The Strategy of Jaguar Land Rover PLC - Coursework Example

JAGUAR LAND ROVER ALL-ELECTRIC VEHICLES SUPPLY CHAIN MANAGEMENT SYSTEM By Location Executive Summary This report analyzes Jaguar Land Rover PLC’s new supply chain that incorporates the production of an all-electric vehicle, to make viable decisions regarding JLR’s new suppliers. Knowledgeable observers conclude that the majority of companies in the automotive industry manage their supply chains well. Nevertheless, the inclusion of a new product line means alteration of the supply chain. First, the report identifies sources of information and data about suppliers, followed by a description of the most suitable supplier selection framework. Further, the report identifies differences between the two supply chains followed by a mention of the roles of customers in the supply chain. The subsequent section highlights ways in which the new supply chain addresses quality, quantity and cost issues. Upon identification of difficulties faced in the new supply chain, the report concludes by providing recommendations to solve the major problems faced. Table of Contents Introduction The world’s largest single manufacturing operation is in the automotive industry. In effect, the industry uses 40% of the world’s rubber, 15% of the world’s steel and 25% of the world’s glass. In addition, the industry also consumes 40% of the world’s oil output. There was a very high production growth rate in the industry from 1952 to 1973 of 5.9% annually (Suthikarnnarunai, 2008, p.13). Nevertheless, there was also a declining growth rate from 1974 to 2002 during the oil shock period, and majorly due to the market saturation in developed countries. Currently, there is an increasing production of vehicles and a sluggish world demand, which causes low utilization of production surpluses, and most importantly surpluses. Jaguar Land Rover PLC is a well-established vehicle manufacturer in the world. The need for an all-electric vehicle means the company must alter its supply chain considerably. Most notably, the supplier selection process for the new product line is different from that used in previous production. There are many decision frameworks to use in selecting suppliers under such unique circumstances. In this case, JLR PLC seeks customers that uphold environmental friendliness in their products. Essentially, the company’s success relies on the quality of suppliers and relationship between them. Therefore, it is vital to select the ‘right’ supplier from the very beginning. Sources of Data and Information Regarding Suppliers Suppliers make an integral part of almost every business. Essentially, a firm has a tough time growing without manufacturers to make what it sells or its raw materials to make what it sells (Tam & Robertson, 2002, p.370). It is the same case with Jaguar Land Rover (JLR). Changing the product from fuel-consuming vehicles to all-electric vehicles means changing some elements in the supply chain, especially suppliers. It comes with the need for suppliers of environmentally-friendly raw materials that work well with all-electric vehicles. However, the major challenge lies in where the company gets these suppliers. Several options are discussed in this section. There is a variety of channels through which JLR can find suppliers. First, it is advisable to make a shortlist of possible suppliers via a combination of available sources, which gives the company a broader view of suppliers from whom to choose. One source of information about suppliers is friends and business acquaintances. Undoubtedly, it is possible to get honest information about suppliers, especially regarding strengths and weaknesses, from other manufacturers or companies that have used its services. Nevertheless, it is an unreliable source of information given the probability of a competitor to confide in the company over supplier’s information (Tam & Robertson, 2002, p.370). In addition, JLR can get supplier information from directories. It is usually the case when the company needs suppliers from its local area, usually within the country. Directories, such as Thompson and Yellow Pages are reliable when a business needs supplier information from the local area (Russell & Hoag, 2004, p.110).Again, it is inappropriate for this case because JLR seeks suppliers outside the UK, which do not exist in local directories. Most importantly, given that the company’s needs are specific to the automobile industry, trade associations exists that match suitable suppliers (George et al. 2006, p.14).Trade associations are organizations pioneered and funded by businesses within the industry. In essence, an automobile industry trade association takes part in the industry’s activities, such as lobbying and advertisements. It is from these ventures that JLR knows potential suppliers and contacts them. Most significantly, an association offers specific services such as business networking. As such, it creates a network that links suppliers and companies to enhance the supply chain activities. Furthermore, JLR can obtain supplier data and information from business advisors (George et al. 2006, p.14). Here, local organizations that support businesses like the chamber of commerce take the company to the direction of potential suppliers. However, there is the best opportunity to talk with all suppliers in the same place during exhibitions. It is advisable to check the relevance of exhibitors before JLR goes to exhibitions. Exhibitions are events organized to bring together suppliers and buyers and improve relationships within the supply chain. Finally, the trade press is another source of information about suppliers. Trade magazines have advertisements from potential suppliers. As a result, JLR browses the internet for a list of high-quality trade magazines. Suppliers drop contacts with advertisements, and the company gets back to them. Legal Requirements Relating to the Collection, Use and Storage of Information The principle ethics of data collection cuts across many fields. Just as in any research, data and information about suppliers must be kept confidential. It is important to have strict measures that ensure information is used just for the purposes for which it is intended. First, data and information collection should maintain objectivity (Joy, 2007, p.30). Essentially, the company seeks supplier information to weigh their suitability for the new all electric vehicles. It is an objective that should be maintained, and all search efforts should seek to achieve predetermined objectives (Rhodes, Bowie & Hergenrather, 2003, p.69). In effect, the assumptions, opinions, biasness, and expectations of whoever seeks data and information must remain non-intrusive. There should be no interference with the major objective in the search for suppliers (Joy, 2007, p.30). In addition, personal or seemingly intrusive information must not be solicited, and where necessary, the researcher exercises absolute caution and sensitivity. In the search for supplier data, the researcher ensures that everyone with who he interacts provides only information needed to evaluate suppliers (Joy, 2007, p.30). It implies that the researcher should not solicit, from whichever source, personal and seemingly intrusive information about suppliers. Most importantly, the company should treat information given about suppliers as strictly confidential. It is the primary responsibility of JLR to ensure the privacy of data and information provided. As such, information does not reach people who may misrepresent or misuse it for selfish gains. The process of data and information collection is objective and aims to achieve predetermined objectives while maintaining confidentiality and privacy (Rhodes, Bowie & Hergenrather, 2003, p.69). Appropriate Decision-Making Framework A suitable decision-making framework considers the fact that JLR needs an all-electric vehicle in its new supply chain. Deciding the most appropriate supplier is vital in a highly competitive industry such, as the automotive industry. Beskese and Sakra (2010), proposes a hierarchical model that helps automotive companies in the supplier selection process. In essence, the sub-criteria and criteria in the model are placed in order by two experts in a specified multinational automotive OEM using the fuzzy AHP. In addition, the major criteria are arranged from the most important to the least important. The supplier factors include quality, promotion and price, services and delivery, company structure and company capabilities. Most significantly, there are no major differences between the priority sets, even though there are chances of choosing varied suppliers in the same case (Sagar & Singh, 2012, p.34).As a result, it is challenging for a company to assure consistency in the supplier selection decision. In their study, Beskese and Sakra (2010) surveyed two experts from a multinational OEM, who defined priority weights in the supplier selection decision. After the initial scores, the experts were asked to review a number of their comparisons to enhance the level of consistency. The study concludes that quality, price, and promotion, are the most prioritized components in deciding on a supplier (Sagar & Singh, 2012, p.34; Beskese & Sakra, 2010, p.810). The table below summarizes the components of each decision element QUALITY Product/service quality Reject percent rate Conditions of return Supplier overall quality ISO certification status Adherence to quality tools and personnel PRICE AND PROMOTION Product price Quantity discount Payment terms Transportation and insurance fees DELIVERY AND SERVICE Delivery on-time always Quantity restriction in delivery After sales services Length of lead time Spare parts accessibility COMPANY CAPABILITIES Engineering and technological capabilities Tech and engineering support resources Supply chain management Management information system Research and development e-business capabilities Production capabilities Production variety Production capacity COMPANY STRUCTURE Financial stability Corporate culture Relationships Green product It is important to note the last decision element in the table, green product. Presently, JLR seeks suppliers with sufficient knowledge of environmentally-friendly products with the all-electric vehicles in mind (Sakris & Talluri, 2002, p.20). It seeks to eliminate fuel emissions and adopt vehicles that use electricity only. The implication is that suppliers of fuel and other lead products are eliminated from the supply chain instantly. In effect, the company identifies, from the previous shortlist of suppliers, suitable suppliers who meet the above criteria (Ellram, 1990, p.570). As shown in the table above, factors, such as suppliers’ financial stability and corporate culture are also considered. Essentially, no business seeks to deal with suppliers who can go bankrupt anytime. Information on the financial position of suppliers is available from different sources (Sakris & Talluri, 2002, p.20). Furthermore, the Automotive Sector Quality Management system standards, ISO16949 requires a company to evaluate suppliers solely based on the supplier’s ability to provide products and services that meet the organization’s requirements (Jamil, Besar & Sim, 2013, p.10). It highlights previously mentioned information collection regulations where the company does not solicit seemingly intrusive information from whichever source. What the company requires is identified beforehand, and the entire selection process seeks to meet JLR’s production requirements (Jamil, Besar & Sim, 2013, p.13).The supplier selection decision varies depending on the nature of services and products to be secured. Usually, the selection process has several stages some of which are not applicable to simple purchases. The number of potential suppliers is reduced at every stage to end up with what the company considers the most qualified and reliable suppliers. It is summed by the evaluation of potential suppliers against order winners. Later, there can be a re-evaluation of suppliers based on several factors, such as duration of supplies, supplier performance, changes or risk in requirements, quantity, etc. With a clear idea of what the company needs to purchase and potential customers identified, the management builds a shortlist of sources, which meets the company’s needs (Jamil, Besar & Sim, 2013, p.13).There are many considerations when looking at the firms/suppliers in the shortlist. For instance, the company considers whether the supplier can deliver what the business wants and when it wants it. In addition, of importance is the financial security of suppliers other than whether they have been established for long. Suppliers with more experience in the market are preferred. Further, the company asks itself whether it knows other companies that have worked with and recommend the supplier. Finally, it is important to consider whether the supplier is on any approved suppliers’ list from the government or trade associations (Beskese & Sakra, 2010, p.811). How the Supply Chain for the New Vehicle Differs No doubt, dealing with a new product line means that the organization must adopt a different supply chain. By definition, the supply chain includes all activities, facilities and functions directly or indirectly involved in the transformation and flow of goods and services from raw materials, finished products to delivery to customers. In essence, the term supply chain implies related managing organizational business activities, which includes the web of interconnected relationships between distribution, sales channels, manufacturing, warehousing, transportation, and suppliers. There are several business activities that come out of vital supply and logistic processes. They include procurement, distribution, customer services, inventory control, transportation, order entry, sales planning, receiving, inspection, shipping, production scheduling, purchasing and warehousing management, etc. Presently, JLR has a supply chain that includes modules or components suppliers, OEMs (car manufacturers), dealers, customers, and distributors. The first tier includes suppliers with many global world players having own assembly or production capacities near to OEM. It means they make their designing or engineering decisions by establishing local development or engineering centers (Carter & Rodgers, 2008, p.360). Similarly, the new supply chain seeks to work with such global world players, even though they should be environmentally-conscious in their product design. It is important to note that suppliers are the most affected by the new supply chain owing to the change in product design. The company needs suppliers with ‘green’ products that do not emit fuels, which pollute the environment. It follows that suppliers with electrically-inclined products get the upper hand. The previous section identified criteria used to decide on the most suitable suppliers (Carter & Rodgers, 2008, p.367). Nevertheless, components of the supply chain, such as production assembly and distribution, as well as customers also change. The move to an all-electric vehicle means JLR changes its plants and production equipment. The company installs plants that in themselves do not pollute the environment. The all-electric vehicles are manufactured in a different way compared to conventional vehicles. Most notable is that their production seeks to take care of the environment. Undoubtedly, customers in the supply chain also change (Stock, Boyer, & Harmon, 2010, p.23). It goes without saying that all electric vehicles could be more expensive than conventional vehicles. As such, the current customer base may not afford it given the need to market at high prices initially. It requires marketing efforts that seek to identify the most profitable market segment for all-electric vehicles. It is from such market analysis that the company decides the number of all-electric vehicles to produce. This forecast later influences the profitability of producing the new product. The flow of materials in a single direction, the flow of money and order in the other direction, and the information flow in both directions connects each member of the supply chain to other elements in the chain. As a result, coordination in the supply chain focuses on the control of information and material flow among customers, manufacturers, and suppliers via the process of communication, transmission and information sharing. Therefore, a change in any link in the supply chain causes a wave of effects that propagate all over the supply chain. It is the case with JLR’s production system that aims to change its product line from conventional fuel-consuming vehicles to all-electric vehicles. Hence, the entire supply chain is affected by every small change in any component of the chain, especially suppliers and production plants. Addressing Quality, Quantity and Cost in the New Supply Chain The need for efficiency makes it necessary to adopt lean supply chain management in the new supply chain. Lean supply chain (LSC) is not necessarily for companies seeking to streamline their manufacturing, but for any business that seeks to streamline processes by eliminating non-value adding activities and wastes (Srinivasan, Gilbert & Srikanth, 2004, p.15). JLR has several areas in the supply chain that identify wastes as costs, inventory and time. The company must examine every component of the supply chain to create a leaner supply chain. The need for cost, quality and quantity efficiency begins at the procurement stage. Here, the company realizes that its purchasing needs are not complex. As a result, JLR eliminates many procurement offices in the new supply chain. Essentially, having two or more procurement offices means vendors could be given conflicting information (Mason-Jones, Naylor & Towill, 2000, p.55). The concept of the lean supply chain means JLR adopts a single procurement point for every vendor, which ensures each vendor/supplier has a single point of contact. It eliminates procurement costs arising from having many offices, other than ensuring delivery of the right quantity of supplies and in the best quality. Further, the company can seek new technologies that help improve the procurement process. Such technologies include an internet-based procurement service that allows purchasing from vendor catalogs (Srinivasan, Gilbert & Srikanth, 2004, p.13). In addition, JLR can change vendor payment options for the new supply chain. Undoubtedly, using the two-way match, which involves payment on receipt improves supplier relationships and reduces resources in the purchasing department. Moreover, the company can engage in lean manufacturing since it is the basis of lean supply chain management. It involves improving manufacturing processes to reduce resources and wastes, but still maintain operation performance (Mason-Jones, Naylor & Towill, 2000, p.55). Quality is usually an integral part of the lean supply chain. In essence, having zero defects in manufacturing increases the efficiency by reducing wastes within the company as a whole. Therefore, with high quality, customers no longer return vehicles, which imply the need for fewer resources to handle quality and returns issues (Lamming, 1996, p.185). Usually, companies with lean supply chain management examine each of their bills of equipment and materials, routings, to identify areas that require improvement. Furthermore, JLR should examine warehousing processes to identify areas of eliminating non-value adding and wasteful steps. A significant area here is the reduction of unnecessary inventory. Keeping inventory is as costly as it is beneficial. The cost of inventory sometimes outweighs benefits realized from keeping inventory (Srinivasan, Gilbert & Srikanth, 2004, p.13). The accumulation of spare parts requires resources and money to store and maintain. By minimizing inventory, JLR reduces warehousing handling and space, which minimizes the overall cost. Finally, it is significant to streamline transportation in the new supply chain. Usually, many businesses engage in poor shipping decisions in a bid to improve customer satisfaction (Srinivasan, Gilbert & Srikanth, 2004, p.13). It involves shipping orders without putting together additional orders to reduce expensive shipping options due to a customer’s request. In effect, the company realizes that it uses many shippers unnecessarily when it can reduce shipping alternatives and minimize the overall costs. The Role of Customers in the Supply Chain A stop to think about how and why the company has configured its supply chain shows that everything is done for customers. In essence, JLR looks for the most effective suppliers that guarantee best value to customers. Customers are at the center of business activities and influence virtually every company decision. Most importantly, they play a significant role in the supply chain that involves production and product delivery. Interestingly, the company also searches for the most innovative partners to provide consumers the best products and services (Bayazit, 2006, p.566). It requires the creation of an ethically sound supply chain that is resilient to disruption just to satisfy customers. Customers are integral part of the supply chain, and their values, needs, and opinions affect supplier decisions made by JLR Company. For instance, the need for all-electric vehicles is pushed by the customers who prefer environmentally friendly vehicles. As such, the company seeks suppliers with related products that manufacture this type of vehicles. It shows that customers’ needs and values are integrated with supply selection. The importance of customers implies that the company builds the supply chain around customers (Suthikarnnarunai, 2008, p.13). In addition, suppliers also purchase the company’s vehicles. It is pointless to manufacture all-electric vehicles when there is no market. Correspondingly, the market consists of customers who can afford this type of vehicles. As a result, the customers also determine the distribution channel used. The company keeps in mind customers’ preferences before deciding on a distribution channel. It is important to note that customers exist at the farthest end of the supply chain (Srinivasan, Gilbert & Srikanth, 2004, p.13). All activities aim to satisfy customers’ needs hence they play an integral part in the supply chain. One of the last activities in the supply chain is after sales services. It seeks to provide customers comfort and convenient regarding the use of vehicles. After sales services work specifically to satisfy customers, hence they would be eliminated when there are no customers in the supply chain. Potential Areas of Difficulty in the New Supply Chain There are bound to be challenges in the new supply chain given the change in the product line from fuel-consuming vehicles to all-electric ones. First, there are difficulties in facility selection (Bayazit, 2006, p.566). Producing a new line of vehicles means the company uses different facilities or plants. The choice of appropriate plants is difficult owing to many logistics involved. The challenges here are often referred to as low-cost vs. local or off-shore vs. near-shore questions. It is important to choose facilities that optimize operations by reducing the cost of manufacturing and doing other business activities. In addition, the company faces challenges in optimizing transportation routes (Shepherd & Gunter, 2011, p.45). The decision on routes to use in distribution of all-electric vehicles is a challenge given the diverse distribution of customers. The above make two most important inbound logistics the company must address in the new supply chain. The cost of distribution could be more than anticipated, which raises the overall cost of doing business. However, more worrying is the difficulty faced in supplier selection. There is no guarantee that supplier selection decision framework adopted gives the most suitable suppliers. The framework for analyzing quality, service and delivery, as well as business capability and structure identified previously has its inadequacies (Suthikarnnarunai, 2008, p.13). As a result, JLR Company may settle on suppliers it considers most reliable yet they are not. The complexity of the supply chain means wrong supplier choice is costly and hinders the entire production process. Furthermore, there are difficulties in optimizing the product flow path (Shepherd & Gunter, 2011, p.45). It is the process of moving raw materials from supply through productionand comes with challenges given the change in the product line. The collective set of many choices constitutes the flow paths of products in the supply chain. Also, the consolidation center selection and analysis also poses great challenges. For a large company such as JLR, there are many suppliers of different products hence the need for a consolidation area. In effect, it is inappropriate to use the previous consolidation center used for fuel-consuming vehicles. The consolidation center is used to assemble smaller shipments and make the final product. The need for environmental friendliness means the company must choose the best consolidation center. Another major challenge is whether the company should consider new delivery options. Here, the management decides whether JLR should continue shipping its products or ship directly from suppliers. The line of supplies used in all-electric vehicles differs from those used in fuel-consuming vehicles. Also, the new supply chain is affected by customer choices. Market forecasts regarding the demand for all-electric vehicles could be inaccurate. It leads to production in excess of what the customers need. Conclusion The supply chain management is a complex process that involves many logistics. This research analyzes the new supply chain framework for Jaguar Land Rover Company (JLR) to allow an understanding of differences with the initial supply chain. The section on data and information collection identifies several sources from which the company obtains supplier information. One source of information about suppliers is friends and business acquaintances. Undoubtedly, it is possible to get honest information about suppliers, especially regarding strengths and weaknesses, from other manufacturers or companies that have used its services. In addition, trade shows provide the perfect source of supplier information. Established suppliers are popular in a region and appear on trade shows. Ethically, it is required that the company uses obtained information just for the purposes for which they are intended. Where necessary, the company should not solicit for seemingly intrusive personal information. Further, supplier selection is a major challenge in the supply chain. This research uses a supplier choice decision framework proposed by Beskese and Sakra (2010). The suppliers include quality, promotion and price, services and delivery, company structure and company capabilities. The selection process has several stages some of which are not applicable to simple purchases. The number of potential suppliers is reduced at every stage to end up with what the company considers the most qualified and reliable suppliers. This report also highlights ways in which the company addresses quality, quantity and cost in the new supply chain. In effect, the lean supply chain is suitable for this case. It seeks to streamline supply chain activities from procurement to product delivery and eliminate non-value adding and wasteful stages in the supply. The new supply chain differs from the previous one in the sense that a change in product line alters every activity in the entire supply chain. Most notably, suppliers for the new type of vehicles differ, so do customers. Finally, the company faces both inbound and outbound logistics challenges in the new supply chain, which include facility selection, transportation route optimization, and consolidation center selection and analysis challenges. Recommendations Based on the new supply chain scenario discussed, this report recommends the following: 1. The use of quality sales forecasts that guarantee accurate demand for all-electric vehicles. In effect, JLR produces exactly what the market/consumers require hence meeting demands with no overproduction. 2. The use of more than one supplier selection decision framework that ensures failure in one framework is countered by another. 3. Using modeling technologies to make manufacturing location decisions that are optimized in the entire supply chain, which highlights the tradeoffs in all cost elements. 4. The use of advanced transportation algorithms that define routes to minimize the cost of inbound shipments while taking into account realistic constraint and cost structures. 5. Modeling all alternative product path flow options and the use of smart algorithms that determine the most suitable choices. 6. Realizing that all-electric vehicles differ from fuel-consuming vehicles and so do their supply chain management processes. Virtually every component of the supply chain changes with the adoption of this type of product. List References Bayazit, O., 2006. Use of analytic network process in vendor selection decisions. Benchmarking: An International Journal, 13(5), pp. 566-579. Beskese, A., and Sakra, A., 2010. A Model Proposal for Supplier Selection on the Automotive Industry. 14th International Research/Expert Conference, pp. 809-812. Carter, C. R., and Rogers, D. S., 2008. 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Supplier selection with multiple criteria in volume discount environments. Omega, 35(5), pp. 494-504. Read More