Porsche Supply Chain Strategy: Industry Framework, Unique Value Proposal, and Managerial Focus - Case Study Example

Porsche Supply Chain Strategy Affiliation Introduction The motor vehicle industry has become wide and competitive in nature hence creating the need for creation for Porsche to address elements of supply chain strategy in order to adopt a simple and relevant strategy that suits its environment, market concerns and organization`s objectives. Porsche has managed to make an impact in the global vehicle industry through its dynamic policies and functional strategies that match the current market expectations. The company has incorporated supply chain strategies that illustrates the relation of its functions and various activities of the value chain in an attempt to match the company`s business proposal to its global customers. Porsche`s organizational supply chain strategy is determined by the interrelationship of its industry framework, unique value proposal, various internal processes and managerial focus. These elements include factors that drive the formulation of a stable supply chain strategy (Perez, 2013). Industry framework The Porsche industrial framework reflects the stakeholder’s interaction in the production and market process to meet customer specifications. This involves technological advancements and economical factors that translate to competition in the motor vehicle industry. This framework is driven by different factors that affect the supply chain mechanism, all interrelated in respective ways. German is the biggest market for motor vehicle industry and Porsche has managed to tap into its local market and widen its market scope into the European, Asian, African, and American market. German made vehicles have a great demand globally with the highest amount of vehicle exports in the world. In 2013, Germany recorded the highest exports of passenger vehicles in the world followed by Japan and South Korea (German Trade & Investment, 2014). The demand profile of Porsche has influenced the company`s consistency and stability of its assets` and strategies as a main focus of manufacturing efficiency and vehicles cost. The German company has made a dramatic influence in sports car business creating large demand and consistent market desire for its vehicles globally. Moreover, the firm has managed to channel its market mediation costs to useful measures. Porsche balances the imbalance of demand and supply through executions of price markdowns in an effort to counter the effect of excess supply in the market occasioned by loss in sales when supply is less than demand. Such costs are characterized by consequences of demand degree predictability (Perez, 2013). In consideration to the fundamentals of supply chain expressed by Perez, Porsche has continuously integrated the lifecycle of its products through increased brand development that enhance features of the Porsche sports cars. The brand has made strides to respond effectively to the technological changes in the automotive industry. This has been implemented through different models introduced that match the market`s expectations and technological demand. Porsche and other automotive Germany engineers are constantly putting extra effort in development of alternative technologies in the vehicle industry by adaptation of electronics and lightweight manufacturing materials in order to improve energy efficiency. The company`s core element is value that creates growth which provides Porsche with the capability to invest in progressive technologies, skilled workforce and advanced products. The company also works to improve its processes and come up with new ones while maintaining the art of good returns (Porche, 2015). In addition, embracing innovation is aimed at reducing carbon emissions, management of smart traffic and implementation of government`s initiative on electric mobility. Such trends have an impact on the market mediation costs and improved demand predictability (German Trade & Investment, 2014). Porsche`s supply strategy has been directed to create relevance between cost of assets and total cost of the products. The firm`s profits are increasingly correlated with the asset`s rate of utilization. The company has assured maximum utilization rates that apply to the detriment of service levels and working capital. The strategy chosen by Porsche is customized to meet the responsive nature of the market changes. Unique value proposal Another point of concern that geared Porsche automobile in securing its supply structure is its unique value proposal. This is outlined by the company`s competitive position in consideration of its supply chain. There are various qualities of the company that make it a relevant alternative to global customers. The company has made it a priority to tap into the global market by developing vehicles that make it considered the better option in the market. Incorporating of performance designs in its various models has made the company increase customer demand and global base. Porsche sports have been leading in profit margins for a long period of time exceeding their competition by 10%. The CEO of Porsche, Matthias Mueller has spearheaded a 2018 strategy to maintain high profit margins despite instability in the market environment. The company has maintained a goal of continuous growth through creation of extensive expansion and investment policies (Young, 2013). High reduction in fuel consumption with 1.7% annual CO2 emissions in the environment is one of Porsche’s performance indicators that are distinct with the company and make it stand out in the sports car industry. Moreover, the company has developed models that feature climate control system with enhanced air ventilation system and different temperature regulation controls for all passengers and driver`s comfort. This provides for a gentle, strong and normal air conditioning. The cars are also equipped with carbon filters that traps air particles escorted by an air-recirculation system that monitors air density and quality hence reducing humidity. It also switches the circulation system to fresh or circulated air whenever it is required. In cold weather, the 911 Porsche model provides a demister function that clears mist from the windows to make it clear. Furthermore, the model has a solar sensor that detects the sunlight`s intensity and regulates it evenly for the occupants comfort (Porche, 2015). Additional features in the 911 Porsche model is the cruise control that controls the speed of the car automatically for driver`s relaxation when cruising long stretches. It operates between a speed range of 18-149mph and can be activated on the steering control. Some of these features have been incorporated by other vehicle companies. Nevertheless, Porsche was among the first companies to innovate these systems in a sport car. The company has invested in a light design package providing a clear and practical appealing. It incorporates LEDs in the door pulls, foot wells, rear seats and door storage compartments. These lights can be dimmed to suit the surroundings (Porche, 2015). The 2015 Porsche Macan features a V6, 3.6L twin-turbo with a power plant and a stroke of 3.3in. The car is equipped with a Turbo S that reaches 60mph in less than 5 seconds. These features are not achieved by any other sports car thus making Porsche a unique advancement. Through this featured designs, Porsche has recognized market demands which has enabled it combine key aspects in supply chain management and shape its connection in incorporating the processes to ensure customer satisfaction (Avery, 2013). Due to conveniences of its customers, Porsche vehicles are among the first vehicles to incorporate the interior lighting technology associated with night conditions. These vehicles are equipped with automatic lighting functions that automatically switch on LED for a specific time when the car doors are opened or closed by use of the key remote features (Porsche Cars, 2015). Porsche`s Macan S model has a powerful brake system. It is equipped with a 6 piston monobloc front brakes with fixed calipers that press 13.78in disks. The turbo has rotors with a 14.17in diameter. These models achieve braking action with a combined caliper integrated with a parking brake. Additionally, Mican S has rear discs with 12.99in diameter while the Turbo model has 14.02in diameter. The braking technology in Porsche cars make it to automatically slow the car`s speed in situations of a crash hence reducing kinetic energy in case of a collision. The models are also equipped with a multi-collision function provided by the brake which is triggered when sensors in the airbag detect a potential collision leading to maximum breaking. However, the driver is able to override the break system by braking at high pressure or accelerating. The brakes features make the Porsche models best for speed and great acceleration. Thus being a perfect feature for sports cars (Avery, 2013). Porsche models are more advanced with different chassis options that provide the driver with a dynamic experience. Some are designed with a steel spring to improve quality of the ride for improved performance and advanced off-road features. Other rings arrangement and dampers improve handling and comfort of the cars. A different suspension has a PASM and steel spring combination system that is standard to the Macan. The company has further provided option for PASM to be selected for Macan S model. Moreover, the Macan S model has a leveling system with air suspension, PASM and height adjustment. An adjustable ground clearance to 3 levels with a sitting .59in lower compared to other vehicles level. The loading level of the car drops the car`s rear side much lower than other carts at 1.97in. These levels are activated by a press of a button situated in the luggage area (Avery, 2013). These models are few of Porsche`s creation that display its unique value proposal in the motor vehicle industry. These strengthening facts build its value proposal element of supply chain strategy. Managerial focus The managerial focus for Porsche has been between its competitive position in the market and its supply chain process. The supply chain of the company has been included in the managerial focus hence facilitating its decision making process. This ability has made the company ensure coherence between its business`s proposal and execution of the supply chain. The success of the supply chain process of the company has been advocated by the management`s initiative of achieving value to customers demands alongside searching for local efficiencies. This creates alignment between the business structured policies and the supply chain. Other European and American companies have a more local efficient centered approach that conflicts with the customer’s proposal. Most of Porsche`s competition have a standard approach strategy that emphasizes on efficiency performance regardless of competitive position structured by the organization. Thus making these organizations lose their influence in the global market scene (Perez, 2013). Internal processes This element in supply chain strategy ensures Porsche has a good combination and connection in its organizational supply chain activities incorporated under source, manufacturing process and delivery. Porsche has managed to embrace the aspect of utilization of assets and the decoupling point location. The company has integrated this aspect by creating models that resemble the need and priority of its global clients. Different parts of the world have different demands and priorities depending on the geographical locations and other aspects. Porsche internal process is structured to meet this demand under this element in an effort to capture the highest market potential in the business. In connection to this, the Porsche North American market has been supplied with models of Porsche that embrace American expectations and its dynamic values. Porsche`s decoupling point has been made at the end of the manufacturing process for cost relevance in asset manufacturing. Prior to Porsche`s decoupling point, the workload of the manufacturing firm is smoothed by a market forecast hence the firm`s manufacturing cycle is long so as to increase efficiency and the rate of asset utilization. After assessing the decoupling point, the manufacturing process is guided by demand hence making it extremely variable and reducing manufacturing cycle of the company together with the order period. This has made customers of the vehicle organization have a positive view of Porsche. A large part of the inventory is focused before the products decoupling point. The firm`s decoupling point is far from the client`s end point in the supply chain. Therefore, Porsche supports demand buffering by a high capacity to control this effect and make it efficient to the customer. The firm`s customers are highly useful as they assist in reduction of demand uncertainty. Porsche`s customization of its vehicles diminishes when the decoupling point is close to the client`s end point. The minimum order size is governed by the transportation cost`s relevance to the total cost (Perez, 2013). Porsche`s management understands well the factors governing its business structure, hence it has chosen to utilize the most common supply chain model under its line of industry. This is the custom-configured supply chain structured model oriented to responsiveness to market demands. It is characterized by relatively high relevance degree of asset costs to total cost and unlimited assembled products on a unique based platform. Porsche`s competitive position is structured on providing a unique product configuration of manufactured products depending on the final consumers demands and preferences. This model incorporates a configurable product within a combination of manufactured designs different specifications bound by limits. Its difference with the agile supply chain`s model is that agile`s model is customized according to a client`s specification limited by certain constraints. The custom-configured supply chain is achieved by assembling manufactured parts into a whole assembled product. Product configuration of Porsche vehicles configuration is attained during the motor vehicle assembling process where different parts are assembled in accordance with a specifics market`s specifications. Porsche being a motor vehicle company with goals that target the global market, the management has structured its assembly process to match its customer`s demands effectively (Perez, 2013). Usually the processes that are followed by product configuration of the Porsche models are lengthier compared to the configuration and downstream process. Due to the unlimited number occasioned by finished manufactured vehicles as a result of multiple assembling of vehicle parts, it is difficult in making accurate forecasting. Other factors that prove to be complicated in the process are the finite nature of parts and the situation where processes occurring before configuration are planned according to a continuous replenishing model that depends entirely on variability of the brand`s demand profile. Additionally, configuration of the model vehicle is scheduled after extensive research of the market`s demand and available vehicles in the market. A short order cycle designed with intense capability follows after the research process (Perez, 2013). In respect to these factors, the supply chain observed by Porsche utilizes a configuration to order the decoupling point approach. The certain processes of the assembly that occur prior to configuration are handled by an efficient supply chain and the assembly process operates the same way as an agile supply chain. Porsches` order entry system is accurate, detailed and user-friendly which ensures a more respective and clear concept of what the customers require from the company. Understanding this perspective makes it easier for Porsche to tailor its production line in meeting their demands. This supply chain is effective for Porsche because of the following factors: a. The manufacturing process preceding configuration is managed by the company under the criteria of a continuous flow system in regards to the demand profile characteristics. b. The company`s downstream and configuration process is managed according to an agile supply chain model. c. Porsche has maximized on the number of configurations for the vehicles platform as it minimizes the parts used for the platform. This aspect helps reduce complex issues in the organizations supply chain. d. The firm has ensured availability of assembling parts before configuration process in order to ensure a reduction in the order cycle. e. The availability of product configurations of the company have been made available in finished products inventory being managed by an efficient supply chain. Conclusion During past years, forecasting on a new product was an easy aspect. Today, emerging cars that previously had good sells lose platform within a short period of time. The shifts associated with customer demand in connection to different products, brands and segments are ever increasing. The market of the motor vehicle industry has evolved globally with customers getting access to different choices compared to the past. There is growth in demand for personalized cars hence consumers tend to visit the showroom with better knowledge of their needs. Therefore, the privilege of companies enjoying customer loyalty is decreasing in all segments. The supply chain chosen by a company in this industry should put into consideration the shifts in market demands. Therefore, flexibility concept and quick responsiveness should be incorporated. Previously it was a simple strategy to implant a supply chain when launching a new design or product in the market and make necessary changes over its lifecycle. However, the need for responsiveness and profound flexibility should be implied today to enable suppliers react fast when manufactured product volumes do not correspond with designed plans or when a products mix differs from the company`s forecasts (Perez, 2013). References Avery, T. (2013, November 18). 2015 Porsche Macan Features and Specs Announced. Retrieved July 26, 2015, from super street network: http://www.superstreetonline.com/features/news/1311-2015-porsche-macan-features-and-specs-announced/ German Trade & Investment. (2014). Industry Overview: The Automotive Industry in Germany. Retrieved July 26, 2015, from www.gtai.com: http://www.ixpos.de/IXPOS/Content/EN/Your-business-in-germany/_SharedDocs/Downloads/automotive-industry-in-germany.pdf Perez. (2013). Suppply Chain Strategies:Which one hits the mark? Retrieved July 26, 2015, from Agile Business Media llc: http://www.supplychainquarterly.com/topics/Strategy/20130306-supply-chain-strategies-which-one-hits-the-mark/ Porche. (2015). Additional Features 911 Turbo. Retrieved July 26, 2015, from Porche Cars North America, Inc.: http://www.porsche.com/usa/models/911/911-turbo/comfort/additional-features/ Young, S. (2013). Porsche Strategy 2018. Retrieved July 26, 2015, from Word Press website: https://wrtg3040mmsjt.wordpress.com/2013/04/25/porsche-strategy-2018/ Read More