The Effects of Supply Chain Management in the Automotive Industry

The Effects of Supply Chain Management in the Automotive Industry

Introduction

“Supply Chain” encompasses the manufacturers, the suppliers, the carriers, the warehouses, the retailers, and the customers. These entities intermingle to achieve the common goal of maximizing the overall value generated. A contemporary supply chain involves not only the flow of material among the suppliers, the manufacturers and the customers but also the bi-directional exchange of information. Additionally, the impact of globalization has emphasized the need for an efficient, cost effective, and time bound movement of goods (Umble, 2003). Widespread acceptance of manufacturing principles, like Just-In-Time (JIT) and lean inventory, has placed greater impetus on the reliability of supply chains. Competition, lower margins, growing customer expectations and rising energy costs fuel interest towards research in supply chain management.

Consequently, fields such as operations research, statistics, and information technology, have become indispensable constituents of the Supply Chain Management (SCM) analysis and design process. Advanced technologies like web services interoperability, Radio Frequency Identification (RFID), and Collaborative Product Commerce (CPC) have emerged as the key drivers in supply chain strategy decisions. Accordingly, SCM has evolved into a discipline which is a confluence of a myriad of fields (Henk , 2003).

Schematic of a Supply Chain

Applications of Supply Chain Methodology

Process improvement, elimination of waste, quality control and innovation are the buzzwords in today's idea-based, design-obsessed economy. In the course of enhancing customer satisfaction, the reduction in order reaction time and the product quality improvement play a critical role and have been proven to positively impact the bottom-line of an organization. Automobile industry is a leader among the other sectors of the economy in the constant updating of products, using advanced technology and high quality standards. Globalization has caused a significant increase in the number of enterprises in different market segments. The growth of new and traditional markets, in turn, caused an increase in demand and interest in the processes in networks of communication and production processes in the automotive industry (Disney, 2003). Increased competition forces manufacturers to quickly and accurately respond to individual customer needs, as long as possible to support the client's commitment to the chosen brand. In today's market environment, it is important that responses be as agile industrial efficient. The "supply chain management" enables companies to achieve this by improving their ability to respond quickly to customer demand, while reducing production costs. In order to accurately respond to regional and individual requirements, you need optimal highly organized system OEMs, suppliers of systems and components, partners, and, of course, customers.

Automotive Industry

Automotive industry has one of the most complex supply chains mainly because of the complicated nature of the end product, number of supply chain partners involved and the geographical locations of supply chain partners. A typical vehicle requires around 5.000 - 7.000 finished parts; and these finished parts in turn consume nearly 130.000 subparts (5). These parts are either manufactured in-house or sourced from multiple supply chain partners across the ...