Harvard Case - Process Reengineering in Emerging Markets: An Automaker's Experience (A)
"Process Reengineering in Emerging Markets: An Automaker's Experience (A)" Harvard business case study is written by Haritha Saranga. It deals with the challenges in the field of Operations Management. The case study is 10 page(s) long and it was first published on : Mar 1, 2017
At Fern Fort University, we recommend that the automaker implement a comprehensive process reengineering strategy focused on enhancing its supply chain management, manufacturing processes, and information systems to achieve greater efficiency, cost reduction, and improved customer satisfaction in the emerging markets. This strategy should incorporate elements of Lean Manufacturing, Six Sigma, and Just-in-Time (JIT) production, while leveraging technology and analytics to optimize operations and enhance decision-making.
2. Background
This case study focuses on an unnamed automaker facing challenges in its emerging markets operations. The company struggles with high inventory costs, long lead times, and inconsistent product quality, hindering its ability to compete effectively in these rapidly growing markets. The case highlights the need for a strategic approach to process reengineering to address these issues and achieve sustainable growth.
The main protagonists are the automaker's senior management team, responsible for developing and implementing a solution to improve the company's performance in emerging markets.
3. Analysis of the Case Study
The case study can be analyzed through the lens of Operations Strategy, focusing on the following key areas:
- Supply Chain Management: The automaker faces significant challenges in its supply chain, including high inventory levels, long lead times, and inefficient logistics. This is partly due to a lack of coordination between suppliers and manufacturers, leading to delays and increased costs.
- Manufacturing Processes: The manufacturing processes are inefficient, characterized by high waste, low productivity, and inconsistent quality. This is attributed to outdated technology, lack of standardization, and limited workforce training.
- Information Systems: The automaker's information systems are fragmented and lack real-time data visibility, hindering effective decision-making and operational control. This limits the company's ability to optimize production planning, inventory management, and customer service.
Framework: The TOWS Matrix can be used to analyze the automaker's situation:
| Strengths | Weaknesses | Opportunities | Threats |
|---|---|---|---|
| Strong brand reputation | Inefficient supply chain | Growing emerging markets | Intense competition |
| Established manufacturing capabilities | Outdated technology | Rising consumer demand | Economic volatility |
| Strong financial resources | Lack of standardization | Technological advancements | Political instability |
4. Recommendations
To address the challenges identified, the automaker should implement the following recommendations:
1. Supply Chain Optimization:
- Lean Manufacturing: Implement Lean principles to eliminate waste and optimize resource utilization throughout the supply chain. This includes value stream mapping, bottleneck analysis, and Kaizen events to identify and eliminate non-value-adding activities.
- Just-in-Time (JIT) Production: Transition to a JIT production system to minimize inventory levels, reduce lead times, and improve responsiveness to market demand. This requires close collaboration with suppliers and efficient logistics management.
- Supply Chain Collaboration: Foster stronger relationships with key suppliers through collaborative planning, forecasting, and information sharing. This can be facilitated through online platforms and shared data systems.
- Inventory Management: Implement robust inventory management systems, including MRP and ERP, to optimize inventory levels, reduce stockouts, and minimize holding costs.
- Logistics Optimization: Optimize logistics operations by leveraging technology and analytics to improve route planning, transportation efficiency, and warehouse management.
2. Manufacturing Process Improvement:
- Six Sigma: Implement Six Sigma methodologies to reduce defects, improve quality, and increase process efficiency. This involves identifying and eliminating process variations through statistical analysis and process control.
- Process Standardization: Develop and implement standardized processes for manufacturing, assembly, and quality control to ensure consistency and improve efficiency.
- Technology Upgrades: Invest in modern manufacturing technology, including automation, robotics, and advanced manufacturing systems, to enhance productivity, improve quality, and reduce costs.
- Workforce Training: Provide comprehensive training to employees on Lean Manufacturing, Six Sigma, and other process improvement methodologies to enhance their skills and knowledge.
3. Information Systems Enhancement:
- Real-Time Data Visibility: Implement an integrated Enterprise Resource Planning (ERP) system to provide real-time visibility into operational data, including production, inventory, and customer orders. This enables data-driven decision-making and improved operational control.
- Data Analytics: Leverage data analytics to identify trends, predict demand, and optimize resource allocation. This can be achieved through business intelligence tools and advanced analytics platforms.
- Digital Transformation: Embrace digital transformation initiatives, including cloud computing, Internet of Things (IoT), and artificial intelligence (AI), to enhance operational efficiency, improve customer experience, and gain a competitive advantage.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core Competencies and Consistency with Mission: The recommendations align with the automaker's core competencies in manufacturing and its mission to deliver high-quality products at competitive prices.
- External Customers and Internal Clients: The recommendations aim to improve customer satisfaction by reducing lead times, enhancing product quality, and providing better customer service. They also aim to improve internal efficiency and reduce costs for internal clients.
- Competitors: The recommendations are designed to help the automaker compete effectively in emerging markets by improving its operational efficiency, reducing costs, and enhancing product quality.
- Attractiveness - Quantitative Measures: The recommendations are expected to generate significant cost savings through reduced inventory, increased productivity, and improved efficiency. These savings can be quantified through financial modeling and analysis.
All assumptions, including the availability of technology, skilled workforce, and commitment to change management, are explicitly stated.
6. Conclusion
By implementing these recommendations, the automaker can significantly improve its operations in emerging markets, achieving greater efficiency, cost reduction, and improved customer satisfaction. This will enable the company to compete effectively in these rapidly growing markets and achieve sustainable growth.
7. Discussion
Other alternatives not selected include:
- Outsourcing: Outsourcing some manufacturing or logistics functions to specialized providers. This could offer cost savings and access to expertise, but it also involves risks related to quality control and supply chain disruptions.
- Joint Ventures: Forming joint ventures with local companies to leverage their market knowledge and access to resources. This can be beneficial for market penetration, but it requires careful partner selection and management.
The key risks associated with the recommendations include:
- Resistance to Change: Employees and management may resist change, leading to delays and implementation challenges.
- Investment Costs: Implementing these recommendations requires significant investments in technology, training, and process improvement initiatives.
- Technological Risks: The success of the recommendations relies on the effective implementation of new technologies, which may pose challenges in emerging markets.
8. Next Steps
The following timeline outlines the key milestones for implementing the recommendations:
- Phase 1 (Year 1): Focus on supply chain optimization, including Lean Manufacturing, JIT production, and inventory management improvements.
- Phase 2 (Year 2): Implement Six Sigma methodologies to improve manufacturing processes and enhance product quality.
- Phase 3 (Year 3): Upgrade information systems, including ERP implementation and data analytics capabilities.
This timeline is subject to adjustments based on the company's specific needs and resources.
By taking these steps, the automaker can transform its operations in emerging markets, achieving sustainable growth and establishing a strong competitive position.
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Case Description
Set in early 2009, Part (A) of the case describes the operational challenges faced by a growing subsidiary firm of a global auto major, in an emerging economy. The case illustrates how India emerges as a key market and the Indian subsidiary evolves into a material management and logistics (MM&L) hub for its Asia Pacific and Africa (APA) region. As the volumes of APA region begin to increase, the parent company realizes the need to automate material planning and scheduling-related processes across the plants in the APA region, which were being managed manually. The company takes this opportunity to virtually integrate the entire supply chain across all the plants in the APA region, by linking sales planning, material planning, procurement, production scheduling, and delivery activities, through a common order-to-delivery (OTD) system for the APA region. The Indian subsidiary in the meantime decides to introduce a small car, specifically engineered to meet the requirements of a high-volume, but price-sensitive Indian market. The case then focuses on the challenges the APA MM&L team faces in implementing the OTD system, for the first time in India plant (to be followed by plants in Australia, South Africa, China, and Thailand), replacing the existing built-to-stock (BTS) model. Part (A) of the case ends by unfolding the age-old tension between the upstream material planning and scheduling activities and the downstream marketing and distribution networks. The various stakeholders in the system are left to grapple with these challenges before they can arrive at a consensus regarding "if and how to implement" the OTD system in order to enjoy the benefits of automation and virtual integration. Case (B) describes the outcomes of the actual implementation and provides scope for investigating the impact of OTD on the success of the small car introduced in the Indian market.
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