis, 2013). To increase sales, the company should shift attention from low-end cars and start manufacturing high-end cars which fetch high prices in the market. This will help in boosting the revenues for the company and ensure that operational costs can be met without struggling. The high-end manufacturing will also help the company to address supply chain vulnerabilities as high-end manufacturer’s practice lean manufacturing so as to ensure quality products are provided.
The company should also consider investing heavily in learning, research, and development. This will help the company to become a learning organization which is able to adapt according to different situations (Zhu, Cordeiro, & Sarkis, 2013). Learning involves training staff in the organization so as to equip everyone with the needed knowledge and skills to perform duties effectively. Training the engineers involved in the manufacturing will enable the company to be able to produce high-quality products which can compete favorably in the global market.
Environmental dynamics leads to the uncertain business environment which keeps on changing. European car manufacturing companies once enjoyed tremendous success but now cards have changed and Japanese car manufacturers are doing well in the industry. Renault Company and other companies in Europe have a lot to learn from the Japanese car industry as it has made big strides in the sector. The Japanese car manufacturing engages in lean thinking and manufacturing which has helped the sector a lot in becoming a quality leader in the world. The Japanese car manufacturing sector also enjoys an efficient supply chain which has helped the industry have a lot of influence on Renault company cars. Renault Company has faced various challenges such as lean downtrends, imports from low-cost countries and misleading statements in the quest to address supply chain vulnerabilities. Renault can, however, use continuous learning, manufacturing high-end cars and producing environmental conserving cars to help revive the operations and sales.
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