Managing the Supply Chain in the Auto Industry - Essay Example

One economic aspect of the auto industry that I find most interesting or significant is about managing the supply chain. This is a very important aspect of the auto industry due to various reasons. It should be noted that various components are required in the manufacture of an automobile. These components vary and they are often obtained from different suppliers. This means managing the supply chain of the various components. It is important to ensure that the right components are delivered at the right time. It is imperative to establish if the supplier is capable of meeting the demand for the components required at a particular period. This is meant to ensure that there are no delays that can witness in the manufacture of the automobiles. Careful management of the supply chain entails that the automobile manufacturer will be in a better position to meet its target. Essentially, the business aims to make profits and this can be possible if an organization is capable of meeting its demand at a particular time. There should be no loopholes in the supply chain for the organization to operate effectively and efficiently.
The other reason for managing the supply chain is related to the aspect of maintaining quality. Different companies can supply the same component required in making automobiles. However, the likely challenge to be encountered is that the quality of the components supplied by different suppliers may differ. Some parts supplied may be substandard and this can compromise the quality of the final product manufactured. The automobile manufacturer must outline the standard expectations about the quality of the components supplied by different suppliers. Ensuring high-quality components supplied can be achieved through establishing a quality assurance department within the manufacturing plant that would be responsible for ensuring that the parts supplied meet the standards. Defective components can be rejected and if needs be, these can be replaced with quality products.
The other reason why managing the supply chain is important is about creating a good relationship with the suppliers. This is very important since this means that aspects such as pricing can be negotiated. A reputable car manufacturer can negotiate the prices of different components that are used in manufacturing automobiles. This is very important since the best deals can be achieved. Favorable prices of the components required for making cars mean that the final prices of the ultimate products are likely to be favorable to the targeted customers. The price of the final automobile offered in the market determines the success or failure of its performance in the market. Therefore, it is essential to create favorable conditions during the procurement process of the components required in manufacturing cars to be in a position to favorably influence the final prices that can be charged. This also plays a pivotal role in determining the viability of the organization in its operations given that the automobile industry is characterized by stiff competition. Read More