This paper seeks to explore Company X’s strategic approach to logistics management, customer value, and understanding the inspiration of supply chain in the company. Hypothetical contexts linked to the study are supply chain patterns, inbound production logistics, tool and operator management, and spare parts logistics. The paper majorly looks at how supply chain enhances customer value at Company X.
Company X is a sales and distribution business who predominately deals in the automotive spare parts sector. It is a globally recognized organisation and has an extensive global supply base. Suppliers lead times can range between two days to six months, highly dependent on region location and production waiting time. Company X is based in the UK and has gained the ability to supply around 30,000 automotive spare parts to an extensive network in approximately 130 countries. The annual sales mix is 70/30, Overseas vs. UK/Domestic market. The company outsources a high percentage of its manufacture. Region port consolidation then occurs and importation to the UK. All goods are good in two primary warehouse sites locations ready to be picked and processed into orders as per our customers demand. Multi- modal transportation is of particular importance to Company X, it relies on their services in both upstream and downstream flow of product and services.
In the manufacture of the spare parts, Company X allows some waiting time based on the nature of the produced parts. Moreover, the diverse nature of Company X sourcing program is influenced by some bullwhip effect on demand which has enormous implications on the factories production and ability to supply within timeframes.
Principles of Automotive Supply Chain Systems
Company X is more focused on strategic supply chain management (SCM) of functional improvement and achievement. Strategic logistics management is a significant source of customer satisfaction and competitive advantage. As a new model, SCM focuses on dealing with physical product and data which is associated with both high-point suppliers and low-point customers for value generation (Abdulrahman, Subramanian, Liu, and Shu, 2015, p.316).
SCM refers to the association of suppliers and customers to offer quality customer service at reduced charges. Besides, the management of relationships is the core focus of SCM. Nonetheless, suppliers and customers are different in SCM. Logistics achieves the demand of customers by offering products on time and at a low cost (Lysons and Gillingham, 2003, p.29). Maintaining the logistics of physical goods and information and providing end customer value is the fundamental aspect of SCM.
The SCM strategy and competitive advantage have gained popularity recently. An explicitly defined, the activity-oriented, well-reserved, well-organized, quantifiable strategic plan provides a valued benchmark in the global financial setting (Larson and Halldorsson, 2004, p.24). Strategy binds the organization to the outside world. The SCM strategy is associated with the leadership of the company. Ayers and Odegaard, (2017, p.26) argue that active organizations operate with one-plan. Overall the plan of SCM and logistics should concentrate on the functions, processes, and actions of supply chain management objectives.
Company X’s supply chain strategy is the source of its success because being an automotive manufacturer the company focuses on shipping vehicle components to be amassed on-site by the domestic manufacturing plants (Thomé, Scavarda, Pires, Ceryno, and Klingebiel, 2014, p.94). The reason is that import duties in relation to completely knocked down (CKD) stock usually are considerably less than for the complete products. Also, the components tend to occupy less freight space hence the reduction of freight costs. Chopra and Sodhi (2014, p.74) assert that Company X manages to supply the right quality of the automotive spare parts at the right time, in the right quantity, and at the right price. Also, for an adequate supply chain, Company X engages in strategic management of the movement, storage, and procurement of its raw materials and spare parts. Also, Company X manages business-based information flow (Govindan, Soleimani, and Kannan, 2015, p.617). It also the company partners with successful marketing channels, which enhance its profitability because of engagement in cost-effective marketing practices.
The supply chain partners working with Company X focus on the delivery of superior value in its automotive spare parts, which reach the end customer at a considerable cost. Company X’s supply network includes the local vehicle manufacturing plants and warehouse management, where spare parts are received once they are shipped from the UK to the overseas (Schönsleben, 2016, p.16). Then, after the parts arrive at the local manufacturers, customers acquire fully assembled pieces in the form of cars.
Company X Supply Chain
Mining of raw materials Manufacturing Shipping of parts Assembling of the parts
Therefore, after the acquisition of materials, Company X transforms them into automotive spare parts, and finally, they are assembled into vehicles by the local vehicle manufacturers (Abdulrahman, Subramanian, Liu, and Shu, 2015, p.316). In the company, there are support activities conducted by the human resource management, technology development, procurement, inbound logistics, operations, outbound logistics, marketing and sales, and the provision of service (Drucker, 1962, p.268). Company X ensures the conduct of value chain in the distribution of the manufactured spare parts. Also, the company makes transformations in its operations depending on the changes in technology and society, therefore the ability to meet the market demand. Company X’s facility structure, information, material handling, transportation, and inventory management enable it to engage in effective supply chain management (Boysen, Emde, Hoeck, and Kauderer, 2015, p.116). Indeed, Company X’s waiting time, capacity, and delivery of the automotive spare parts are performed through the active distribution channels.
The Integrated Logistics Model to Underpin Waiting Time, Capacity, and Delivery
Company X engages in production logistics processes and trade order processing inbound production logistics (Wang, Wiegerinck, Krikke, and Zhang, 2013, p.873). The ideal and alternatives in automobile manufacturing need some flexible production and personal allocation of the spare parts and units. Company X engages in Justin-sequence kind of production process. The spare parts for every single vehicle are produced in unique production locations. The rapid distribution of spare parts is an essential aspect at Company X since it enhances an active after-sale service, and a vital element for consumer gratification (Christopher, 2013, p.23). The variety of components and parts to be stored in stock at Company X is extremely large due to the vast range of vehicle models and personal configuration alternatives. Besides, Company X ensures that there are ready replacement parts for all the cars for a long duration. It is possible for company X to supply original spare parts for vehicles that existed in the past, for instance, 30 years ago. Company X has also launched a major project for the advancement of the company’s spare parts logistics (Caniëls, Gehrsitz, and Semeijn, 2013, p.136).
In recent times, Company X has introduced the after-sale program to its outlets and areas of operation in 130 countries. The project focuses on the improvement of spare parts made accessible in the entire network, minimize the operation cost and the inventory levels of the spare parts. The project also aims at an increased general parts business performance (Estampe, Lamouri, Paris, and Brahim-Djelloul, 2013, p.253). The after-sale parts program also focuses on the standardization and integration of the spare parts logistics procedure in the whole supply chain including:
The general supply chain process from the orders placed by the car dealers to the process followed in making payment.
Projection and planning of the future demand for spare parts.
Linking all partners to the spare parts logistics structure.
Coordination of warehouse in the case of some incoming products to the outgoing stock inclusive of annual stocktaking and stock transfer (Min, 2015, p.31).
The order pickers at Company X have to be confident that there is precise and elastic control of original parts logistics.
There should also be maximum permanence for uninterrupted.
Company X’s automotive spare parts logistics entail the projection of the demand for the parts, its acquisition of materials, technology, capital, information, and workforce that is necessary for satisfying the particular demand. Company X also optimizes the stock production based on customer requests (Davis Jr. and Manrodt, 1992, p.213). To gain its competitive advantage, Company X engages in the differentiation of its products.
Management of time or waiting time is a significant logistic activity, which is carried out at Company X in response to the service demand by customers. Besides, Company X has the capacity to schedule its resources and manage them effectively to prevent waste. The distribution of the automotive spare parts is also based on proper management and adherence to right practices (Johnson, Scholes, and Whittington, 2008, p.34). For Company X to meet its customer requirements, it conducts all the three logistic activities together. This helps the company to yield the total gain for its manufacturing process.
The general supply chain network of spare parts is associated with logistics departments of Company X. The company has strong capabilities and skills in automotive logistics, which enhance its effectiveness in the global functioning network. Company X is always ready to offer quality and effective services through the provision of complete support and knowledge and leveraging their capacities (Ross, 2015, p.27). The management of Company X and the distribution of automotive spare parts need to meet various requirements in relation to the logistics of the automotive sector.
Based on the STEEPLE framework, it is clear that Company X has been focusing towards the accomplishment of its business goals through being social, politically, environmentally, economically, and technologically responsible (Govindan, Soleimani, and Kannan, 2015, p.616). The company ensures that the production of automotive spare parts and their distribution is done in ways that do not violate the set rules and regulations. The company pays for all charges that are legally required in all the nations of its operations. It also ensures the payment of costs like insurance for its adherence to the legal, operational requirements of an automotive company. Also, the company is cautious to avoid any practice, which might cause harm to society, for instance by reducing its waste and recycling some of it. The delivery of spare parts is done through advanced technology to reduce the consumption of resources, such as energy and water (Davis Jr. and Manrodt, 1992, p.213). There is the conduct of online communication with customers or the local vehicle manufacturers to enable the company to offer value to its clients. Indeed, Company X is highly improved and committed towards the realization of a sustainable business based on its operations across all the 130 nations.
Company X runs a global or international global supply chain system. It operates a horizontally unified supply chain; therefore controlling it’s the major part of its operations. The integrated logistics enable the company to realize sustainable, strategic, and competitive advantage (Abdulrahman, Subramanian, Liu, and Shu, 2015, p.318). The joint logistic process involves the transportation of the spare parts, effective handling of the parts, and communication of every detail pertaining to the manufacturing and distribution process. There are other logistics activities like inventory management and material handling.
The integrated logistic model as followed by Company X ensures that all products are attached to their respective activities. This model has enabled Company X to realize some growth on the consumer awareness and the concept of marketing (Govindan, Soleimani, and Kannan, 2015, p.617). There is also the introduction of an online system of provision of services to customers, therefore, making the communication between Company X and its clients useful. It also becomes possible for the company to produce the spare parts and cover the lead time of two days to six months without any failure. Value addition is another aspect of the integrated logistics model at Company X, which enable consumers’ perception regarding the value of spare parts through the formation of economic utility (Shi, Liu, Shang, and Cui, 2013, p.702). Company X enhances economic efficiency in the form of place, time, possession, and form utility. The model also enables Company X to function effectively based on its service and financial perspectives. The company is able to save on its inventory carrying costs, transportation, warehousing, and logistics costs. The integrated logistics costs are also controlled in every department at Company X through an effective method. Marketing practices of the company are done with the aim of informing the potential customers about the spare parts, price, and location.
The integrated logistics require money for them to be active and focus on reducing the entire operational cost. For effective budgeting at Company X, the logistic manager prepares a detailed budget, which explains the need for money and areas where it would be used. The company also engages in some activities which help in the realization of the effectiveness of services (Hartmann, and Moeller, 2014, p.287). Order cycle time at Company X is also reduced similarly with the retail inventory range, and the warehousing wants. In the case of an error or mistake into a customer service advantage, Company X handles the issue through logistic response recovery. Effective consumer response is implemented for there to be the reduction of order cycle period by the company (Shi, Liu, Shang, and Cui, 2013, p.702).
Company X mobile computing solutions offer maximum support to its production processes, minimize error and failures rates, and enhance uninterrupted manufacturing (Dekker, Pinçe, Zuidwijk, and Jalil, 2013, p.541). Company X realizes an increase in return on investment (ROI), promises consistently improved product quality and is confident that deliveries and deadlines are accomplished. This is the reason why Company X as an automobile manufacturer operates under great value on fail-safe and reliable industry computers. Nonetheless, automotive manufacturing is a highly demanding sector for computing hardware (Rushton, Croucher, and Baker, 2014, p.31). Besides, in Company X, the terminals are wide-open to substances that tend to be profoundly hurtful for electronic gadgets. Carbon is an example of content affecting the production of spare parts at Company X. That is why the produced parts are generally sealed against water and dust in line with a fortification class, promising flawless conduct even in polluted or moist environments (Sundin and Dunbäck, 2013, p.2). In the distribution of the produced spare parts, Company X has to incur some cost.
The distribution costs include the significant fright costs (Van Weele, 2010, p.34). Depending on the volume of parts transported from Company X, the distribution cost also varies. Among the distribution costs at Company X are IT costs incurred in the process of management of the automotive supply chain operation. There are also transportation charges from the company to the warehouse or local automobile manufacturers’ destinations. Other costs include the inventory carrying costs, packaging, service factors, miscellaneous expenses, and insurance cover, especially for the freight (Lai, Wong, and Lam, 2015, p.448). The spare parts are customarily transported through water, therefore the shipping cost. The distribution cost also varies based on the volume of spare parts supplied. Also, charges are calculated based on the distance covered and the demand rate.
Other costs incurred at Company X include the holding costs, acquisition costs, and cost of stock-out, which is incurred the moment spare parts are supplied to the vehicle manufacturers (Azevedo, Govindan, Carvalho, and Cruz-Machado, 2013, p.137). There is also the storage cost, especially for those spare parts remaining in the warehouse. Company X also incurs the administrative costs and labour costs in relation to the inspection and handling of the elements while they are distributed (Harrisonand Van Hoek, 2008, p.17). The stock-out costs at Company X are spread to the cost incurred for any action taken in relation to the spare parts that are distributed. Also, the charges for the transportation of spare parts are directly incurred by Company X.
The trade-off decision is made at Company X based on the cost incurred during the production process. In the case of delay in the acquisition of raw materials, this influences the waiting time, capacity and delivery of spare parts to the required destination either at the UK or in the overseas (Qrunfleh and Tarafdar, 2014, p.349). In logistic planning, Company X focuses on minimizing the impact of distribution costs. The company reduced the number of depots in its logistics system although this aspect increases the local delivery cost.
Company X is an automotive spare parts manufacturer operating and distributing the spare parts in around 130 countries. The company’s logistics and supply chain strategic focus on the provision of services, which meet its customers’ needs. The company focuses on the management of its supply chain in a manner that reduces the wait time, enhances the company’s capacity, and improves the delivery of spare parts to the vehicle manufacturers in the UK and overseas. For the management of its supply chain and logistics, Company X focuses on meeting the market demand and ensures the provision of spare parts to the customers at the right quality, quantity, price, and place. The company’s manufacturing decisions are made quickly with the focus of providing quality spare parts. The company incurs distribution costs in the form of transportation charges, packaging, IT costs, miscellaneous expenses, carrying costs, and insurance costs since the spare parts have to be transported through the water. Company X incurs some shipping costs. The company also ensures access to spare parts for the vehicles which were manufactured even in the past through the volume of production of spare parts. Therefore, Company X incurs warehousing costs and storage and maintenance costs because of the retention of spare parts for a long duration. Company X integrated logistics model helps in its competitive advantage, which is based on its differentiation. Also, Company X conducts various primary logistic activities such as product management, transportation, and communication among others. The company manages its time, ensures effective management of resources, and delivers the spare parts through the appropriate distribution channels. Indeed, for the realization of the intended value and gains, Company X integrates all the three primary activities to its entire production system. Nonetheless, Company X logistics and supply chains have a significant influence on the organisation’s ability to deliver its products to its customers.
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