Multi-part Corporation - Case Study Example

Answer Multi-part Corporation, one of the developed world’s largest manufacturers of metal and plastic moulded components, has a vision to build superior customer relationships through “a series of strategies and processes that create new and mutual value for individual customers, that build preference for the organization, improve business results and growth rates over a lifetime of association”. (Ian Gordon, 2002) Customer Relationships and Impact on Business Growth: Multi-part has focused on Increased “Customer Collaboration and Interaction” so that it could retain existing buyers of mostly business-to-business products. Its major global customers are IBM, Compaq, Ford, BMW and Black and Decker which have extensive worldwide production and sales network. Since these customers together account for substantial amount of sales (metal and plastic moulded components), Multi- part corporation always considers its customers’ word-of-mouth recommendations about existing products as well provides assistance in developing new designs which are least costly for its global customers. This not only results in increased productive efficiency and speed but also in reducing costs of goods produced and other operating expenses in various regions while simultaneously improves organization’s profits. In addition, this collaboration can be seen when Multi-part often calculates and quotes its costs to customers to enhance their satisfaction and perceived value. Secondly, Multi-part has established “effective service delivery systems” in order to ensure timely delivery and transportation of its products to its business partners. It has maintained “service standards” and “created service level agreements to smooth internal service delivery”. Successful implementation of “Just-in-Time inventory control” method results in saving costs and move products and services to customers more quickly. In short, this strategy is extremely helpful in enhancing customer satisfaction and retaining existing customers which is a better tactic (in most cases) than making new buyers. (Susan and Nash, 2005) Thirdly, Multi-part believes in implementation of “marketing concept” that examines “sense and respond” policy instead of “produce and sell” which is a part of “selling concept”. This means that Multi-part Corporation is interested in producing and selling what the buyers demand rather than what the company wants to sell. The act of taking suggestions from buyers for producing newly designed products is a clear evidence. This has not only enhanced buyers’ trust over the Multi-part Corporation but has also made it a preferred supplier of its plastic and metal components, in most cases, compared to other five international players that enjoy worldwide coverage like Multi- part in the same industry. Without any doubt, having excellent business relationships with its major customers has made Multi-part their preferred supplier, and they often encouraged the organization to establish supply factories on Ideal adjacent sites in the developing countries where these buyers have constructed their new factories to make the most of cheap labor costs and infrastructure and make additional profits. Fourth, the global player actually believes in supplying “improved quality products” to its customers, operating in developed nations, because no manufacturer or supplier can survive and observe growth/expansion when it produces and sells sub- standard products. Perhaps, Multi-part’s consistent production and supply of quality B2B products (that are used as raw materials to produce different products) to its buyers at competitive prices has made it one of the largest manufacturers in the metal and plastic moulding industry in the world. For evidence, Multi-part is presently operating large factories in USA, Canada, United Kingdom, Germany, France, Spain, Italy and smaller factories in Denmark, Norway, Sweden (Scandinavian countries), Austria, Turkey and Israel. This status definitely would not be accomplished if Multi-part was involved in manufacturing and selling of below standard products. Finally, Multi-part convicts in “continuous improvement in business operations”. In order to maintain its competitiveness and expand its market share, it uses new technology so that it could meet its buyers’ changing wants and demands. Implementation of “Efficient Procurement (Purchasing) Practices, Management Control and Coordination, Product and Service Management, Quality and Inventory Management” have brought Multi-part in the list of top five international producers of metal and plastic moulding components. (McNamara) Answer 2: Major Changes: The first major change that is observed in the marketplace is the “transfer of industries” from developed industrialised nations to developing countries especially China, India and Malaysia. The major global buyers of Multi-part Corporation didn’t completely wind-up their factory operations from industrialised nations where there were paying high labor wages and extra amounts for utilities, although the companies were provided excellent infrastructure because of persistent business-friendly policies of these nations. However, the demand of cheap products from their existing consumers in this competitive era and highly lucrative business opportunities in the developing countries because of recently introduced economic reforms to boost economy, forced these major buyers to build new factories in China, India and Malaysia where production is cheap due to less expensive utilities and lower wage rates. The companies have planned to export most of their produce to existing markets where they have observed consistent demand patterns and reasonable growth rates. The second major change is increase in “bargaining power of suppliers” because of standardization of products all across the world. The buyers of raw-materials and finished products are now free to contact any approved supplier located anywhere in the world who provides them their required top-quality products at lowest possible rates in specified time limit. Therefore, the global customers of Multi-part can purchase the plastic and moulding components in the regions where they are operating and are dependent on Multi-part anymore. The third major change is “customers are shifting downward responsibility for part, components and assembly projects. This value-addition is often associated with e- coating, in-die assembly and other operations”. MPC, in order to sustain and maintain its market share (at least), would have to invest heavily in assembly lines, testing equipment, storage, component and finished inventory and systems to support purchasing and logistics. The reason behind this is that most of the competitors, especially international players, are expected to adopt this new value-addition policy to meet customer requirements and gain customer loyalty. (Louis A. Kren) Lack of Supply Chain Coordination and Bullwhip Effect: The recent market changes will adversely affect MPC’s growth if it fails to devise a pragmatic counter approach in this regard. One of the major impacts of these changes is lack of supply chain coordination which usually improves if all semi-autonomous centres take actions that together increase total supply chain profits. Multi-part is facing problems because its cost of doing business is different in different regions due to labor wages, utilities, tax rates etc. It then devises its selling prices according to changes in domestic business conditions. The move towards standardized products from its buyers due to globalization of markets has greatly affected the demand forecasts of its various profit centers, especially those with higher production costs. This has aggravated the coordination among those profit centres where more variation in net profits is observed. General Managers who control separate business units are tended to defend their businesses because of these market changes. Bullwhip effect distorts demand information within the supply chain, with different divisions/profit centres having a very different estimate of what demand looks like. The result is a loss of supply chain coordination. Secondly, the construction of new factories in developing nations by customers would affect the overall demand of MPC products because its buyers would prefer to purchase their required products from regional suppliers, who might charge lesser prices (to make the most of this opportunity) than what MPC charges. Moreover, there is a threat of potential new entrants in the industry that view MPC’s absence in region as an open opportunity to make relationships with established buyers (Ford, IBM etc) and reap profits. Answer 3: Keeping in view the current market changes, it has become a challenge for Multi-part to formulate effective strategies that would enable in business expansion, growth and retention of its major global customers who have benefited from the globalization and subsequent standardization of products which has increased their bargaining power. Some of the strategies that could help Multi-part Corporation in coping with the challenges are as under: Entrance in Developing Countries and Market Development: The first strategy that MPC should formulate is to seek potential entrance in developing countries that offer quality infrastructure, availability of utilities at affordable prices, cheap labor and business-friendly policies. Multi-part must pay attention to emerging economies such as China which has now become third largest economy in the world after USA and Japan. Moreover, it can also make feasibility reports for new ventures in Malaysia and India which today have received the status of Asian tigers. Starting new ventures in these above mentioned countries would enable Multi-part to continue its supplies to its major global buyers which have already constructed their factories in these nations. This would not only reduce the threats of losing market share but also result in reaping additional profits because of lower cost of doing business. The chances for accomplishment are high because both China and India have observed double-digit GDP growth rates in past 6-7 years. Since Multi-part have capacity to build state-of-the-art plants because of availability of mammoth funds and budgets, it would observe economies of scale and specialization because of trained production and management staff, which together would contribute greatly in success of new ventures. Also it would be able to further strengthen its relations with major buyers which have already encouraged MPC to build its factories adjacent to their sites. Finally, it would also result in Quick Inventory turn and lead-time compression which are critical for customer satisfaction, convenience and loyalty. Six-Sigma Implementation: Multi-part Corporation must ensure successful implementation of popular business strategy Six Sigma which includes “process, organizational and technical change in order to achieve customer satisfaction, operational efficiencies and revenue” thus maximizing shareholders’ wealth. MPC’s research and development department has to devise ways through which it could develop and induct new value-added products in company’s product range and innovate existing products. This is also necessary because its global buyers are inclined to produce and market new products through aggressive advertising campaigns to reap additional profits. Moreover, MPC must pay attention to process innovation. For this purpose, MPC can invest in replacing old plants by new ones so that it could hasten the production speed and increase efficiency. This would not only reduce operational costs but also result in in-time delivery of products to its buyers which demand smooth supply of their major raw-materials. (Smartsolutions.com) Employee Training and Learning Organization: Another strategy that can be adopted by MPC is improvement of its “employee training system” to ensure more coordination and communication among employees in this rapidly changing business environment. It must train its employees to develop contingency plans for unique, unexpected, unclear, unpredictable and unstructured events. Moreover, middle and lower management employees should be empowered in making decisions with an access to organizational information networks. Dividing the tasks into teams will also be beneficial. Perhaps, this strategy of making MPC a learning organization would be extremely helpful in competing in new workplace. Answer 4: Concluding the above, it is worthwhile to mention that major global customers of Multi-part Corporation are moving their production plants towards Asian emerging economies such as China, India, Malaysia, Indonesia, Pakistan, Israel, and Turkey etc. where manufacturing (activities in textiles, consumer and food products, engineering products) are gaining momentum because of increased foreign direct investments by most international business giants which are willing to exploit availability of cheap labor. Contrary to this, westernised developed countries have recorded reasonable growth rates in services sector than manufacturing and production. In reality, these nations are focusing more on high-tech industries such as Machinery, Steel, Robotics, and Arms etc. Therefore, it is beneficial for MPC, according to my understanding, to build new factories (like its buyers) immediately to compete in global markets where price factor will play a key role in determining aggregate demand of products in near future. Secondly, MPC must revise its mission and vision to bring it in line with the requirements of new workplace. Unequivocally, the mission statement plays an important role in achievement of organizational objectives. Thirdly, value-addition must not be neglected in today’s era because most of the producers are working on this area so that they could meet customer requirements. WORK CITED McNamara, Carter. n.d. Operations Management. Available at http://managementhelp.org/ops_mgnt/ops_mgnt.htm Accessed 27 November, 2009 Gordon, Ian., 2002. “BEST PRACTICES: CUSTOMER RELATIONSHIP MANAGEMENT”. Ivey Business Journal. 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