Introduction
The ability to concurrently develop a product and its supply chain is a major competence in manufacturing industries. When the tow activities get undertaken efficiently at the same time, massive returns are bound to get derived. Proper design ensures that goods produced have the highest quality possible. High quality guarantees customer satisfaction and improves the brand name and legacy. Suitable supply chains, on the other hand, ensure that goods and services reach the customers on time. They also provide that the cost of supply is greatly diminished and saves the company revenue.
However, in the auto-manufacturing industry, this ability is greatly underdeveloped. The concept of simultaneous product design and supply chain is relatively new. Not many companies have the know-how of its proper and efficient implementation. Another reason for the poor development of concurrent development and supply chain management is that it lacks a practical methodology. Currently, there are so many logistics and bottlenecks involved in the implementation of such a system. It is, therefore, time-consuming and resource intensive exercise that does not yield many returns.
Research efforts have not achieved the industrial threshold gap due to the lack of a methodology convergence. The current methods tend to steer in different directions. They do not meet at a common ground. Such a situation renders the entire exercise a trial and error operation. The Supply Chain Demand (SCD) researchers and product design communities still do not have a common meeting point to integrate the two processes (Myer 19).
Just after the evolution and rapid expansion of IT technology from the mid-2000s to the 2010s, many auto manufacturers started moving from build-to-stock production types to build-to-order production systems. A build to the stock system is whereby a manufacturer produces standardized vehicles in bulk and selling to meet demand. In a built-to-order production system, on the other hand, the manufacturers build cars that meet the actual specifications of the customer. Typically, the vehicle gets built in response to order. There is no manufacturing in advance. This particular method ensures customer satisfaction (Harrison, Skipworth & Van Hoek 16).
Recently, German automakers have put more efforts to increase their adherence to this new model of design and distribution. The primary goal of the built-to-order is to achieve short delivery times, high reliability of delivering methods and prompt response. The above factors show that the company is committed to placing the needs of its customers first.
This paper, therefore, discusses the application of concurrent product and supply chain design at the Porsche Company. It further highlights challenges in supply chain management that the firm faces. The essay addresses how to design for logistics can get applied to control logistics for the sake of increasing the agility and response of supply chains. All these factors get analyzed about how they will affect the market performance of the new Porsche 911 (Super Cars 1).
The Porsche Company
Porsche is a German automobile manufacturer. The company specializes in high-performance sports cars, sedans, and SUVs. Its headquarters is located in Stuttgart. Volkswagen AG is the leading owner of the company. Currently, the lineup of models by this company includes the Boxster, 911, Panamera and the Cayman.
Porsche’s supply chain process begins with the customer and ends with the client. It recently adopted a build to order system along with a mass customization program to deliver its high-quality cars as per its customer requirements. They utilize a highly sophisticated system to capture various details such as costs involved, customer preferences, and lead times. This information gets communicated on a real-time basis along the corresponding supply network. This reduces the order-to-delivery time and helps in tracing and tracking of material. It also aids in the planning of demand and improves the accuracy of inventory across the plant. Through the use of integrated technologies by its manufacturers, suppliers, and distributors, the company can deliver the customized vehicle to its clients with fewer lead times (Henderson & Reavis 32).
Challenges in concurrent production and supply chain design.
Continuous cost reduction- The Company faces a constant need for the ongoing reduction in costs. At the same time, it requires meeting the needs of the consumer entirely. These two conditions need to get fulfilled as the company embarks on efforts to expand into new markets and product lines. The demand for Porsche luxury cars is steadily rising internationally. From Russian millionaires to Chinese noblemen to American tycoons, all of them desire this vehicle. Efficient production lines will also ensure fast assembly and delivery to the clients. This is indeed an enormous task. More funds are required to meet this expectation. Too much customization will slow down the production process and is likely to lead to delays.
Omni channels- another emergent issue is that of managing complex omnichannel. An omnichannel is a multichannel approach to sales. It aims at providing customers with seamless shopping experiences. This smooth customer experience applies whether the shopping gets done online on the desktop or via mobile phones (BubbyAutomobile 1). Included in the shopping media are telephones and showroom sales. We currently live in a fast paced world with massive internet proliferation. Most activities from, learning to commerce are moving towards cyberspace. Therefore, the demands of e-commerce and large-scale availability of mobile-enabled consumers increase the number of stock keeping units they need to support. Building new distribution centers is an additional cost. There is more staff to hire, and direct-to-customer sales are more time consuming.
Progression of careers- Porsche also faces a problem with the progression of careers. This activity entails the development of new skills of production. It also includes demonstrating returns on investment. The firm faces difficulty to provide viable career options for supply chain staff who are talented. If these staffs do not get the career options they deserve and desire based on their academic qualifications, they will opt for other opportunities. This process will in turn cause the company a shortage of manpower. Fewer workers mean less ability to meet demand and less customer satisfaction.
Inventory management- Porsche is a vast and successful company. Proper management involves keeping adequate inventory at hand so that a company can be flexible while meeting all client and customer expectations. This company has a well-managed system that meets the above requirements. However, rapid production techniques mean that they have to keep updating their records with speed and accuracy.
Risk mitigation- The Company seems too reliant on a few suppliers. If one or a few suppliers cannot meet demand, then losses are bound to occur. Companies need to diversify their suppliers. In such a case, the absence of one supplier does not lead to significant loss of revenue and stalling of production activities.
Design for logistics
Design for logistics is a group of concepts within supply chain management. It involves design and production approaches which help in the manufacture of logistics costs. They increase the levels of customer service and have three key components.
Economic packaging and transportation
This component entails three main activities that move from operational, then tactical, and finally to strategic.
Common sense- products need to get designed for easy shipping and shelf display. Stronger and rugged designs will increase the cost of parts. However, the net cost of the product eventually reduces. This reduction is caused by the lowering of padding and protection costs due to the strength and durability of the good.
Facilitate logistic function- easy packaging and repackaging will enhance utility. It also saves time during packing. This factor will go a long way in enabling the efficient design of business models in the supply chain (Owerns & Warner 29).
Concurrent and parallel processing
This methodology will allow the manufacturing process to get modified. This change will enable the earlier sequential steps to get completed at the same time. Another consequence is that the technique reduces manufacturing head times and lowers inventory costs. Forecasting of demand will get an improvement, and the safety stock requirements will also reduce.
Standardization
When parts get standardized, the quality of the product remains constant throughout all manufacturing plants. Process standardization eliminates most errors in the process. It also improves the efficiency of the workforce. Procurement Standardization reduces delays in the course of obtaining raw materials (Hal).
The above concepts can get applied to the Porsche Company in the following areas:
Control of logistic costs: Facilitation of logistic functioning saves time during packaging thus enables more goods to get packed and delivered. Reduction of headpiece as a result of concurrent and parallel processing will enhance the forecasting of demand. Proper forecasting will lead to cost savings on logistics.
Agility of the supply chain: Forecasting predicts future demand. This process enables the supply to change with the corresponding shifts in demand. This process will allow the company avoid losses caused by a sharp dip in demand. Procurement standardization will enhance the prompt delivery of materials at the agreed dates. This will prevent delays in manufacturing and products will get delivered to the owners on time.
The efficient design of business model and systems: Efficient packaging will reduce the overall cost of goods. Standardized processes, procurement procedures, products and parts enhance the operating efficiency of the manufacture and assembly of the vehicles.
The postponement concept and the push-pull boundary
The delay concept is a business strategy to maximize benefits and minimize risks. The approach slows more investments into service or product until the last moment. In supply chain management, the manufacturer creates generic products which can get modified later on before the final transportation to the customer. For example, an umbrella manufacturer can produce only white umbrellas. When the demand for the umbrellas rises, the producer can now dye specific colors in response to individual customer demands.
Porsche Company can, therefore, build vehicles with the same standard features. Later on, the interior design and painting can get customized according to the wishes of the client. This procedure will enable Porsche continuously produce vehicles rather than wait for orders. Furthermore, it adequately caters for situations whereby there is a sudden excess of demand.
Push-pull factors affect any given type of business. Push factors involve taking a product directly to the customer. The activities involved in this method include trade show promotions, direct sales through showrooms and negotiations with dealers on price subsidies. Dealer negotiations enhance the efficiency of the supply chain allowing dealers gain an efficient supply of products.
Pull factors are motivation strategies to move customers in seeking out a brand in an active process. The techniques used include adverts and mass media and sales promotions. They may include after sale services such as the installation of extra features. The tow forces interact at the push-pull boundaries through buffer inventories. A buffer inventory is a cushion of excess supply in excess anticipation of demand. This type of inventory reduces the severity of out-of-stock situations in sales. It results in better customer services as it ensures the satisfaction of unsuspected demand. Furthermore, the demand gets met with a high degree of accuracy. Accompanied with proper forecasting, the Porsche Company can produce slightly excess vehicles to cushion them from effects of spikes in demand.
Inventory management and risk pooling
Inventory management involves various process. One of them is the just-in-time manufacturing and delivery. This process reduces the carrying costs of goods. The storage fees and licenses get eliminated. Porsche can, therefore, use the method to cut on such expenses. Levelized production involves making inventory at a steady rate. This method avoids peaks and valleys. If the company waits for too many orders, they might have to increase the number of shifts. During slow times, they might find themselves paying idle workers (Silver, Pyke & Peterson 41).
Risk pooling is a process where manufacturers come together to form a pool. This kind of pooling provides protection against catastrophic occurrences such as sudden bankruptcy. The process suggests a reduction of demand variability. It allows for a decrease in safety stock and hence reduces average inventory. Porsche can use the concept to minimize the risk of a sudden dip in demand (Schwarz 828).
Works cited
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Henderson, Rebecca, and Cate Reavis. “What ’ S Driving Porsche ?” (2009): n. pag. Print.
Mather, Hal. "Design for Logistics (DFL)-The next challenge for designers."Production and Inventory Management Journal 33.1 (1992): 7. Web.
Meyr, Herbert. “Supply Chain Planning in the German Automotive Industry.” OR Spectrum 26.4 (2004): 447–470. Web.
Owerns, Richard C., and Timothy Warner. “Concepts of Logistics System Design.” (2003): 28. Print.
Schwarz, Leroy B. "A model for assessing the value of warehouse risk-pooling: risk-pooling over outside-supplier leadtimes." Management Science35.7 (1989): 828-842. Web.
Silver, Edward Allen, David F. Pyke, and Rein Peterson. Inventory management and production planning and scheduling. Vol. 3. New York: Wiley, 1998. Print.
Super Cars. "SUPER CARS MEGA Factories PORSCHE 911 CARRERA HD Documentary 2015." YouTube. N.p., 23 July 2015. Web. 25 May 2016. <https://www.youtube.com/watch?v=nhayy-qSWg8>.
