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Tuesday, December 13, 2011

THE USE OF B2B AND SUPPLY CHAIN OF THE AUTOMOBILE INDUSTRY

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THE USE OF BB AND SUPPLY CHAIN OF THE AUTOMOBILE INDUSTRY


INTRODUCTION


The globalization and consolidation of the world’s automotive industry is having a profound effect on relationships between OEMs (Original Equipment Manufacturers) and suppliers in business-to-business relations. In the vanguard of these changes are the Big Three American automakers - Daimler Chrysler, Ford and General Motors. The most vital part in this chain, today more than ever before, is the customer, because they are the people who purchase goods that keep businesses profitable. However, profit is no longer entirely the focus.


The process of the supply chain for one of the world’s largest manufacturers is a long process that includes model design, supplier, mass production, research, engineering laboratories, covisint, styling, testing, preparation for production, manufacturing, along with sales and service in developing a vehicle. Daimler Chrysler, General Motors and Ford put this into effect by creating new innovations in technology to improve vehicles. The supply chain also involves the location of manufacturers plants, and the history of each company.


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Statement of Purpose


The purpose of this report is to explain how the automotive industry (Daimler Chrysler, Ford, GM,) is going to unify their automotive supply chain exchange into one super �exchange. Then I will show how this unification will end up and why these three automotive manufacturers are considering doing this type of change. Another point will be to explain the logistics part of the supply chain of the automotive industry. To give a brief history of the three leading automakers in the U.S. to see how the auto industry is going to reduce cost and the way they are going to increase production. And how the three automotive makers are involved in this process.


Scope


The factors, which are relatively important to the three automotive makers (Daimler Chrysler, Ford, and GM), are the logistics of supply chain, reduction of manufacture cost, ways to increase productivity and other issue that they are tackling.


Source and methods





The limitation of this research is all resources that the James C. Jernigan Library, Texas A&M University-Kingsville can provide.


Report Organization


In the corporate America, the automotive industry makes up a large percentage of the economy leaving Daimler Chrysler, General Motors, and Ford the three largest automotive makers. The process of the supply chain is a long process of model design, suppliers, mass production, research, engineering laboratories, covisint, styling, testing, preparation for production, manufacturing, with sales and service in developing a vehicle.


The history of Daimler Chrysler, General Motors, and Ford gives inside information on how each corporation started and how they become the leading automobile manufacturer in the U.S.


Supply Chain For Automobile Industry


Although once considered to be little, but status items, motor vehicles are now regarded as necessities in most developed nations. The number of cars, vans, trucks, and buses in the world now averages at least one for every twelve human beings. The automobile industry is one of the world’s major manufacturing industries, and activities involved in the production of these vehicles and special-purpose vehicles such as fire engines, hearses, and ambulances help the industry thrive. This production includes the manufacture of components such as engines and bodies as well as the design and assembly of the final product.


Companies that produce only at home but sell products internationally are called multinational trading companies. Companies that own or control production facilities in more than one country are called multinational corporations. (Kuhndt 1)


Model Design





As part of an effort to persuade drivers to buy new cars, manufacturers regularly implement engineering advances and major styling changes. Engineering changes may stem from the desire or need to increase safety or energy efficiency or decrease exhaust emissions that pollute the air.


For decades the consumer has had a variety of automobile models from which to choose. Today there is a choice from hundreds of named or numbered models and thousands of variations based on body type, engine capacity, and price class.


The design process is lengthy and complicated. Although the process has become largely standardized, the time gap between the first display of a model on a drawing board and its debut in a dealer’s showroom can be as long as five years. Usually even before initial planning begins, experts called market-research analysts collect information that indicates what kind of automobile the general public seems to prefer. (Thornton )


Before a new model design can be approved for mass manufacturing, there are several important steps. These are prototype building, testing, evaluation, correction, design of production machinery, and the manufacture of that machinery. The prototype process begins with clay models that are covered with colored plastic and other materials to simulate the surface of a real car. This mock-up provides the basis for engineering drawings and blueprints. The model changeover finally occurs when a plan’s machinery is altered to meet the requirements of the new parts for the new design. Certain parts, however, can be produced more economically and efficiently by outside manufacturers. The decision to make or buy a part is made by the management team and the industrial engineering staff.


Cars have traditionally been designed for two markets, North America, which preferred larger and heavier cars as long as fuel prices were low, and Europe and Japan, which because of different economic conditions preferred smaller, more fuel-efficient vehicles. Economic situations, particularly the rising cost of gasoline in the 170s and ‘80s, however, promoted the development of a “world class car”. Fuel-efficient, lightweight, boxy in profile, suited for most climates, and able to be produced with components manufactured around the world (Kuhndt 1)


Suppliers


The suppliers task is to reduce product costs and inventory levels, maintain high quality, offer more product features to consumers, and participate in OEM planning. This works only when suppliers harmonize their procedures with the OEMs and a degree of trust bonds supplier to OEM.


The supply chain in almost every industry has changed beyond recognition in recent years. Suppliers tend to be fewer and larger, in which they operate closer with their major OEM. The automotive industry has certainly been the hot bed of big news over the past few months. Each of the Big Three automakers (General Motors, Ford, Daimler Chrysler), and many related industry giants, announced some form of partnership or Web-enabled joint venture designed to lower procurement costs by leveraging technology. This model is the network or alliance, in which confidential information can and must be shared. The purpose was to create the worlds largest business-to-business Internet portal called Covisint.


Covisint is designed to connect original equipment manufacturers (OEMs) with auto manufacturers. This is used to manage supplier relations, procurement, performance, and to keep manufacturers compliant with automotive industry requirements. This makes communication and managing suppliers much more efficient and affordable and helps the tiers keep in contact.


. For the suppliers, the advantage is in being better able to project manufacturing runs, supply needs, and financial resources. The portals may also implement an auction approach that will let manufacturers obtain the supplies at a lower cost. Portals controlled by manufacturers can lower the barriers of entry to alternative suppliers who now may have the information and access that was so hard to obtain through traditional contacts. Portals controlled by manufacturers can also be used to raise the barriers to entry for those who would like to compete with the manufacturers.


This strategy makes the OEMs direct suppliers, the so-called Tier 1 suppliers, far more involved in the design and production of vehicles. To win and retain OEM contracts, suppliers are forced to build more complex organizations that can assume additional functions and financial exposure. A streamlined supply chain is emerging as weak links are strengthened, absorbed by competitors, or is eliminated.


Mass Production





The production of an automobile involves the assembly of more than 15,000 individual parts. In a modern manufacturing plant these parts are moved in a variety of ways through the air suspended form traveling hooks, carried along on conveyor belts, or transported by forklift trucks. Every part is directed to the exact spot at which it is needed at precisely the proper time.


This method of manufacture is called assembly line production. The system is laid out in a river-like pattern. Similar to tributary streams merging to form a principal river, numerous tributary lines converge at assembly points, or stations. There the parts they carry are put together and then moved on to a further stage of assembly. The windows and windshield and appliances such as the radio, heater, windshield wipers, and cigarette lighter are installed as the car nears the end of the assembly line. All along the line inspectors test the various parts of the car. At a large plant using an assembly line, vehicles can be produced at the rate of 60 to 80 per hour. (Thornton )


The assembly line is, perhaps, the outstanding contribution of the automobile industry to technology. Today the largest companies produce frames and components in regional assembly factories. The final assembly is then completed at a separate plant.


Research





The first steps in the production of an automotive vehicle are in a research laboratory. Here chemists, physicists, and computer scientists work with metallurgists and engineers. Together they plan, evaluate, and test all promising ideas.


ENGINEERING LABORATORIES





The next steps in the production or improvement of an automobile take place in engineering laboratories. Here the findings of research scientists and engineers are put to practical use. It is here also that the new ideas that are produced by research are converted into products and services that have practical application in automotive production as well as vehicles.


Technological advances


Many expect that business-to-business E-Commerce will completely reengineer the supply chain and restructure the value chain. If business-to-customers systems (BC) are linked into business-to-business (BB) supply chain applications then a customer order may propagate all the way up the supply chain to suppliers. Eventually the automobile industry expects to be able to implement a build-to-order system in which a customer order on the Internet triggers the manufacturing process for the automobile and notifies the suppliers that the manufacturer will need four more leather seats, four tires, a particular windshield, more paint, and so on. These linked systems can reduce inventories, and help to avoid shortages of parts and supplies


Styling





While the current year’s automobile models are being manufactured and sold, designers are working on models to be marketed four or five years hence.


Testing





Proposed new automobile models are given exhaustive tests on proving grounds and test racks. It is here that engineers learn how the vehicle will react to actual driving conditions. Most occupations in this category are for engineers.


PREPARATION FOR PRODUCTION





After a new model has been designed, built, tested, and approved, its blueprints, working models, and test results are given to the manufacturing department. Here skilled production workers begin the task of mass-producing the automobile. A wide variety of specialists in the production area contribute their skills.


The tool-and-die maker is largely responsible for making the new machinery that is needed to form and build the automobile. First the tool-and-die maker fabricates parts by hand. Then models are duplicated on computerized, robotic machines. There are about 75 classifications for tool-and-die makers. Each requires a four-year apprenticeship. (Kuhndt )


Manufacturing





The first step in manufacturing an automobile is the stamping, forging, casting, and machining of such materials as steel, aluminum, zinc, and plastics.


Sales and Service





Once the automobile has been manufactured, it must be sold and maintained. There are numerous jobs in new and used auto sales and in all the related service areas. As automobiles have become more complex, the number of auto shops performing specialized work has increased.


DAIMLER CHRYSLER


History


On September 18, 18, Daimler Benz and Chrysler came together making it the second largest merger in the U.S. at a cost of 40.5 billion dollars. This merger was initiated through the unanimous vote of the shareholders of both companies. On September 18, 18, it named the new company, Daimler Chrysler AG. Bob Eaton, chairman of Chrysler and J├╝rgen A. Schrempp, chairman of the Board of Management of Daimler, joined hands to form one of the most respected firms in the auto industry.


The announcement stated simply that the two executives would serve as co-chairmen of the merged company. The announcement further stated that Chrysler executives would continue managing Chrysler operations in the usual way and, in like manner, Daimler executives would manage the Daimler operations. Thomas T. Stallkamp, a highly regarded automotive man, was named president of Daimler-Chrysler Corporation, reporting directly to Eaton and Schrempp, with full responsibility for the Chrysler operations. Making corporate headquarters of the merged company in two locations Auburn Hills, Michigan and Stuttgart, Germany. (www.wsws.org)


The Merger figures


The merger formed a company at that time of $1 billion in consolidated revenues and profits of $7.1 billion. Daimler accounted for $71 billion of that revenue and Chrysler for $61 billion. However, Chrysler’s contribution to the profit level of $7.1 billion made them the more profitable of the two companies. Coming from the automotive product-planning perspective, the merger made good business sense.


Manufacturing plants


Daimler Chrysler’s primary function is manufacturing Mercedes-Benz, Chrysler, Plymouth, and Jeep, Dodge, Smart, Freightliner, Sterling, Stera, Debis, Adtranz, MTU, TEMIC and other vehicles. This makes them one of the most successful and respected companies in the world. Daimler Chrysler has manufacturing facilities in thirty-four countries and operates more than 00 countries worldwide.


Its international operation facilities include a manufacturing plant in Cairo, Egypt named Arab American Vehicles Company. This plant was established in 177 and currently employs 75 employees that produced 0,000 Jeep Cherokees per year. Daimler Chrysler also maintains a plant in Beijing, China that is named Beijing Jeep Corporation. Beijing Jeep Corporation employs 8,000 employees that produce 7 percent of Jeep Cherokee sales in their domestic market. They also export 15,00 in sales to countries like Southeast Asia, Africa, Middle East, and South America.


Daimler Chrysler’s domestic manufacture plants are scattered throughout the United States. One plant is the St. Louis South Assembly plant that produces Chrysler Town & Country, Dodge Caravan, and Grand Caravan, Plymouth Voyager, as well as the Grand Voyager. They employ about 4,71 employees in turn produce about 1150 vehicles a day. Another plant in the U.S. is the Huntsville Electronic Plant located in Huntsville Alabama. This plant manufactures automotive electronic components like radios, engine controllers, body controllers, transmission controllers, transaxle (4wd) controllers, and instrument cluster. They employ about ,87 employees and have 5 robots in the plant that produces about 11,100,000 units per day.


Innovation


In 1, Daimler Chrysler has patented over 000 new inventions, and unveiled over eighty-five new developments in the fields of passenger car and commercial vehicles. Through this innovation Daimler Chrysler wants to become the leader in technology. So the products that are developed can continue to set standards for the markets where they are sold. This helps us provide our customers with a safer, and more comfortable ride. These innovations are a key to securing and consolidating the business success of this company.


Some of the latest technology and innovation that Daimler Chrysler came out with this year is Pedestrian-Recognition System Unveiled for the first time, this new technology marks a pioneering step towards banishing accidents from the roads. It comprises a computer-supported recognition system with extremely rapid processing speeds. Then there is New Logistic Systems also connected to the Internet, these systems promise savings from more efficient logistics for shipments to and from company plants. (Kilbance )





Effects of Business to Business


Daimler Chrysler said at the time that it planned to use PowerWays technology to improve its business-to-business (BB) supply chain management activities. Daimler Chrysler is also involved in creating its own Internet applications. One of those applications is that is called Fast Car; it is an Internet-based development and production system that enables departments like design, development, production, finance, procurement and logistics that will collaborate in real-time. The automakers say they plan to funnel $00 billion worth of supply and material purchases through Covisint annually. The giant automaker also says it intends to harness the Internet as a sales channel. The company recently began online sales of new Mercedes-Benz vehicles in Europe and in the United States.


GENERAL MOTORS (GM)


History





General Motors was founder in 108. The company employs more than 88,000 people and partners with over 0,000 suppliers companies worldwide. General Motors has grown into the world’s largest automotive corporation and full time vehicle manufacturer. The company has a global presence in more than 00 countries. GM has more than 60 major subsidiaries, joint ventures and affiliates around the world. GM provides a broad range of financial services which include consumer vehicle financing, full service leasing and fleet leasing, dealer financing, car and truck extended service contracts, residential and commercial mortgage. (www.gm.com)


Manufacturing Plants


GM worldwide automotive operations have been combined into a single global unit knows as GM Automotive Operations. It is composed of four regions North American, Europe, Asia-Pacific, and Latin America, Africa and Mid East.


First, GM North American (GMNA) is responsible for designing, manufacturing and marketing vehicles for Chevrolet, Pontiac, Oldsmobile, Buick, Cadillac, GMC, and Saturn.


Second, GM Europe (GME) designs, manufactures, and markets vehicles and components throughout the continent. Manufacturing facilities are located in 11 countries and national sales companies operate in 5 countries.


Third, GM Asia Pacific (GMAP) manufactures and markets vehicles in a region organized around five groups Japan, Korea, the China group, India, Australia and New Zealand. (Thornton )


Innovation





The best example of GM innovation is development of the OnStar system. OnStar system introduced a couple of years ago on Cadillac models, and now being offered across much of our entire product range. OnStar offers a wide array of in-vehicle features, from satellite communications to global positioning technology. This development provides service like if you lock your keys in the car, a call to OnStar will unlock your door by via satellite. Another example is if youre in an accident in which the air bag is deployed, OnStar automatically calls for help and directs emergency response teams to your location. The really great thing about OnStar is that new ideas keep popping up - like built-in phone service and voice-activated access to the Internet, both of which are being rolled out on GM vehicles with OnStar now.


Effects of Business to Business


GM purchases billions of parts from the supplier community. The focus within General Motors Worldwide Purchasing (WWP) is to add value to the customer and improve customer enthusiasm in the marketplace. In order to accomplish this, GMs WWP is committed to working closely with suppliers in an effort to bring the highest quality and best value products to their customers. The suppliers using Covisints Quote Manager tool to communicate with GM in responding to the Request for Quote on products and services, in cases where both purchasers and suppliers required more information, the buyers and suppliers were able to revise and update their documents using the Quote Managers revision control feature.


By implementing Covisint Quote Manager, General Motors purchasing was able to meet the timeline for a tight sourcing deadline by handling the entire RFQ process electronically. Another benefit of using Covisint Quote Manager is that it allows GM WWP to maintain a historical electronic record of the sourcing process. This eliminates current process that relies on large binders or boxes full of hard copy information. With Quote Manger, future buyers or team project members can access the sourcing information and have all relevant information readily accessible online.


FORD


History


Ford Motor Company was born on June 16, 10 in a small converted wagon factory located in Detroit, MI. Its assets consisted of tools, appliances, machinery, plans, specifications, blueprints, patents, a few models and twenty-eight thousand dollars in cash supplied by twelve investors. Along with Henry Ford the other eleven investors were a coal dealer, the coal dealers bookkeeper, a bank who trusted the coal dealer, two brothers who owned a machine shop that made the engines, a carpenter, two lawyers, a clerk, the owner of a notions store and a man who made windmills and air rifles.


The first car for sale was described as the most perfect machine on the market. The first car was sold to a Doctor in Chicago by the name of Dr. E. Pfennig. This was a major blessing to the stockholders who saw that the bank balance had dwindled to two hundred twenty three dollars. Over the next five years Henry Ford first as chief engineer and later president, directed an all-out development and production program. Over the next fifteen months the old wagon factory spit out seventeen hundred of the early model A’s.


Between 10 and 108 Henry and his engineers very quickly went through the first nineteen letters of the alphabet from the model A to the model S. Some of these models were experimental and never actually reached the public. Eventually Henry and Alexander Malcomson the Detroit coal dealer had so much friction between one another that Malcomson was out of the company and therefore leaving Henry with fifty-eight percent of the shares. Finally as president Henry accomplished his goal he produced a rugged simple car at a price low enough to afford. This car of Henry’s dreams was the Model T, the most famous car ever built. This automobile sold for as little as two hundred sixty dollars without extras. With all the extras the automobile sold for an average of four hundred dollars. (www.fordmotor.com)


During the mid-150’s Ford Motor Company became a publicly owned corporation with approximately 700,000 stockholders. As Ford rolls into the 160’s, Ford recognizes a market demand an inexpensive sport car target to young buyers. The Mustang has exploded on to the scene in 164. Then the early 180s gasoline prices rose and Ford had to create a car that was fuel-efficient. That when the Taurus and Mercury came on to the market. As for today ford is known as one of the top three auto manufacturers in the world. As it leads in the world’s largest producer of trucks and second largest in car and truck combined.


Manufacturing Plants


Ford Motor Company has about 140 plants in 6 different countries worldwide. Now that Ford globalized, they are becoming more advanced; they have new innovations and better technology. Most of vehicles manufactured in these 6 different countries are Volvo, Mazda, Lincoln, Ford, Mercury, Jaguar, Aston Martin, and Land Rover.


Innovations


One of the ways ford is improving it corporation is by improving its customer safety, which in turn is improving its customer service. For example, ford looked at its high rollover rate on SUV’s enhanced its safety by providing a new airbag in its SUV’s and light vehicles. Other new direction that ford is heading for is experimentation with alternative fuel conversion’s and battery powered vehicles. ( Rossman 1)


Effects of Business to Business


Ford Supplier Networks (FSN), which currently enables over four thousand suppliers, has now committed to adding functionality and creating a single point of entry with the help of Covisint. Ford Supplier Networks will be able to pull applications from Covisint and update their profiles that will allow instantaneous broadcast to all OEMs.


As for Covisints it will be able to addresses the rate of information rather than procurement, which it value to ford suppliers network. This will let suppliers be able to use collaborative tools, and other features that Covisints building. Ford Supplier Networks goals by using covisint are to decrease vehicle delivery times by increasing the flow rate of information and applications with Ford suppliers over the web and, ultimately, to reduce vehicle delivery times.


Summary


The Supply Chain of the automotive industry is a network that facilities and distribution options that perform the functions of procurement of materials. The transformation of materials onto intermediate and finished products will lead into the distribution of finished products to customers.


The various phases of the supply chain work in concert to deliver to all facets of demand. without blanketing all niches, competition fills this void. It is here that the design team is paramount in assessing the needs and wants of the intended customers, while factoring in increased safety and reduced emissions. Safety is a prominent marketing focus; with the higher safety ratings come increased selling points. Products that encompass affordability and value, a major concern of consumers, keep it within reach of your target customers.


Conclusion


In conclusion this report serves to explain the roles of the supply chain in the automotive industry. It describes all the collaborative nuances that bring an automobile to fruition, and mentions the processes taken by automotive manufacturers to provide transportation nationally as well as internationally. These three leading manufacturers contribute new innovations of automotive technology that collectively provide safer vehicles as well as a first class service to their customers. With these consistent advancements and refinements, automobile evolution will continue to be polished by the unseen forces that nurture the supply chain of the automotive industry.


REFERNCE


1. Inc., Responsive Data Service, Cahners Business Information (000). Application planned and Deployed Automotive Industries Information technology Issues In automotive Industry supplement and Business and management Practices, 1(), 18-0


. Kilbance, Doris (000 August). Technology test-drives the automotive supply chain. Frontline solution, p.1 (). Transportation Equipment Industry reference


. Rosier, Ben (000 August 10). Mercedes-Benz set review EU web Industry. Marketing, p.0 (11). Transportation Equipment Industry reference


4. Rossman, Randi (000 June). Putting the customer in the driver’s seat. Wards Auto World, p.11-15. Transportation Equipment Industry reference


5. Truby, Mark (000,August 8 Tuesday). Automaker pushes faster delivery cutting time it takes to get vehicles to buyers’ tops agenda. Inc., The Detroit News, Business p.1


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