Production Chain in the Car Industry and CSR - Term Paper Example

Production chain in the car industry and CSR Introduction The global car industry in general and the US car industry in particular have beenexperiencing a substantial shift in strategy and policy related issues with the ever increasing emphasis on the concept of corporate social responsibility (CSR) both within and without the organization (Garriga & Melé, 2004). Globalization has invariably impacted on the industry to such an extent that the current level of operations and the related outcomes has been determined by a set of endogenous and exogenous variables that require a well focused analysis. Globalization has come into still sharper focus on account of the current global economic downturn. The global car manufacturing industry and its production chain have invariably been influenced in the process (Hughes, Wrigley & Buttle, 2008). Production chain can be described by “using an iron ore mine as an example - the production chain is the actual mining of the material, crushing and screening, beneficiation, logistics, stockpile management, ship loading, etc. Essentially, the production chain consists of every activity that contributes to turning the raw material into the end product of saleable iron ore” (www.optika.com.au). Next phases include making steel sheets and iron bars which go in turn into the production of a car. However, how many firms in how many countries were involved in the production of a car can never be known by even the buyer. All car manufacturers in the world use some imported spares in their ultimate products (Meyer, 2000). Similarly in the supply chain process of selling and buying a lot of services – banking, finance, insurance, freight, shipping, whole sale and retailing – are involved. This illustrates the extent of globalization in the modern production chain process (Barrientos, 2000). Thus this paper would investigate the extent to which CSR related issues of the organization impact on and are influenced by the production chain in the backdrop of intense globalization. In fact this leads to related issues like modern international Human Resource Management (HRM) practices and ethical standards against the backdrop of an evolving CSR empowered corporate environment (Singh & Zammit, 2004). Production chain analysis 2.1. Procurement In the production chain analysis of the car manufacturing industry procurement is the first strategic phase. Procurement refers to a process that consists of a series of interconnected activities such as resource transfer, purchase and mobility. In other words it has three interconnected activities. They are the development of supplier networks, buying components and raw materials and finally the coordination of inbound logistics. Developing supplier network involves a complex and diverse process of initial activity. For example supplier networks are associated with raw material suppliers such as suppliers of steel sheet, engine parts, fabrics for seats, glasses and so on. The most significant aspect of developing supplier networks can be seen in the diversity in the geographical expanse of individual suppliers (Buxey, 2005). This heterogeneity presupposes a complex relationship between suppliers and the manufacturer. For example the American car giant Ford procures its supplies from diverse sources including Canadian, Japanese, Chinese and East European. When purchases are made some international procedures have to be adopted such as those related to initial inquiries, calling for quotations, shipping formalities and related documentation, payment procedures, insurance, freight, transport and so on. The process of coordinating these inbound logistics is an integral part of the procurement process and therefore the whole process of procurement is determined by a well planned series of interconnected activities. 2.2. Fabrication The fabrication process consists of molding plastic spares by using resins; making body panels; die casting valve covers; dyeing and weaving of fabric; and finally extruding molten steel in to desired shapes. The fabrication process is characterized by a higher level of efficiency because time spent on reworking a unit could cost the company so much in terms of lost revenue. For instance as of late many big car manufacturing firms have realized the importance of procuring supplies from specialist manufacturers abroad. As a result the impact of globalization can be seen in the final manufactured product. Fabrication is also characterized by other important elements such as CSR related issues. For example CSR initiatives and policies adopted by suppliers of raw materials and spare parts are not known to the final manufacturer. Therefore it is possible that the final manufacturer would expect some common standards and practices to be adopted by individual suppliers (Levy, 2008). However being more cost conscious manufacturers of final product tend to ignore both HRM practices and CSR policies. Outsourcing in the global car manufacturing industry has brought to the fore a number of ethical issues, including those related to child labor and CSR. Production chain of the car manufacturing industry heavily depends on the outsourcing industry right now. Globalization has gone one step further by expanding the design phase in to digital technology based creations (Garrod, 1998). As such the services of design engineers living thousands of miles away can be hired online by the manufacturer to make the final product. Under these circumstances a number of other issues related to modern international HRM practices come up. For instance when labor processes are outsourced to third parties the subsequent HRM practices will not be the company’s problem (Glosser & Golden, 2005). The net result is that the final manufacturer depends on the outsourcing agent or supplier to carry out all those related activities. 2.3. Assembly The assembling process involves again a series of interconnected tasks such as making the shell by spot welding body panels; painting; bolting the engine transmission and suspension system and the steering to the body; and finally fixing the seats and wires to complete a unit. This process of assembling also involves the maintenance of the assembling plant and therefore the whole process has to be designed and planned with accuracy. For example the automation and calibration of assembling equipment and tools on the assembly floor have to be maintained with up-to-date technology. Assembly line tasks at car manufacturing plants are highly characterized by breakdowns or holes due to poor labour management practices. It is here that proper CSR policies play a pivotal role in empowering the assembly line managers to settle problems then and there (Meyer, 2004). For example CSR policies adopted by Ford in the past were highly regarded as well designed to meet the demands arising from a pressure cooker like situation. It is a well known fact that at car assembly plants workers are well organized and therefore their demands to the management are well articulated. As some independent researchers have pointed out car assembly plants operate on the principle of process continuity which means handling the assembling process with a clear focus on continuous rotation. The assembling process also significant when international HRM practices are considered. In the first place many car manufacturers in the world have moved out of their original occasions and gone in to faraway places where cultures are different and above all management practices are alien (Hannan, Carroll, Dundon & Torres, 1995). As a result multinational companies like Toyota, Ford, Nissan and BMW have adopted a set of international HRM policies of hiring, training and recruiting local employees. While the regulatory regimes in the host country can be of far reaching importance, the attitudes of new recruits can be of much greater importance because attitudes can either create a pleasant environment or destroy the whole set of work norms. International HRM practices go further than this. In the first instance car assembly plants located in foreign countries are expected to comply with the existing labor practices (Schneider & Tung, 2001). In other words the existing labor codes might impose an additional burden on the relocating company thus leading to friction between a management and the labor force. Furthermore it is possible that motivation strategies of the company might come in to conflict with the local employees. Language differences apart there can be a host of other differences such as religious and ethnic. These cultural differences necessarily affect employee relations and therefore international HRM practices must be oriented towards training and re-training the local labor force so that company standards will be met. The recruitment strategy and the labor management policies must be aligned to meet contingency demands and as many researchers have pointed out at many car assembly plants often the sourer of friction between the foreign management and the host country labor force is the inability of the labor force understand the kind of work culture that the foreign management brings in. Ethical principles and practices also impact on labor relations (Econ & Geogr, 2007). For instance employees are expected by the management to comply with organizational rules which might not be acceptable to some of the employees. When Toyota initially moved in to Britain in 1986 to establish a car plant, the Toyota management thought that British trade unions would acting accordance with the labor code. However subsequently the car plant had to be closed down when the Japanese management realized that British trade unions did not want to be brought under an umbrella organization to represent common interests. In fact each trade union, such as technicians, electricians, engineers, accountants and so on had their own individual unions, seeking to further their own individual interests. 2.4. Tests The testing process involves test driving the product usually in the presence of industry experts and press people. Test driving a product occupies a very important place in the production chain of the car manufacturing industry due to a number of reasons. In the first instance the final product has to succeed all tests such as level surface, mountainous terrain and negotiating elbow shape bends. Testing the final product in the car manufacturing industry is also significant due to the fact that any sales promotion and advertising campaign in mass media can be carried out only after the final tests have been done. In other words industry experts including specialist magazines would carry rave reviews only after they have themselves seen an actual test driving activity. Next test driving a final product occupies a very important place in the production chain of car due to the fact that environmental authorities do not issue a certification of standards till such final tests have been done. In fact potential customers are more thoughtful about emission standards being violated or met by the product (Lau, Yam & Tang, 2007). Finally the production chain of the car manufacturing industry is never complete without a test drive because it enables the potential customer to form an idea about the product. 2.5. Distribution The last link in the production chain of a car is the distribution process. It consists of processing the orders of potential customers; managing the distribution network; controlling inventories; processing orders for shipment; and arranging related transportation services. Distribution is very important because potential customers need to be taken care of on a number of accounts such as efficiency in delivering an order, providing information at the first inquiry itself, reducing delays caused by coordination among sales team and processing orders on the basis of priority. The management of the distribution centers in the domestic and international markets again involves a series of CSR related issues. For instance both employees and the local community expect their expectations to be met. If the management assumes that these expectations are too high, naturally there will be a conflict between managers of these distribution centers and employees and the local community (Feenstra, 1998). Thus one link or the other of the production chain can be negated without the knowledge of the company. The shipment process also involves some complex procedures. Usually car manufacturers have their production plants located in places where raw materials and labor are relatively cheaper. Next when final products are shipped to other countries where they are in demand a number of requirements will have to be met (Gnoni, Iavagnilio, Mossa, Mummolo & Leva, 2003). In the first place shippers not only expect shipments to be smooth but also free from legal wrangles. Thus the distribution process is equally important as any other link in the production chain of car. Overall Analysis The analytical content of this paper would thus consist of the intricate global patterns of evolution in the production chain of the global car manufacturing industry, the related CSR environment and its impact on it (production chain), the HRM issues and their impact on both CSR related outcomes and production chain and finally the ethical issues related to the CSR environment. The structure of the car manufacturing industry are determined by a host of endogenous and exogenous variables such as production costs, supply chain, geographical imbalances, the availability and the relative mobility of resources like labor, comparative and absolute advantages, globalization, industrial or employee relations and a host of other factors. Despite a fast changing environment in the global car manufacturing industry, a series of a priori and a posteriori factors have been persistently present in orienting and reorienting the production chain within it. In the first place, a few automotive giants like Toyota, Nissan, Honda, Ford, BWW, Daimler-Benz, Fiat and Hyundai have been dominating the scene thus effectively preventing smaller companies from influencing the production chain in a substantial way. Secondly it’s more and more being characterized by a tendency to merge with or acquire other related firms on the part of existing companies so that merger & acquisition (M&A) related synergies can be maximized to outdo rivals (Mair, 1998). This is a strategic imperative that has been in practice for a long time though as of recently positive synergies have often been turned into negative consequences for a number of such acquiring firms. Despite these failures car manufacturers in particular and other vehicle manufacturers in general haven’t given up efforts to merge with or acquire other businesses (Hunter, 1997). Next the industry is heavily influenced by globalization related outcomes. Globalization refers to shifting away of production facilities and processes from the original country or location into other geographical regions (Tregenna, 2009). This shrinking of physical distance in the production chain has had a telling impact on the industry’s CSR policies. CSR is defined as “the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large" (Holme & Watts, 2000, cited by Weyzig, 2009). Thus it’s obvious that CSR is all about what the business organization is able to give back to its workforce and the community at large, not necessarily by way of monetary means but by other benefits. The protection of the environment is such a commitment. Next, international HRM issues have been discussed in the related context of the CSR initiatives and policies. The CSR policy design, planning and implementation process has been described and applied in a variety of situations though there is very little attention being paid to the car manufacturing industry or its related outcomes. But nevertheless there has been a considerable amount of literature specifically focused on international HRM practices being adopted on the industry mainly due to the fact that the industry has become so widespread across geographical regions and cultural boundaries. Finally ethical issues which are essentially connected with CSR policies and initiatives tend to be skewed in favor of pleasing the community of people within the locality where the production process is located. Thus it obviously ignores the significance of CSR policies and initiatives to the extended community and the world at large (Gonzalez, Sarkis & Adenso-Diaz, 2008). The production chain in the car manufacturing industry has been influenced by these outcomes in addition to being subject to the fluid dynamics of the globalization process. For instance during the current economic downturn so far the car manufacturing industry has reoriented itself to meeting the challenges of time through new policies. Despite the continuing job losses and resource shifting in the industry there is still a good amount of demand for more economical cars. As a result the industry is becoming ruthlessly efficient. Conclusion In conclusion it must be noted that the production chain of the global car manufacturing industry in general is characterized by CSR rented initiatives and policies adopted by companies with a view to benefiting their employees and communities. However it must also be noted that taking the whole production chain form procurement of resources such as raw materials and labor through to the final task of distribution, there is a host of international HRM environment related practices and issues that also require considerable analysis (Ashamalla, 1998). To top them all there are ethical principles and issues that cannot be ignored in analyzing the production chain of the modern car manufacturing industry. CSR policies and initiatives adopted by car manufacturing firms in the world today have considerably impacted on the market orientation process of the industry itself. For instance employees and communities at large have equally well questioned the motives of the management against the evolving backdrop of a set of complex and diverse relations (Schoenberger, 1987). The assumption that employees and communities associated with the car manufacturing industry in the world have benefitted from these CSR policies and initiatives is questioned by many writers today. For example both Ford and Toyota had to roll back a number of initiatives that were questioned by green groups. Finally international HRM practices adopted by car manufacturing industry have played a pivotal role in influencing the relations between, local labor forces and international managers. Despite a few failures there have been some good success stories as well. Even ethical standards have played a significant role in the process. REFERENCES 01. Ashamalla, M. H. (1998). International Human Resource Management Practices: The Challenge Of Expatriation. 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