Relationships AUTOMOTIVE SUPPLY CHAINS ‘HOW CLOSE IS TOO CLOSE?’
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Transcript of Relationships AUTOMOTIVE SUPPLY CHAINS ‘HOW CLOSE IS TOO CLOSE?’
RelationshipsAUTOMOTIVE SUPPLY CHAINS
‘HOW CLOSE IS TOO CLOSE?’
Automotive Supply Chains
JESSICA LOMATH
ADRIAN SAMARASINGHE
HANNAH SUGRUE
ANIRUDH SUNEEL
Overview
Traditional (pre - 75)Nature of competition - gentlemanly, friendlyPressure - low/medium, steady, predictable
Stress (72 - 85)Nature of competition - closed but deadly, chaoticPressure - high/unbearable, volatile
Resolved (82 onwards)Nature of competition - closed, some collaboration, strategicPressure - medium, some sense of relief
Partnership (90 onwards)Nature of competition - collaboration, tiering, still dynamicPressure - very high, predictable
Lean (late 90s?)Nature of competition - global operation, local presencecontribution to product technology, organic growth, mergers & acquisitionsPressure - very high, self imposed
Lamming’s 5 phases of customer relationships in the automotive industry
Two Approaches to Supply-Chain Design
TRADITIONAL APPROACH BY OEMObjective – lowest purchase price
Arms-length, adversarial relationships
Short-term contracts awarded using competitive tendering
Multiple suppliers for every item
Control of technology and product design retained by OEM
Large purchasing and logistics administration costs
If performance is unsatisfactory the contract is terminated
Very large supply base
PARTNERSHIP APPROACHObjective – lowest cost of ownership
Open relationships with trust
Longer term contracts awarded after lengthy evaluation process
Single or dual suppliers for every item
Design of sub-systems devolved to individual suppliers
Reduced administration costs but more effort developing partnerships
If performance is unsatisfactory the customer help develop the supplier
Very small supply base
What is a tier 0.5 supplier?Three stages in the development of capabilities of tier 1 suppliers:
Tier 1 basic
Tier 1 synchro
Tier 0.5
Advantages and risks of tier 0.5
Advantages
Supplier gets to expand its scope.
Downsized complexity of logistics operation.
Modular designs
Optimised designs of modules and increased quality consistency (50ppm)
Work together with customers to reduce cost.
Shorter lead time.
OEM is less likely to switch suppliers due to established relationship and trust.
Advantages and risks of tier 0.5
Risks
The costs associated with transforming into a tier 0.5 manufacturer
Increased management costs and complexity due to greater tasks.
Relocation of supplier.
Risk to core component business.
Possibility of OEM imposed suppliers.
‘How close is too close?’
GABRIEL RAMOS MAIA
IARA SANTIAGO BRAGA
Context
Company Top Line Inc. Customer Dynamo
Tim Tree, senior VP of Supply Chain Management of Top Line Inc.
Analyse this invitation
Background Situation of the firm two years ago :
Financial ruin;Quality levels;Productivity;Delivering the product.
Top Line only survived because of 7 patents that protected the company`s key processes and product technologies.
For the firm to survive, Tim and his team managed to improve the customer service capabilities.
After the feedback Top Line embarked in a total quality campaign coupled with a lean logistics initiative.
Results and Consequences Results:
Quality defects dropped to 250 parts per million.Delivery performance 98% on time.Productivity increased by 15%.Sales increased by 30%.Market share of global market increased by 8%.
Consequences:Supplier of the Year awardKey Supplier status by Dynamo
Conclusion Conclusion:
Tim is not confident that Top Line can live up to the new challenges because there are some tools that the company is not accustomed to doing. ◦ Communicate information in a real-time;◦ Share technology;◦ Integrate and plan production schedules; ◦ Dedicate resources to a costumer.
Opportunity to grow Top Line
Opportunities
Growing and learning with a consolidated partner
Improving processes, capabilities, and customer
service
Technology, operational and planning gains
Threats
Not able to accomplish the challenges loss of trust
Dynamo would have access to Top Line technology and patents
A failure could risk all the past 2 years improvement – Dynamo is
the main customer
Tim should accept the challenge. It is the most risky option, however, the collaboration is the future of supply chain. This is a unique opportunity of integration,
and refusing the invitation could mean fall behind competitors.
Recommendation
No
Conservative position
Other partners to
replace Dynamo demand
Improve capabilities to
possibly become a close partner in the future
Yes
Risky position
Spend all the effort
necessary to live up to
expectations
Resources, time and teams committed to
Dynamo
Increase trust in
Dynamo
Summary
ActionsHow to guarantee a successful partnership:
Spend enough resources
Support from high management
Negotiation to possible shared goals – specially in the beginning
Arrange frequent meetings with Dynamo
Try to achieve reciprocal interdependence: too much dependence is not healthy