What Are the Key Challenges That Are Brought about of the Global Motor Industry Supply Chain Management - Literature review Example

SUPPLY CHAIN MANAGEMENT OF AUTOMOBILE INDUSTRY Table of Contents Table of Contents 2 Introduction: 3 Operational Concepts used in Toyota: 3 Comparison between American and Japanese supply chain: 5 ‘Lean Production system’ and the benefit and challenges to the motor industry: 7 Challenges faced in the supply chain management of global automobile industry: 9 Environmental concerns related to JIT concept: 11 Conclusion: 12 Reference List: 13 Introduction: The operational processes of the corporate firms are evolving with the increasing competition and rapid changes in the demands of consumer base (Gilmore, 2008). The automobile industry has one of the most dynamic supply chain management systems that are characterized mainly by technological and strategic perspectives. Japanese automobile manufacturer, Toyota is considered as a pioneer of the supply chain management process (Liker, 2008). Their concepts and techniques are being widely used around the world for increasing the competitiveness of the operating systems and developing a better customer service delivery. Concepts such as lean management, automatic loom, JIT, Kanban, Kaizen, etc are all part of the Toyota Production System (TPS). Hoyle (2010) noted that Toyota’s supply chain management processes are mainly directed towards achieving a continuous quality improvement process which can adapt to the changing business environment. However, Gilmore (2008) criticized that implementation of world-class manufacturing techniques (WMT) is based on the ability of the workforce to acclimatize with the concepts and changes in the work structure. These sentiments will be further studied in the following segments of the essay in a comparative manner. Operational Concepts used in Toyota: The Toyota Production System is considered to be one of the most efficient manufacturing systems in the international corporate sector (Liker, 2008). Not only the automobile manufacturing firms but also other production units are also implementing the concepts developed by Toyota. In order to assess the challenges faced by the automobile industry, the key processes being implemented has to be understood and analyzed first. Lean manufacturing forms the basic structure of the operations management process of Toyota (Liker, 2008). In the words of Mishra (2009), lean manufacturing is the process of reducing the waste which can be the result of work overload or imperfect work process. In Toyota, this is called the Muda-Muri-Mura concept (Toyota, 2014). Lean manufacturing process focuses on the individual aspects of the operational process and measures the output in comparison to the input which allows the managers to gauge the quantity of waste being formed or the sum of raw materials being exhausted in the production process and decrease it (Hoyle, 2010). In order to align their manufacturing process with the concept of lean manufacturing, the Kanban card was introduced which helped in connecting the various supply chain units and develop a streamlined production system (Aravindan, Devadasan and Selladurai, 2008). Figure 1: Toyota Manufacturing Process (Source: Liker, 2008, p.2) According to Fine (2009), the two primary strongholds of the Toyota are Jidoka and JIT. Just in Time (JIT) focuses on developing a system to assess the exact amount of products needed, when needed and the number of units that needs to be delivered. Meanwhile, Jidoka is developed for controlling the manufacturing process and preventing over production. Ahire and OShaughnessy (2008) stated that Jidoka is the method of discontinuing the production process through equipments or manual systems. This enabled the company to align the market demand and the production process and connect their internal functions with the market response. The process of Toyota is based on ensuring continuous improvement which allows them to enhance their capability and also control as per the demand of their consumers (Wilkinson and Dale, 2007). The overall operations management process of Toyota can be considered as a cost focused strategy which thrives to develop perfection in every individual functions within the operational process of the company. The process of continuous improvement has been termed as Kaizen (Kelemen, 2009). However, Cao, Clarke and Lehaney (2008) stated that continuous improvement can derail the supply chain management of a company from the organizational goals. Ahire and OShaughnessy (2008) further added that continuous improvement processes is an expensive process and has high risks in context of frequent changes in the work structure that can hamper the overall productivity of a firm. Comparison between American and Japanese supply chain: The differences in the supply chain process is not only based on the style of production but is also influenced by many other factors such as geographic and demographic compatibility with the operational process, market nature, consumer behaviour, organizational capability to support the functional aspects and financial requirements of the supply chain management (Aravindan, Devadasan and Selladurai, 2008). Burrill and Ledolter (2008) noticed that the western supply chain processes are mainly developed in a manner which allows them to identify and cater to the consumer needs by providing new products and services where as the Japanese model of supply chain is more inclined towards the improvement of the in-house process. Relating the supply chain management with strategic planning process, Wilkinson and Dale (2007) stated that it cannot be considered whether the supply chain process is related to cost or differentiation focus based on the geographical segmentation of the automobile industry. Murty and Kumar (2010) further added that the focus of the supply chain is related with the organizational objectives and the market situation. The Asian consumer base is considered to be more price conscious unlike their western counterparts where brand and quality are the main factors (Patel, 2011). Based on this, Patel (2011) opined that supply chain of Toyota thrives towards cost advantage whereas American firms such as Ford or General Motors are trying to create a differentiation in their products by engaging in innovative production processes. For instance, the alliance between General Motors and PSA Citroen has been developed for enhancing their customer offerings (Kelemen, 2009). In a more channelled discussion, Vokurka (2006) mentioned that American operational processes try to ensure optimal utilization of resources based on their acquisitions and adaptability with the technological changes in the operational process. Meanwhile Japanese supply chain process ensures optimal utilization of both existing and newly acquired resources which provides them an upper hand in the cost management process. Also the focus on developing a continuous improvement in the operational function which ensures market compatibility has helped Japanese automobile companies to make them market ready (Lahidji, 2007). For example, the Jidoka and JIT processes help the company to position their products in the market at the right moment and also stop the production process for preventing inventory costs (Patel, 2011). On the other hand, American firms are more focused on inflicting consumer expectations in their products which can reduce the product efficacy but builds greater consumer response in the market (Murthy, 2007). Based on the concept of continuous improvement, many western firms are also adopting concepts such as JIT and lean manufacturing in order to gain a cost and differentiation advantage at the same time. The concepts of supply chain management processes cannot be explored by analyzing their contribution in the overall process of development but by measuring the changes in outcome of the process as a result of inclusion of any particular technique (Deane, McDougall and Gargeya, 2006). Thus, performance of the firms in the international automobile industry can be one of the major factors in assessing the efficiency of the supply chain management of the business. ‘Lean Production system’ and the benefit and challenges to the motor industry: Lean production system mainly revolves around the concept of reducing waste in the manufacturing process in order to develop the process of resource utilisation. The aim of lean manufacturing process is to ensure perfection in quality, reduction of cost and reduction of the lead time for producing and delivering the goods to the consumers (Patel, 2011). The framework of TPS is based on this concept which enables them to manage their operational process in accordance with the customer demands and also shift their production process based on the performance of various markets around the world. Figure 2: Lean Manufacturing Process (Source: Lakhal, Pasin and Limam, 2008, p - 631) The above diagram reflects the lean management process and the aspects included in it. The three dimensional goal of the lean manufacturing process is supported by JIT and Jidoka. JIT is based on continuous flow of information and work, pull system, Takt time concept that connects the various segments of the operational process and helps in enhancing the efficacy of the production and delivery process (Lakhal, Pasin and Limam, 2008). On the other hand, the Jidoka ensures that the production can be stopped at the right moment to prevent overproduction of products and over utilization of the resources. Jidoka also separates the human resources from the technological resources so that manual control can be taken over the manufacturing system if any equipment malfunctions (Lahidji, 2007). At the bottom of the process, concepts such as Heijunka, standardized work and kaizen are implemented in order to establish discipline and a proper routine that will focus on measuring the utilization and efficiency of the entire work process. The overall process develops stability in the operations process. According to Murty and Kumar (2010), the lean management process influences the decisions of the managers by creating internal objectives for all the functional departments. Often it is considered that lean manufacturing process can segregate the consumer wants from the manufacturing process considering the rapid changes in their tastes and preferences. Rocha, Searcy and Karapetrovic (2011) opined that lean management needs a complete support from the top managerial authorities to the base level employees for ensuring complete success that can be considered in practical situations. Another problem in implementation of lean manufacturing is the changes in the processes and the readiness of the employee base may not be aligned. Lean manufacturing process changes the work structure along with the development of new product plans. This can demoralize the employees and also reduce their productivity, thus efficient team leaders and line managers are needed to control the workforce of a company (Burrill and Ledolter, 2008). Challenges faced in the supply chain management of global automobile industry: The international motor industry is one of the most technically sophisticated industries in the world (Rocha, Searcy and Karapetrovic, 2011). The industry needs to regularly ensure the compatibility of their employee base with the technological resources in order to survive in the competitive market. According to Ahire and OShaughnessy (2008), the supply chain processes of the automobile industry is threatened by the rapid development in the technological systems which is giving little time for the employees to adapt to the changing surroundings. As observed by Rocha, Searcy and Karapetrovic (2011), the global motor industry is developing in terms of the number of products being used by the consumers. However, the sustainability of products in the market is a matter of concern for the firms in terms of ensuring the quality of the products. Lakhal, Pasin and Limam (2008) emphasized that markets are getting tougher as firms are trying to make their mark in the international segment but this has increased consumer diversity which demands a better and more flexible supply chain process in accordance with the needs of all the consumer groups. On the other hand, Burrill and Ledolter (2008) stated that global operations also develop a culturally diverse workforce which increases the complicacies in handling the organizational process. The training process in the supply chain management is also another factor that creates problems in the global automobile industry. As studied above, lean manufacturing processes require absolute support from the staff and the top managerial authority. Thus, in the international supply chain process appropriate implementation of lean manufacturing can be problematic. Rocha, Searcy and Karapetrovic (2011) noticed that the volatility in the supply chain and management process is increasing with the expansion of the global market. As new options are available in the market, customer loyalty has decreased in the past few years (Burrill and Ledolter, 2008). This has also increased the fluctuations in the supply and demand of the consumers creating more need for Jidoka in the operational management process of the firms. Another problem faced by the global operations management process of the automobile industry is the supplier networks in the global industry. The supplier process and connections of the global business place are developed considering many influential factors such as the export and import regulations, the political restraints, currency fluctuations etc (Kelemen, 2009). Apart from these, quality is also a major issue in the selection of suppliers that can reduce the significance of the supply chain process. The cost of operations in the business processes are also a major consideration in the business process of the firms (Hoyle, 2010). The geographical and infrastructural facilities of the supplier locations influence the choice of the companies operating in multiple segments (Vokurka, 2006). Environmental concerns related to JIT concept: JIT although is considered to be one of the most effective supply chain concepts of the business processes, but it is also criticized for its limited of environment friendly approach. According to Ahire and OShaughnessy (2008), the accessibility of the suppliers with multiple markets has increased the production rate in the automobile industry and has also increased the rate of emissions in the business process. Further, the growing production process also increased the logistics of the business firms which is not environment supportive. Apart from this, the scrap and waste management concept also resulted in the increased usage of the energy resources which reduced the development of the firms. Rocha, Searcy and Karapetrovic (2011) mentioned that JIT concept focuses on connectivity among all the staff which requires increased usage of telecommunications and other communication means. The excessive usage of energy is in a manner nullifying the financial benefits of the firms gained from extra waste reduction. Another environmental concern related to JIT is the wastage of time and money has not considered aspects like time lost in traffic jams or materials wasted during transition (Burrill and Ledolter, 2008). As these factors are not considered in the interim JIT planning process, these wastages are also not part of the wastage reduction process and hence are disposed off in the surroundings which are also not environment friendly. Conclusion: Supply chain management of the global automobile industry has evolved with the changes in concepts and practices of production system. Toyota is one of the most hyped names in context of establishment of a perfect supply chain management process. Toyota mainly focuses on creating cost competitive advantage by reducing the cost of operations and the development of an inter-connected and error free production system. Lean manufacturing defines the underlying principles of the supply chain management of TPS. As lean manufacturing includes various other concepts that relate to the final outcome of reducing waste, achieving quality and reducing the time of production, numerous other techniques have been developed to support all the goals of the lean manufacturing process. However, in comparison to the American supply chain management, the Japanese supply chain process is more focused on creating internal excellence to develop a steady delivery process. Meanwhile the American supply chain process is developed in a manner to be compatible with the consumer expectations. In a global context, the increasing fluctuations in the market demand is one of the major problems faced by the automobile firms managing their production and supply process. Reference List: Ahire, S. and OShaughnessy, K., 2008. The role of top management commitment in quality management: An empirical analysis of the auto parts industry. International Journal of Quality Science, 3(1), pp.5–37. Aravindan, P., Devadasan, S.R. and Selladurai, V., 2008. A focused system model for strategic quality management. International Journal of Quality & Reliability Management, 13(8), pp. 79-96. Burrill, C.W. and Ledolter, J., 2008. Achieving Quality Through Continual Improvement, 3rd ed. New York: John Wiley & Sons, Inc. Cao, G., Clarke, S. and Lehaney, B., 2008. A systematic view of organisational change and TQM. The TQM Magazine, 12(3), pp. 186-93. 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