Application of Supply Chain Management to the Expansion of Geely Auto

Supply chain management has become so crucial to the success of companies nowadays as described by Nada Sanders (Sanders, 2011). Majority of the world’s top brands owe their success to the exceptional management of their global supply chains. Supply chain management (SCM) can, therefore, be defined as the collaboration and management of the flow of information, products, as well as funds in the entire supply chain. For a strong successful SCM, these activities must be well coordinated to flow seamlessly without any alteration. The supply chain thus defines refers to the network of all the firms and organizations involved in the production and logistics of the final products to the final consumer (Sander, 2011:3). This paper, therefore, explores the application of Supply chain management to the expansion of Geely Auto, which plans their first production line of an Electric taxi in Coventry.

  The supply chains required by businesses can be both internal and/or external. The internal supply chain entails the company operations, performing works on products whereas internal supply chain involves supplying of raw materials, parts and equipment and suppliers for the organization. The figure below demonstrates a simple supply chain:

For an organization to claim to be successful or on the path to success, efficient and effective supply network must be designed properly. For global coverage, the organization must be prepared to undertake designing complex supply chain network.

Designing Supply Chain Networks

Geely auto will have to be creative in planning, designing and developing sustainable supply chains network. Their objectives will be to develop plants and warehouses with an aim of incurring the least cost given that this is their first production line in Coventry for an electric taxi. This is essential in establishing the appropriate location of production lines and their distribution warehouses (Showroom) and the best strategy for distributing the taxi to the rest of UK. This location must accessible to both Geely Auto premises and the target clients (Amiri, 2006; 568).

Sanders (2011), describes two important types of supply chain network. They include the physical structure of the network and the management of the network. These two are intertwined completely. On further analyzing the physical structure, Sanders (2011), notes the following important elements:

a.   The number of entities that are part of the supply chain: Geely Auto has to establish the appropriate number of entities involved in their successful production depending on the complexity or ease involved.

b. The structural dimensions of the network:  This involves the number of tiers in the supply chain and members making up each tier. Geely Auto will also to evaluate the number of firms to be involved in each tier. Whether have a few tiers with many members or many tiers with few members depending on what suites the production of the taxi.

c. The number of process links across the supply chain: The complexity of the supply chain depends on the process links to be managed. Such process links include demand management, customer relationship management among others.

Factors influencing the distribution Network Design

Chopra (2001), discusses further the factors that influence the structure of the distribution network:

i. Response time:

This is the period between a client placing an order and the actual delivery. It is in the best interest of Geely Auto to have several showrooms with already made electric tax to facilitate easier delivery or pick-up by prospective clients.

ii. Product variety

Product variety shows the number of different products by the company to suit the clients’ needs. Geely Auto should also have a variety of products in their distribution network to take care of the many clients with different needs and specifications.

iii. Product availability

This represents the probability of having the actual product in the existing production networks. In this case, Geely Auto should be able to make correct predictions and market survey to know the appropriate period of restocking their products.

iv. Customer experience

This is the ease with which a client can be able to make an order and receive it. Creating great customer experience is vital to creating return-clients. To be successful in their new venture, Geely Auto must be able to create outstanding customer experience with any compromises.

v. Order visibility

This is the ability to track the order from the time of placing it to its final delivery. It shows the progress in anticipating the order. Geely Auto will need to explore additional spheres of improving their order visibility including engaging in e-commerce to ensure their availability on the internet making it possible for prospective clients to make the orders online.

vi. Returnability

In case of dissatisfactory products, a company needs to look into the ease of returning such goods. Ordering items online often lead to such issues. For a better relationship with the customers, the company needs to have a friendly and reasonable returnability policy.            

The automaker must make wisely these decisions as they may have further cost implications if any changes were made. For example, Chopra (2001) notes the following supply chain costs that are affected by changing the distribution network design: inventories, transportation, facilities, and handling as well as information costs. Chopra (2001) illustrates how these costs are affected by the changes in the distribution design:

Increase in the number of facilities in the supply chain leads to the increase in both the inventory and inventory costs as shown above by the two figures. As the facilities further increase, the logistics costs decrease the increase as shown below. The logistics costs include the summation of transportation, facility and inventory costs.

Geely Auto must, therefore, make considerate decisions in selecting an appropriate supply chain network that embraces the above criteria to ensure its success in its new venture in Coventry.

Quality Management

Quality management, also referred to as total quality management (TQM) is defined by Sanders (2001)as “ an integrated organizational effort” (Sanders, 2001:285) that has been designed with an intention of improving the quality in every level. Through total quality management, organizations must strive to meet and exceed the consumers’ expectations. Every member of the organization must adopt these high standards in order to give their client the same high-level services. Poor services along the chain will be passed to the final consumer, thus resulting in dissatisfied customers,

For the automaker to succeed in their new venture, they must employ high-level total quality management throughout the company structure. The new production line in Coventry should be a reflection the larger company. To ensure this standard is maintained throughout the company, the factors below should be considered:

a. Voice of the Customer

This is where TQM is defined as exceeding consumers’ expectations. The first goal of the company will be to identify, then meet beyond expectations what the client desires. Customers, therefore, shape the quality supplied by the consumer. The challenge to the company is always to identify the tastes and preferences of the consumers. It is always hard to genuinely and correctly know what clients want (Sanders, 2011:285). To keep up, companies conduct market surveys and customer interviews to determine precisely what these consumers really want. To effectively compete, Geely Auto must involve in improving the services rendered by involving their customers.

b. Cost of Quality

The costs for poor quality are high for the companies. Dissatisfied customers badmouth the company and consequently loses clients.  Companies must strive to provide high-quality services and products to their clients lest they suffer the wrath of dissatisfied customers.  Sanders (2011), expounds on such costs incurred in an even of dissatisfied customers as shown below:

c. Quality Tools

Workers must be supported and accorded proper and necessary training. To understand total quality management, all staff must be at par with training aimed at improving the understanding of the consumers’ needs and preferences.

     Above all, the organization must learn how to accord the customers the best top-level services. Ensuring that all the services offered within the same organization are the same and are of high standards, will create a good reputation for the company thus attracting more customers.

Lean Production

Sanders (2011) defines lean as a management approach that creates value for the final consumer consumers through the most efficient utilization of resources possible. Therefore, lean production involves elimination of waste of every type and involves many organizational efforts in the company working together simultaneously. The use of lean production often leads to large cost reductions, increased customer service as well as improved quality of the end products. In many industries, lean production has become a standard procedure incorporated in various industries such as auto and aerospace as well as in computer industry. Geely Auto, therefore, fits in very well by use of lean in their production. Lean production is incorporated in the production almost as a production process from the onset of production to the final products. Lean production has been greatly famed through the elimination of waste feature; basically removing anything that does not add value to the final product (Sanders, 2011:276).

Sanders (2011) describes the tenets of the lean philosophy as described below:

a. Elimination of waste

Waste is anything that does add any value to the final product. Waste may include space, energy, time excess material or even excess human activity not adding any value to the product and/or service being produced. Companies must reduce this waste by use of lean production. Geel Auto can morrow from lean production while setting up their production line. Among others, waste may come from the poor design of facilities, or even moving from one place to another in search of parts and supplies.

b. A broad view

Everybody in the company must work towards giving the customer the best service. An employee must execute his tasks as assigned by the company for the better service delivery to the consumer while the company can also focus its energies towards the success of the entire supply chain. Taking the broad view enables the success of the entire supply chain rather than individual success.

c. Simplicity

Lean advocates for simple solutions to the challenges faced. Getting a simple solution to problems facing the organization prove to be more effective than concentrating on more complex and expensive solutions. Simplicity ensures that everybody in the company is on the same page in executing the tasks.

d. Continuous improvement

Continuous improvement involves every single activity in the company moving towards a better element. This improvement ensures customer satisfaction and guarantees service beyond expectation to the customers to the company.

e. Visibility

Lean stresses visibility; that waste has to be seen and identified to be eliminated. Therefore, to facilitate visibility, lean facilities have to be clean and spacious ample floor space. Without confusion and disrespect to the workplace, lean focuses on making problems visible to anyone in the company.

f. Flexibility

This refers to the ability to adapt to the changes in the environment. For example, changing the production volumes rapidly to suit the prevailing high demand is a display of flexibility. Flexibility can also mean producing a wider range of products.

Sanders (2011) describes lean production as a system that keeps minimal levels of inventory, relying on the efficiencies gained through repetition, removal of all unusual steps and motion and use of visual signals. Lean production is based on the ‘pull’ system and not the push system with an aim of producing and moving products.

Sustainable Supply Chain

 A sustainable supply chain avoids consuming so much of the resource that operations are compromised. Sustainable analysis of the outputs involves all aspects of pollutant emissions so that the health of the neighbors is in jeopardy. Sustainable supply chain management aims at achieving long-term corporate profitability while protecting the environment and the human welfare. According to Sanders (2011), the below are ways of improving the company’s sustainability performance:

a. Financial payoffs: They include reduced operating costs increased volume and low administrative costs among others

b. Operational payoffs: These include process innovation, productivity gains, improved resource gains, waste minimization among others

c. Organizational payoffs: include improved shareholder relationship, improved employee satisfaction, reduced regulatory intervention among others.

d. Consumer-related Payoffs: these include customer satisfaction, increase in market share, and improvements in the company reputation as well as new product innovation.  

Geely Auto needs to take into consideration these measures to ensure appropriate sustainability has been incorporated into their business model.

Customer Relationship

Creating strong reliable customer relationship is key to unlocking value for customers in a business. The marketing manager must be able to present and keep close customer relationship. For any supply chain to thrive and be successful, it must always remain competitive and provide top-notch products and services while ensuring efficient customer relationship. The chart below provides a summary of the various types of customer relationships:

Every supply chain member is both a supplier and customer.

The company must ensure appropriate strategies for increasing transactions with an aim increasing the profits of the firm are chosen. To ensure effective customer relationship, appropriate marketing strategies must be adopted to ensure good consumer relationships are maintained. The automaker must leverage on improving consumer relationship that has a direct relationship on the profitability and subsequent success of the company.

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