Management for Supply Chain

Questions: 1. What are the challenges in concurrent product and supply chain design in regards to key characteristics of the development chain at Porsche? 2. How can design for logistics concepts be applied to (i) control logistics costs and (ii) make the supply chain more agile/responsive and (iii) more efficient for the new Porsche 911? 3. How can the postponement concept and repositioning of the push-pull boundary assist in developing an Assemble-To- Order (ATO) or Build-To-Order (BTO) manufacturing strategy for the new Porsche 911? 4. Can inventory management and risk pooling theory be used to explain the rationale for an ATO strategy for a new Porsche 911? Answers: Introduction Porsche is a German car manufacturer. The company primarily focuses on the manufacture of Sports cars, SUVs, and sedans. However, it also possesses operations in other fields as well. The company was founded by Ferdinand Porsche in 1931 and has since then evolved to become one of the leaders in automobile manufacturers. The headquarters of the company are located in Stuttgart, Germany and owned by Volkswagen AG. The company has been the creator of a large number of iconic cars and as such, the lineup includes 911, Panamera, Boxster, Cayman, Cayenne and the Macan. Porsche has for long focused on the quality of its cars and as such, has undertaken a large number of steps in order to make itself distinct from its competitors. The brand value of the company is also linked to the various successes in the various fields including customer satisfaction. Porsche as such has evolved to be one of the most recognized names in the automobile industry with many models becoming synonymous with spo rts cars. Discussion (1). Porsche has had a well functioning strategy ever since its inception. Porsches supply chain strategy is a lean strategy that aims at understanding the customers needs and then acting accordingly. The lean strategy is one that provides less time for the development of the product and putting it out to the market. The strategy then evaluates the customers reactions and shortcomings in the product and then proceeds to correct those(Blanchard, 2010). The supply chain is thus a system that makes it easier to identify the orientation of the customers. The success of the supply chains can be traced by looking at the numbers that speak volumes about the companys success. In 1992, the number of cars sold by Porsche was 15,083. By 2012, the number had risen to 151,999. The turnover of the company also increased manifold during this period. While the annual turnover in 1992 was 978 million Euros, by 2012, it was 13,865 million Euros. The supplier base of Porsche consists of 650 suppliers, 22,00 0 active part numbers, 750 dealers and 125 markets ("Carbon wheels for Porsche 911", 2012). In addition to this, Porsche has a huge number of after sales service stations and also a large number of spare parts manufacturers and suppliers across the world. While the system might provide the company with the ability to formulate a supply chain that is flexible and cost efficient, the main challenge that it provides is in the department of the development chain. The challenge that the company faces due to a lean strategy is that the company is not able to develop a new product to the utmost level (Fernie Sparks, 2009). While Porsche has been for long a company that relies on innovation, it needs to create products that are not just new to the market but also possess a high quality. The challenge is created because of a short throughput time. Because of a tight timeframe in which, the company is supposed to manufacture and launch products; it misses out on certain important departments . The new cars may be developed but the problem in this process is that since the company goes to market them as soon as they are created, the shortcomings of the car might be overlooked (Weele, 2010). In such a case, while the company may reach out to the customers later after the units have been sold, the damage to the companys reputation is already done. The impact on the development chain is indeed serious as it is one of the factors that highly affect the companys overall brand image and well being(Gattorna, 2009). The challenge of maintaining a high product quality in a short time is indeed serious as the company has to be constantly alert about each and every unit going out of its manufacturing units. The company also faces challenges in its supply chain system due to the limited time frame. The assessment of the supply chains is not done properly due to such a strategy (Burt, Starling, Dobler, 2003). The supply chains are all treated on the same level and as a result, the c ompany does not locate which chain to be given more priority according to the number of customers, the value etc. All in all, the challenges that the company faces is because of the limited time frame in the lean marketing system. In such a case, the companys main challenges are maintaining the quality of the concurrent product and locating the efficiencies of the supply chains. (2). (i) Porsche is a company that has a considerable presence in a large number of countries where it is a major player. Also, Porsche is a major player in all those countries. In such a case, Porsche cannot take any matter lightly. Porsche must aim at keeping its hold over each and every market. In such a case, The company needs to make its presence felt very strongly in every location and as such, must make considerable spending in various sectors (Hoek, 2006). The logistics department of Porsche, which involves the activities relating to the procurement, transport, transshipment and storage of goods is thus an important factor that affects the company as a whole. The logistics of Porsche accounts for around 30% of each products landed cost. Porsche can use a few of the design for logistics concept in order to control its logistics cost. The first step in this is in the operational sector. The company must at present develop a team to monitor the transportation costs. the company mainl y focuses on the production and does not take into account what steps to take in matters of transportation (Hugos, 2003). However, that is an important factor as that would significantly reduce charges. Also, Porsche can create a system of automated compliance system that would reduce human errors and also possible scams in the companys legal dealings. (ii) Porsche follows a system of a lean supply chain and as such needs to make its supply chain much more agile. However, Porsche cannot do away with its lean system as it is one of the most important systems in the modern age. And since Porsche has for long followed a procedure of a lean system, it cannot do away with it (Lean supply chain, 2006). In such a case, the company must focus on creating a hybrid system. While a lean supply chain management focuses on the output of the company and looks for anything that does not add value. In such a case, the lean system is one that eliminates waste and does not allow anything that would just prove to be a waste of resources and energy. The agile system, on the other hand, creates a supply chain that is responsive to the customers (Mentzer, 2001). An agile system is also, as the name suggests, able to work fast and gain the market share by quickly meeting up with the needs in the supply chains. The logistics are an important factor and th e design for logistics concepts can provide the company with the much-needed idea of how to create an agile system. The part of the design for logistics that needs to be taken into account in order to facilitate the formation of the agile system is the department of delivery (Myerson, 2012). The delivery system, when monitored, would provide the company with the exact steps to be taken in order to make the essential changes that would provide a quick delivery and satisfy the customer. The company should also make few changes in its after sales departments in order to encourage the process. (iii) The logistics cost is the prime factor when it comes to creating an efficient system for any company. The logistics cost of Porsche makes up for around 30% of the landed cost of the companys products (Packowski, 2014). The company should formulate a process that monitors the total costs and wastages that are incurred in the various delivery processes. The company can then proceed to form a system that maintains the department in a manner that takes into account the processes that would provide the least expenditure in the transport and would also provide the company with the means to locate where to manufacture in a manner that the overall expenditure of manufacture and transport would be kept at a minimum (Rudzki, 2006). (3). The Porsche 911 is one of the flagship cars of the company and as such, it is continuously evolving. In such a situation, the company needs to identify whether it follows an Assemble to Order or Build to Order strategy. If the company uses the postponement theory, building an Assemble to Order is one of the best ideas to be put into place (Schniederjans, Schniederjans, Schniederjans, 2010). In the postponement theory, the product is one that can be manufactured that can be modified at a later point. In the case of the 911, Porsche has for long been able to mold the car to the preferences of the modern customer. In such a case, the postponement theory works because the model of 911 is subject to constant change. However, once a new model is launched, the customers would like to add the new features to their cars that are of an older model. In such a case, the idea of creating a product that can be modified in the future holds much value. Since the vehicles are now able to be modified , the company can then follow the Assemble to order policy to create the spare parts of the car separately ("Special Topic Forum on Resources and Supply Chain Management", 2013). In such a case, the company stands to benefit financially from the sale of parts. The push-pull system is one where the information and products are either pushed or pulled. The company can follow a process of push-pull strategy where they push the products towards the customers or the customers pull the products. Since the 911 has been such an iconic car, the car has always been pulled by the customers. However, a build to order is not a very viable option as the company does not stand to benefit financially from it to a large level. Utilizing a build to order strategy would only provide the company with the capital that it gains from the sales. However, the company needs to keep in mind the idea that the after sales are a large department from which the company sustains itself. (4). Inventory management is one of the prime factors in a company that decides to follow a build to order strategy in its manufacturing (Wincel, 2004). The inventory management refers to the management of the various things that go into the manufacture of the product. The inventory management for the Porsche 911 needs to be one which is exclusive. Since 911 is a one of a kind the car, it is quite practical to manage its inventory individually. The inventory of the car can thus be one that is updated frequently. The inventory management should monitor for the spare parts and other things that would go into the making of the car in an assemble to order system (Waters, 2007). However, it should also look for parts that are not in use anymore and can thus be used for other purposes. The risk pooling is thus an important factor in deciding the manner in which the inventory is supposed to be managed. The management of the inventory is dependent on a large extent to the relative demand in the l ocation where the inventory is located. In such a case, the risk pooling would provide the company with an ideal view of the demands in the various locations. The company can thus proceed to form an inventory based on what needs to be taken into account. Conclusion The supply chain management of Porsche is a lean structure and has been successful to date. However, the company needs to take into account the various factors that would promote its adaptation and evolution in the industry. Porsche is one of the most recognized brands in the automobile industry and the 911 is an iconic model. However, this means that the quality and supply chains along with the services need to be made even stronger in order to maintain the value of the vehicle. The perfect balance between the lean and the agile system can be achieved when the company formulates a strategy that makes its supply chain perform utilizing the resources to their best efficiency. References An, C. Fromm, H. (2005).Supply chain management on demand. Berlin: Springer. 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