Logistics and Supply chain management: A Case of Automobile manufacturing industry
Contents
2.0 Supply Chain Strategies and Policies in Automobile Manufacturing Industry. 3
3.0 Evaluation of The Supply Chain Strategies in Maintaining Supplier Relationships. 4
4.0 Suggestion of Systems or Mechanisms to Maintain Business and Supplier Relationships. 5
5.0 Information Technology and Integrated Supply Chain Management and Logistics. 5
1.0 Introduction
Supply chain management involves managing the movement of raw materials into an organization and the finished products to the targeted consumers (Zanjirani, Rezapour and Kardar, 2012, p.56). According to Bendul (2014, p.67), several proposed models evaluate supply chain management, with the common ones being the Supply chain operation reference model (SCOR) and the Global supply chain forum (GSCF). Both the SCOR and the GSCF agree that supply chain activities are broadly encapsulated into three strategic, tactical and operational level activities (Bendul, 2014, p.67).
The first level of supply management is strategic planning. It is the initial step in supply chain management and involves long-term decision-making. Suryanto, Haseeb and Hartani (2018, p. 316), observes that this step lays the first groundwork for the entire supply chain process. The decisions made at this stage include site and facility location, supplier identification and technology to be used in the supply chain management. The second level of supply chain management is tactical management, which focuses on making short-term decisions based on the decision made at the first level (strategic planning). The main focus at the tactical level is to minimize costs as well as risk. Therefore, as observed by Pasi, Mahajan and Rane (2020, p. 3017), the main focus is on customers demand thus decision revolves around procurement, production schedules and guidelines to meet quality. The third level of the supply chain deals with the day-to-day activities that are undertaken in an organization. Some of these activities include forecasting and logistic monitoring (Suryanto, Haseeb and Hartani 2018, p. 316). In that regard, the report explores supply chain management concepts using the automobile industry as the case study. Specifically, the report evaluates the strategies used by an organization in the automobile manufacturing industry, identifies areas of improvement, and provides recommendations on how organizations can enhance their supply chain management practices.
2.0 Supply Chain Strategies and Policies in Automobile Manufacturing Industry
The Automobile industry commonly used supply chain strategies are the continuous-flow supply chain and the lean supply chain strategy (Carmeli et al., 2017, p. 150). The lean supply chain strategy is anchored on the design of a supply chain that is effective by reducing waste and non-value-added activities (Flynn, Pagell and Fugate, 2018, p. 56). The Toyota motor corporation utilizes the lean supply chain to produce reliable automobiles that reduce the organization’s cost, thus maximizing profits. The lean strategy reduces wastes and enhances productivity by eliminating wastes, keeping a low inventory, utilizing technology, constantly improving their manufacturing process and developing employees.
On the other hand, the continuous-flow supply chain strategic model aims to ensure a continuous flow of information and products (Flynn, Pagell and Fugate, 2018, p.57). The model is ideal in the manufacture of products where there is little to no variation in the customers’ profile. Production is to replenish a predefined stock level (Kim and Kim, 2018, p. 2852). The model helps organizations to achieve high service levels and low inventory levels to the customers’ facilities. Toyota and BMW use the strategy to manufacture specific models of vehicles, which requires minimal customization (Kim and Kim, 2018, p. 2852).
3.0 Evaluation of the Supply Chain Strategies in Maintaining Supplier Relationships
As implemented by Toyota, the lean supply chain model helps maintain supplier relationships through collaboration and strategic alliances. This is the same for the other automotive companies that are using continuous-flow supply chain management. Through collaboration and alliances, Toyota Motor Corporation has maintained a long-term collaborative and close relationship with their suppliers(Ghadimi, Toosi, and Heavey 2018, p.67). Toyota collaborates with its suppliers to ensure that there is a smooth flow of supply of car parts. Such collaboration is well illustrated by the collaboration between Toyota and Takata for the supply of airbags to Toyota manufacturing facilities in different parts of the world (Ghadimi, Toosi, and Heavey 2018, p.67). Through such collaborations, Toyota reduces their operational cost and ensures that products are manufactured according to their needs and specification (Rüttimann and Stöckli, 2016, p. 140). Consequently, this helps produce products designed to meet the needs of their consumers specifically.
On the other hand, strategic alliance involves companies coming together to undertake a mutually beneficial project while retaining their independence (Hoang and Rothaermel, 2016). The agreement provides a higher commitment between the two organizations, thus promoting productivity and high-quality manufacturing. An example of a strategic alliance in the automobile industry is the Toyota alliance with Tesla Inc, which allowed Tesla Inc to manufacture the main components of the electric Toyota RAV 4 (Hoang and Rothaermel, 2016). Another strategic alliance between suppliers and manufacturers in the automobile industry is Panasonic partnership with Tesla to supply the later with the battery used for their electric vehicles (Hoang and Rothaermel, 2016).
4.0 Suggestion of Systems or Mechanisms to Maintain Business and Supplier Relationships
Suppliers are very important to an organization’s supply chain. Therefore, organizations are responsible for maintaining a strong relationship with them to ensure that their operations are not interrupted due to lack of supplies. This report recommends that organizations use technology in their supply management, make timely payments, enter into a contractual commitment, and form collaboration and strategic alliances to maintain supplier relationships.
Integrating technology in supplier management helps an organization to enhance its relationship with the suppliers through proper communication and management. Basheer et al. (2019, p. 56) observed that using supply chain management technology helps an organization’s procurement department to pay the suppliers on time and also to identify challenges early enough before they disrupt the organization relationship with their suppliers (Carmeli et al., 2017, p. 150). Secondly, timely payment can be made to eliminate the chances of conflict and disagreement with the suppliers. Lastly, getting into a contract or forming a strategic alliance helps organizations be committed to their supplies. This promotes a good relationship, given that even suppliers are compelled to comply with the buyer’s requirement (Basheer et al., 2019, p.56).
5.0 Information Technology and Integrated Supply Chain Management and Logistics
The sharing of information within the supply chain network allows the different supply chain network players to work together, thus enhancing the effectiveness of supply chain management (Basheer et al., 2019). Additionally, information sharing helps in the optimization of performance and reducing risks in the supply chain. Therefore, information technology incorporated into the supply chain management and logistics helps communicate and integrate suppliers, manufacturers, distributors, and customers to produce quality products in quantities that can satisfy the demand in the market (Basheer et al., 2019). According to Basheer et al. (2019, p.256), integration resulting from the use of information technology is evident from the different software and IT systems used in the supply chain management. These technologies include but are not limited to 1) enterprise resource planning (ERP), Electronic Data Interchange (EDI), barcoding and inventory management software.
Enterprise resource planning (ERP), is an IT framework dedicated to planning core activities of a business (Basheer et al., 2019, p.256). The framework allows the free flow of information within the supply chain. It integrates the finance, accounting, human resource planning and manufacturing resources planning (MRP) aspect of the supply chain (Gunasekaran, Subramanian, and Papadopoulos, 2017). ERP systems assist an organization in automating and integrating their supply chain management and business. The benefits derived from this system include reducing the cost of the organization’s internal operations, efficiency across the extended supply chain and enhanced customer services and relationship with the suppliers (Gunasekaran, Subramanian, and Papadopoulos, 2017).
Secondly, the Electronic data interchange technology is a computer-to-computer interchange for business documents or information in a standard, machine retrievable data format between trading partners (Okano and Fernandes, 2019., p. 70). It enhances the integration of different players in the supply chain by providing timely information about customer sales, enhances accuracy and reduces cost and errors (Okano and Fernandes, 2019., p.70). Thirdly, the barcode technology contains information about a product in transit or the inventory (Pasi, Mahajan and Rane, 2020, p. 3017). The information stored in the barcode includes quantity, price and suppliers. The technology, therefore, helps in keeping records about a product, thus enhancing efficiency. The last information technology used in supply chain management is the inventory management system, which is resourceful for multinational organizations with suppliers in different parts of the world (Pasi, Mahajan and Rane, 2020, p. 3017). The software helps in ensuring that we get their supplies and distribute products to consumers on time. Therefore, the system helps in achieving a good working relationship with the consumers as orders are placed early enough, allowing suppliers time to consolidate the goods and transport them on time.
6.0 Application of E-Commerce in Supply Chain Management and The Concept of Multi-Channel Supply Chain Management
E-commerce in the supply chain context refers to the tools and techniques used in the management of a business in a paperless environment. It includes electronic data interchange (EDI), email electronic fund transfers, and shared databases. E-commerce integrates supply chain management (SCM), through the use of technologies such as e-procurement. The effect of using e-commerce in the supply chain is that it reduces cost and lead time while enhancing efficiency in ordering raw materials and selling the finished products.
7.0 Conclusion
Supply chain management plays a critical role in satisfying the needs of consumers. With a focus on the automobile industry, the report establishes that the commonly used supply chain strategies are continuous flow supply, lean supply. The techniques effectively maintain relationships with the suppliers, enabling the automobile companies to have their raw materials used for production constantly. To enhance this relationship, the report recommends using collaboration, contracts and strategic alliances with the suppliers. The enterprise resource planning (ERP), Electronic Data Interchange (EDI), barcoding and inventory management software is the information technologies that the report has established to be critical in supporting supply chain activities.
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