22-09-2012, 11:48 AM
PUSH PULL STRATEGY IN AUTOMOBILE INDUSTRY
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OVERVIEW
The changing business conditions of the 21st century has led to companies facing issues ranging fromglobalisation, economic uncertainty to new technologies and increasing consumer demands. In the automobile industry, as manufacturers design and build vehicles globally, their supply chains become increasingly complex with challenges that often stand in the way of profitability and higher shareholder value such as long order-to-delivery lead times, unreliable production schedules, excess inventory across the supply chain, lengthy demand planning cycles and lack of visibility of suppliers. The effect of the global economic meltdown increased the pressure on automotive executives to make right decisionsabout their supply chain for better performance. In a highly challenging and competitive environment such as today, where supply chain is a popular tool for improving the organisational competitiveness,an efficient and effective supply chain strategy is a must for automotive manufacturers and their component manufacturers so as to meet changing consumer demands.
Businesses today do not only operate at a lower cost to compete, but has to develop core competencies to distinguish itself from competitors and stand out in the market. Supply chain strategy is part of the overall business strategy, designed around a well defined basis of competition (innovation, low cost, service,quality) . It is integrated with marketing strategy and with customers' needs, product strategy as well as power position. In a rapidly evolving global economy, no firm exist in a vacuum. A supply chain strategy is defined, relative to its competitors’ set of customer needs that it seeks to satisfy through its products and services. This involves decisions relating to the selection of suppliers, the location of facilities and the choice of distribution channels. It is now increasingly accepted that “one size does not fit all” when it comes to designing a supply chain strategy to support a wide range of products with different characteristics sold in a diversity of markets. Therefore, supply chain strategies should be tailored to match the required ‘order winning criteria’ in the market place with appropriate product/market conditions
PUSH PULL SUPPLY CHAIN AT BMW
The supply chain process at BMW starts from the costumer and ends with the customer. BMW uses built-to-order system to give their customers what they want. Customer makes their request through the dealers. The information is then communicated to Munich (Germany). The information is captured in a central data base. Bill allocation is done to determine cost of manufacturing and deciding where the car will be manufactured. This is informed by the nature of the product, the lead time and the cost involved.These processes can be explained as follows.
PUSH PULL BOUNDARY
The supply chain decoupling point is situated at the boundary between the push part and the pull part. It is the point at which the switch from the built-to-forecast mode to the built-to-order mode takes place. The inventories of supplied and made-in house components are kept at this point and their corresponding levels are determined by means of stochastic methods. Due to their position in the supply chain, these inventories are sometimes called decoupling inventories. The customization process is initiated in the pull system after the customer order arrives. The necessary components are picked out from stock and combined in the main assembly line into customized products which are shipped to customers. From the Original Equipment Manufacturer (OEM)’s perspective, there are two positions which are worth to be highlighted: the differentiation point and assembly line decoupling point. The study defines a differentiation point in the assembly line as a point in which variety increases. For example, the painting station in the automotive industry represents a point of differentiation in which the car bodies assume their unique colours. It should be noted that in the assembly process, there is not only a single but many differentiation points at which the products acquire more identity.In the main assembly line, it is more advantageous to delay downstream which is the first point of differentiation.