Smart Car Case Study - Essay Example

? (Assignment) Smart Car: Case Study Introduction Smart car is an innovative concept that was introduced by Micro CompactCar AG (MCC), a wholly owned subsidiary of Daimler-Benz. Formerly it was the joint venture of Daimler-Benz and Swatch. This concept relieves heavy environmental pressure caused by present traffic, and also ensures greater individual mobility. The Smart City Coupe is a two-seater car that meets the needs of travelers to a large extent. The external structure and other features of this car address the mobility problems in urban areas as it is a safe and environment friendly car. The most attractive feature of this car is that it effectively combines driver comfort, safety, and customer choice. The supply chain feature of the Smart Car also becomes the key factor in its market acceptance for it deviates from the conventional practices of manufacture and distribution. This paper will explore the innovative and strategic features of Smart Cars’ supply chain. I Smart Concept and Logistics at MCC The conventional volume car manufacture raised severe supply chain issues which adversely affected the brand reputation of car industries. To illustrate, in olden days, car manufacturers did not given much emphasis on customer preferences but developed car models according to their concepts. Evidently the car models did not match with customers’ actual interests. According to traditional market ideologies, supplier was the king of market who used to govern market trends. Even in modern time, car manufacturers and suppliers exceedingly emphasize on their engineering elegance rather than customer requirements. At this juncture, the MCC Management initiates a ‘customer oriented production concept’ that would enable customers to suggest how they want their products to be configured. The MCC management gives customers the opportunity to specify their car preference. For instance, they can combine two colors of the frame with various colors of the body panels. This way, the company can create an impression of a high level choice even though the product variation choices are kept to minimum. Since the company designs its products according to customers’ choice, to a large extent it can avoid risk elements associated with market demand. Similarly, in traditional car industry, manufacturers did not have a clear picture regarding the time required for the completion of a car manufacturing process (lead-time). In other words, they took comparatively long time to fix lead-time for cars. It was one of the major difficulties in car industries’ supply chain. Suppliers and dealers faced many challenges in the market because of this inaccuracy in production management, and it led to gradual decline in market demand. This paucity of lead-time awareness affected supply process; and it considerably decreased the profitability of both the manufacturers and suppliers. The MCC management recently developed certain strategies that can assist the organization to count lead-time for cars in two weeks. This provision would increase the effectiveness of Smart Cars’ supply chain once it enables the suppliers and other supply chain personnel to involve in production process. According to the Smart Car concept, the MCC management has maintained provisions for the suppliers to co-invest in the production location as well as to take a greater share in final assembling process. This provision would ensure the active supplier participation in the production process also. As a result, MCC can minimize different conflicts in the supply chain and thereby carry out business activities smoothly. Traditional car manufactures did not maintain such practices and it reduced the inter-relation between manufacturers and suppliers. In addition, it is observed that the value added during final assembly in MCC is just ten percent of the production cost price. This practice would indirectly benefit the suppliers and customers since the low level value addition during the final assembly assists the company to reduce the car prices. Unlike in the case of conventional car manufacturing industry, supplier facilities are integrated in MCC’s assembly hall. The MCC management believes that this process may increase the operational efficiency of the company by developing and integrating the Smart Cars’ supply chain with supplier facilities. The MCC earmarked the Smart Cars concept as a strategic learning project and therefore, the management exercised many supply chain experiments in this program. Hence, it is evident that by introducing Smart Concept and logistics at its management level, MCC has tried to address the supply chain issues associated with conventional volume car manufacture. II The Concept of ‘Extend Enterprise’ and ‘Postponement’ While examining Smart Car’s supply chain strategies, one can understand that the concept of ‘extend enterprise’ has largely contributed to the integration of material and information flow. The strategy of ‘extend enterprise’ aims at the further expansion of the organization. Almost all features of the Smart Car are easy to add, both at assembly line and during the lifespan of the car. Therefore, customers can add or remove the required features in future, which is the most feasible aspect of the Smart Car concept. Since the structure of Smart Cars enables the customers to apply their required modifications into the car, it makes considerable positive impacts on the supply chain. For instance, the easily modifiable features of the Smart Cars assist MCC’s designers, engineers, and its suppliers to develop major and minor product redesigns quickly. For instance, the MCC could introduce its first product extension within six months of launch and this activity was a significant indication of company’s future policies. Since new options and features are introduced at rapid pace, it ensures the fashionable feature of the product and thereby helps the management to vie with constant changes. In short, this fascinating feature can help the MCC management to carry out material integration without taking much effort. As a part of its ‘extend enterprise’ concept, MCC launched Smart into its European automotive market where competition in existing channels was rapidly getting intensified. Obviously, MCC ultimately aims at the industry expansion rather than promoting Smart as a new car concept. Hence, the company management also gives great emphasis on unconventional channels and sales processes with intent to create new sales opportunities. As Johnson et al point out, Smart Car concept is characterized with innovative technology and design, increased customer participation, new distribution channels, safety, effective structure, and environment friendly factors. These attractive features add value to Smart concept’s supply chain. The case indicates that Smart Cars’ sales channels keep relationship with customers and sell on a consultative basis rather than a ‘move-the-metal’ basis. The company management employs additional customization opportunities so as to strengthen customer relationship during the period of ownership also. It is identified that the combination of a two or three week lead-time based on the production flexibility as well as direct distribution is a new concept in the automotive market. These strategies assist the organization to ensure effective information flow throughout Smart Cars’ supply chain and thereby boost the efficacy of supply chain operations. As one of the techniques of ‘extend enterprise’ strategy, the company gives priority to the interests of senior citizens, youngsters, and students. So as to integrate material and information flow throughout the supply chain, the MCC’s dealerships are located in highly frequent places in urbanized areas such as shopping centers. This urban area focused business strategy aids the MCC to get information regarding changes in market interests from time to time. In addition, the MCC management maintains smaller sales outlets related to a center in order to increase product exposure and market penetration. Furthermore, MCC’s concept of postponement also largely contributes to product customization and effective factory operations. The Smart centers receive customer orders and pass it to the plant in Hambach where it is processed in accordance with customer specifications. Smart Centers always keep cars in stock for the purpose of display, test rides, promotion, and for ‘takeaway’ sales. Similarly, certain final assembling tasks such as adding special features or light assembly are performed at the centers. While putting off certain assembling stages, the MCC management can efficiently deal with product customization. This single stage sales strategy also benefits the Smart centers to procure their cars directly from the production plant in Hambach; and thus they can avoid difficulties in dealing with a large number of intermediaries. In short, the concept of ‘extend enterprise’ and ‘postponement’ greatly contributes to the flexibility and sustainability of Smart Cars’ supply chain. III Smart Car’s cooperation with suppliers In every organization, there should be well developed cooperation between company management and suppliers so as to promote sale volume. If the MCC management efficiently deals with its suppliers, the firm can easily expand its business to anywhere in the world by replicating the site, its layout, and its supply structure. For this, the firm must provide additional benefits to its suppliers in proportion to the total sales volume. In the opinion of the company management, effective supply chain activities ensure flexibility and just-in-time operation and which would in turn assist the company to trim down transport and logistics costs to the absolute minimum. So as to control the supply chain performance of Smart Car, MCC has limited the number of components supplied by direct suppliers. This strategy would aid the company to ensure the quality of raw materials supplied The MCC management has selected potential suppliers who would help at the site and those who can supply from a distant location. At the same time, the company has to make sure that the selected suppliers operate effectively and timely. From a company’s point of view, effective and uninterrupted production process is an inevitable factor for business growth. In order to ensure uninterrupted production process, there should be continuous supply of raw materials. In addition, the company must be always vigilant in assessing the quality of the raw materials as it may directly affect the product demand to a large extent. Therefore, it is advisable for MCC to establish a separate department for dealing with suppliers. It will help the organization to identify the strengths and weaknesses of each supplier. As mentioned earlier, MCC allows suppliers to participate in the final assembling to ensure quality performance in the supply chain. The suppliers also cooperate with MCC in developing and planning the product. In other words, on the basis of the increased cooperation with suppliers, MCC can control and assure performance in the supply chain of Smart Car. In the case of Smart Car, the company dealers arrange multimedia systems for its customers for selecting their most appropriate car. Hence, the dealers can instantly collect customer order and forward it directly to MCC headquarters. It is the most prominent feature in the supply chain of Smart Car. It is advisable for the dealers to give some attractive offers to customers in association with MCC because that may promote sales volume. In addition to the application of multimedia systems, the dealers must appoint qualified employees who can efficiently clarify customer doubts. Giving great emphasis on suppler relation, the MCC management has invested DM550 million in establishing a dealer and distribution organization. The MCC’s managerial persons must pay higher attention to the execution of the proposed dealer organization. Conclusion From the above discussion, it is evident that MCC has adopted some innovative supply chain practices that are much different from the conventional strategies. Unlike the traditional supply chain practices, the MCC management gives great emphasis on product customization and supplier relation. Similarly, the MCC employs the concept of ‘extend enterprise’ and ‘postponement’ so as to ensure the integration of material and information flow throughout Smart Car’s supply chain. The company puts off the completion of the final assembling process of a car so as to strengthen the product customization strategy. It is also identified that strong and genuine cooperation with suppliers would contribute to the efficacy of Smart concept’s supply chain. Works Cited Johnston et al. The Smart Car and Smart Logistics. Cases in Operations Management. London: 3rd edition, Prentice-Hall, 2003.    Read More