Global Supply Chain Management: Automobile Industry Essay


Describe about the Global Supply Chain Management for Automobile Industry.



In the world of globalization it is impossible to avoid risks, but if looked from a different angle it offers an opportunity to company to adapt a complex yet different situation which is quite necessary in competitive world. Supply chain management implies things will not generally work out as expected and the firm is having the appropriate framework to make it even through unexpected (ACMA 2006).

In automotive industry to manage inventory is a challenging task and many times it even create scandals which are hard to handle. For example, BMW’s general manager Paul Miller was confident enough for balancing supply with demand and then came the prodigious recession and he was forced to invent a plan from scratch. All the experience could not save the company from huge loss. And it was then when they realized the need to tighten up the procedure of inventory management and control (ACMA 2006).

It is necessary to build up a suitable plan for the entire activities of store and purchase department to have the enhanced control over the inventory. Inventory comes under one of the vital aspect of present resources and it grants smooth operation of sales and production department. Management of Inventory is concerned with investing finest amount in operations and effectively managing control system in order to reduce the cost of inventory.

Subsequently, Inventory bears a holding cost so it is constantly desired that a fine amount is invested in stock which is possible at minimum. Stock must be available in legitimate amount when needed, neither it should be too much nor should be too less than desired. If the inventory is not adequate it could undesirably affect sales and production department which would disturb smooth run of business. While, abundance of stock involves increased cost and decreased profit (Humphrey 2009).

Literature Review

Dutta Smriti Mahavidyalaya and Niranjan Manadal conducted a study over inventory management and the importance of inventory and its impact on profitability and liquidity, also on non-insurable threats of ONGC, which is a prominent public sector industry. Along with co-relation between both profitability and liquidity as well as between risk and profitability, their study also observed and tested the profitability and liquidity position of the industry. As per the results given by Dutta and Manandal inventory management is essential to confirm enhanced productive capacity, sound liquidity and good profitability of an automobile industry.

Bernard Abraham and William Koti studied and examined present rules and regulations of stock management at some Indian automobile industry Ashok Leyland Ltd. They conducted a study to find out the strengths and weaknesses of the company, also what are the possible threats that are likely to happen so that pre-hand measures could be maintained in case of any emergency. According to their analysis Ashok Leyland Ltd. needs to focus on incentivize cash sales, digital sales and also must monitor a projecting model which could capture preferences and tastes of consumers (Swaminathan 2006).

Another researcher Jasmine Fernandez studied the problems concerned with management of assets, liabilities, and co-relation that exists amongst them. She studied the problems in a two-dimensional way to examine measures and procedures of investment management, rules and regulations of cash management, principles evaluation, payable and receivable management dealing with, by the analysis of trends of stock and capital control board, and also to provide an inventory plan that could facilitate right stock management. According to her study she found a deadlock amid profitability and liquidity. Also, the company was achieving an adjustment amid risk and return.

Pradeep Singh, the aim of his research was to examine the effect of company’s principal expenses on stock and inventory management. To study this he utilized Working Capital Requirement and Net Liquidity Balance by Shulman and Cox, to determine company’s working capital and then provided various regression models. He concluded that the capital expenses do have a powerful impact on stock management. He also stated that company’s operational cash flow, a control variable is correlated to stock management (Swaminathan 2006).

Major issues in Automobile supply chains

An apt definition for supply chains is “web of organisations which are included through downstream and upstream connections, in the distinctive procedures and exercises which produce results as proving services and products in the hands of consumer and thus could be defined as an aggregate of struggles to integrate a network of companies and synchronization in financial, material and information flows.

Strangely, the main two production network objectives have moved, from lessening working expenses and general stock levels, to worries of how to enhance client administration and rate of item conveyance to business sectors.

The above figure represents a very basic supply chain of automotive industry which is comprised of networks of small supply chains and every supply chain has its own unique features.

Trends in Automobile Supply Chain

The current trend of the automobile industry that affects the supply chain can be seen in the table below. Bernard significantly articulated that a supply chain essentially be custom fitted in view of particular necessities of the item being produced. Especially for the multifarious car industry where, the maker needs to battle with a system with multiple supply chains. (Joshi, Nepal, Rathore and Sharma 2013).

Trends in Demand

Trends in Supplies

Irregular Progress

The demand for automotive is high in Eastern Asia, and Europe, whereas US and Japan who are well established in this industry are flat to deteriorating. And this irregular growth raises allegations on supply chains.

Distinguished Outsourcing

To profit by subcontracting, production

System management traders should compromise flexible, specific activities on the grounds that not each producer will focus on the same center abilities as well as, capacities.


A blend of client interest for personalization,

a perfect product for the perfect timing, and producers overcoming new client portions are making designers to enhance their product list. The ecological development is empowering disintegration significantly more, with the help of growing concerns for fuel proficient automobiles rather than high duel consumption.

Low Cost Country Sourcing

The reduced price isn't all that matters suppliers and makers have to concern about entire cost of outsource, which includes quality of work, logistics, and administration.

This procedure has been referred as best for cost-nation-sourcing, also for store network administration suppliers speaks to another chance to support, empower, oversee, and streamline sourcing.

Augmented Instability

In present scenario, an advanced level of adaptability and receptiveness must be implicit in advance so that traders could reply instantly when in-general product quantity are sometimes not as required or at a point when product mix is different from estimations.

Risk Management

Many of the automobile manufacturers concur that the risk to supply chains management has expanded. Characteristic fiascos, assassination, workplace disputes, also, scale of reliance on accomplices and suppliers are only a few regions that need solid abilities in danger administration.


Some of the important areas are getting neglected such as aftermarket business, despite the fact that it creates the biggest offer of OEM and merchant benefits

Transparency and Accountability

Suppliers must convey execution and results in a straightforward way.

Supply Chain Challenges

The various global level challenges in supply chain management include risk management, increasing customer demands and globalization, cost containment and visibility. There is one interesting fact in supply chains of automobile industry that it lags behind other pharmaceutical and retails supply chains in the five parameters stated above which clearly indicates that the considerable movements has a great need and scope to be more responsive and effective (Swaminathan 2006).

Extensive demand forecasting cycle and incapable to see production, material and supplier constraints, results in delays of delivery of products. A global economic emergency is faced by this industry which led to higher pressure on its performance. High expenditures and fewer profits are persistent encounters in this industry. Just a few companies are able to achieve acceptable results such as BMW, Porsche, Honda and Toyota; prominent tier-1 providers for instance Denso and Bosch (Joshi, Nepal, and Sharma 2013).

In this self-motivated professional atmosphere, a predominant inventory network is one basic component to help manufacturers of automobile separate themselves from the opposition. Indeed, a large number of patterns in the vehicle business are strengthening the necessity to enhance and reclassify store network systems, designs, and procedures.

Strategies and Innovative Plans to Accommodate Challenges

The concerns associated to present supply chain management complexities, challenges and practices are indications that automobile industry is in a very modest stage. Hence there is a need to distinguish significant contemporary patterns that the business is prone to confront later on and thus, progressively acclimate corresponding supply chains to keep up and improve their focused verge (Schwarz 2008).


An innovative plan is required to overcome the issues and meet challenges and improve competitiveness. The plan has been summarised in four elements which are as follows:

Supply chain procedures and product improvement

Leagile procedures must be incorporated in supply chain management for automobile by progressively situating the de-coupled point furthermore rolling out improvements in essential automobile plan in light product policy and secluded organizing of sub-frameworks. Coordination of demand (assortment) of automobiles with gatherings/segments supply over expanded deceivability, improving administration levels, client connections and aptitude improvement are few of the contemporary goals (Schwarz 2008).

Universal viewpoint

Concentration on creating as well as sustaining abroad arcades particularly in auto component sector, LCVs and small car by embracing a universal viewpoint to supplier administration, fabricating, deals, and so forth.

Government Involvement

Administrative involvements, for example, a positive assessment administration, improving R&D abilities particularly associated with cross breed auto innovations and power device improvement and structure are important to upgrade the segment's competitive power (Drucker 2013).

Merchant networks

Supplier systems need to be galvanised, particularly in SME segment to embrace worldwide advancements as well as observations. Outsourcing must not be relied only upon cost but also on engineering, innovation and capabilities of design. Manufacturers of automobile and chief traders must trust aligned business framework, build sustainability through enhanced collaboration, formulate selection criteria and rationalise supplier base.

Connect Supply Chain to New Product Schemes to Manage Over-all Enterprise Cost

To manage and reduce costs related to sales and marketing, operations and research and development supply chain must be connected to new product schemes by:

  • Managing material and capacities over the entire world network. Automobile industry requires a worldwide perspective of interest in a typical configuration to decide on limit administration, source and productive allotment of automobile and alternative substance.
  • Improve cost, network records and demand to supply procedure. In an automobile industry clients anticipate more goods in less cost, and controllers anticipate higher fuel economy, lower emissions and more safety.
  • Maintainable raw-material and enhanced supply chain. When automotive includes more propelled advancements, the substantial element of automobile turns out to be much diverse. Volkswagen from a long time using justifiable raw material in its products and basis through traders who exhibit manageable business procedures, comprising regards for human rights and the earth (Veloso 2000).

The management concerned with logistics determines for organization of conventional commercial cost centres for example warehousing, transportation, manufacturing and purchasing in order to perceive utilitarian cooperative energies inside the firm to better satisfy client prerequisites.

If the supplier-buyer associations are made stronger it will improve execution all through the series. of the store network by the force accomplice may prompt dissention and under execution, accordingly harming the force holder. In like manner, a sensible utilization of force may serve to advantage the force holder (Veloso 2000).

Future Trends and contemporary supply chain management practices

The 'green insurgency' and 'portability transformation' (both individual versatility and open transportation) will be the significant drivers for the car business later on which in India will bring about advancement of rustic markets, feeder administrations between transportation modes also, interest for mass versatility vehicles requiring re-arrangement of present day store network objectives. Secluded item outline includes separating a "mind boggling framework into various littler, discrete, adaptable, bury variable, reusable and independent practical segments alternately modules which can be composed and grew independently and after that collected to frame the whole framework flawlessly" NSDC, (2010).

Seclusion is progressively turning into a standard in the car business, encouraging dexterity, with a multi-layered supplier system, involving less immediate suppliers having a bigger part in configuration, improvement and worth creation. Lucas TVS is a case of an Indian organization which has concentrated on operational perfection with store network best practices of 'particular fabricating' through their New Product Introduction Teams (NPIT) for new ventures which are cross practical in nature. In a matter of seconds the business faces numerous hindrances in actualizing earth responsive supply chains running from absence of attention to switch logistics to monetary requirements. The issue of worldwide prerequisites of maintainability, for accomplishing aggressive separation, will affect the working of Indian car supply chains adding to its unpredictability uniquely identifying with expansion of practical green store network practices, for example, reusing and turn around logistics in Tier 1 and 2 suppliers (Drucker 2013).

Reverse logistics is a noteworthy production network challenge uncommonly in nature in which the business works, Universal Journal of Managing Value and Supply Chains requiring a very much composed, powerful 'turn around store network' which becomes an integral factor in the event of vehicle reviews and in India, dissimilar to in created nations, is found in a negative connection ringing out "doubt and dread" in clients. An illustration is the late instance of review of Ford Eco Sport Utility vehicles not long after its dispatch in June 2013 (because of an issue in a shine plug module) which significantly harmed the brand esteem NSDC, (2010).

A paradigm BTO-SC had been tried in automobile industry of Germany and the operation was successful. This project was designed for an application that might be able to meet changing customer demands. The triumph of the project is based on integration and close collaboration with suppliers along with IT infrastructure which must be combined with scheduling process and efficient production (Saad and Patel 2006).

In the present time of economic slowdown and increased competitiveness automobile service policy is an evolving field. Extending an administration system, utilizing innovation as a organiser besides aptitude improvements that might guarantee that much clients will use OEM approved administration office as opposed to workshops in the disorderly part similar to the pattern in India. This calls for a totally new inventory network worldview to be planned and executed.


In a profoundly focused atmosphere, a compelling as well as productive global store set-up is an absolute necessity for automobile manufacturers and their traders. The commercial act is accessible to a set of elementary problems and arrangements, which although does not hastens the necessity to adjust operations and production network system but slowly it drives towards the need. Communication and constant data’s requirement is growing daily in the supply chain management system. Also, streamlining the inventory system at a place where conditions are favourable for the material to be kept i.e. weather and other conditions do not affect the quality of the raw material and the products, keeps the cost of holding under control (Saad and Patel 2006).

In respect to the ?ۥgreen challenge, the emphasis on nature may reshape this inventory network situation significantly all the more fundamentally. Growing control concerns, vitality costs as well as demands from positive and constructive clients need a declination in carbon use while manufacturing products (Drucker 2013).


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