Free Competitive Advantage Analysis Essay Sample
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Companies that are market leaders in their respective industries do not find themselves there by chance. It is usually because of the consistent sound strategic planning to improve their competitiveness. A closer look at the companies’ activities would reveal astonishing facts on how the companies intricately plan even the simplest of their activities. Their attention to detail is incomparable to other companies in the industry. Strategic supply chain management is one of the features that give these companies a competitive advantage (Hugos, 2011). This paper will undertake an analysis of the competitiveness of General Motors (GM) and Toyota, both market leaders in the manufacture and sale of automobiles. Emphasis would be on how they undertake the basic functions of the supply chain. The functions under investigation include warehousing, transportation, inventory management, reverse logistics, and partnerships and collaborations.
In supply chains, freight transport plays a crucial role at various stages in the conveyance process. It is vital in the movement of raw materials to sub-assemblers, component manufacturers, Original Equipment Manufacturers (OEMs) and ultimately, the delivery of the finished goods to the point of consumption of the customers. Moreover, transport costs correspond to 2% to 5% of the company’s sales. However, the figures may be higher in some industries. Most companies minimize transportation costs by creating economies of scale in terms of the volume that they ship or by proper utilization of the available equipment (Jung, Chen & Jeong, 2007).
Motor vehicle manufacturers have an extremely large production distribution network around the world. Work in Progress (WIP) accounts for a significant percentage of the transportations costs of the company because shipping of several parts for assembly is done from other countries. In fact, the cost of shipping WIP is much higher that shipping finished vehicles. Toyota tailors its transportation strategy to enable it to manage its inventory flawlessly. The company ships its products depending on the orders it receives from customers in various locations. Despite the fact that this strategy increases the transportation costs, it enables it to manage its inventory without any hitches (Harvard Business Review, 2011). GM reduces the transportations costs by adjusting the shipment sizes and routes (Simchi-Levi, Kaminsky & Simchi-Levi, 2003).
After manufacture, products are not automatically absorbed by the market. Warehousing creates the midpoint between the supply and demand in the supply chain management (Scott, Lundgren, & Thompson, 2011). In so doing, warehouses avail locations for storage of inventory to absorb fluctuations in demand leading to the uninterrupted processes in the supply chain. Warehouse management addresses the activities needed to manage efficiently in these operations. The operations comprise of receiving inventory, stocking inventory, and shipping it to their destinations whenever demand arises (Sehgal, 2009).
Toyota uses lean production system that ensures that there is ease in the movement of raw materials and finished products. The system ensures that no raw material remains in the warehouse gathering dust. This has made Toyota eliminate the warehouse. This is because parts go straight to the assembly lines upon receipt and extremely small amount of raw material is kept in the warehouse. GM also uses a lean production system that ensures vehicle parts do not idle in the warehouse. In the US, rail is the principal form of transportation of the vehicle parts. Therefore, interruptions in the transportation of its products would lead to the lack of vehicle parts for use in assembly lines. This was the case in 1992 when rail workers went on strike (Shingo, Shingo & Dillon, 1989).
Traditionally, organizations used to accumulate a large amount of stock and had a wrong perception that it was a sign of wealth. However, this has slowly changed, and organizations have learned that proper management of inventory is vital to remain competitive (Monczka, Handfield, & Giunipero, 2009). Inventory refers to all the materials and goods that are purchased, partially completed materials, and component parts, and the finished goods produced. Too little inventory can lead to the failure of a company, whereas too much of it can lead to many problems with cost of storing the unsold goods being one of them (Wisner, Tan, & Leong, 2009).
Toyota uses the Just-In-Time management philosophy where parts are received just prior to their use in the assembly line for manufacture of vehicles. This philosophy has enabled it to reduce inventory. To ensure the efficiency of the JIT, the company has improved the ordering process from its suppliers. This has enabled the company to reduce its inventory significantly (Liker, 2004). One of the flaws of this system is that hitches in the transportation of the parts would result in delays in the production of motor vehicles. This was evident during the Japanese tsunami of 2011. The tsunami led to the shutdown of many plants that produced vehicle parts leading to delays in the production of motor vehicles.
GM uses the JIT management philosophy to reduce the inventory management costs. Thus, GM requires that its suppliers deliver their products in time to ensure that it continues to produce its products efficiently.
Reverse logistics refers to the movement of goods in the opposite direction of the supply chain. It occurs when the consumers of the product or an organization within the supply chain returns the products (Wisner, Tan & Leong, 2009). Some of the factors that may cause reverse logistic include faulty goods, recycling containers after the use of the active ingredient by the customer or disposal of products that the customer no longer requires. Most companies attempt to reduce reverse logistics as, in most instances, it is an unwanted process in the supply chain.
As mentioned earlier, reverse logistics is an additional expense to some companies that a company should avoid. However, companies may use reverse logistics to improve their trust by the customer. Toyota has set up fluent reverse logistics mechanisms. These ensure that if a vehicle has a fault, the customer can return it to the manufacturer easily. To improve the customer trust in the company’s products, the company has increased the warranty periods given to customers upon purchase of their vehicles (Sherif & Khalil, 2008). The ease with which the company recalled the Prius, one of its models, due to a mechanical fault, is testament to the efficient reverse logistics of the company.
To ensure the efficiency of reverse logistics and co-ordination of the supply chain, GM ensures that there is a collaborative planning and sharing of information with its suppliers and motor vehicle dealers. This has led to the creation of the efficient reverse logistics channels (Harrison, Lee & Neale, 2005).
Partnerships and Collaborations
To guarantee efficiency in the movement of products within the supply chain, companies ensure that they forge partnerships and collaborations with other players in the chain. Partnerships and collaborations offer great risks and opportunities. Breach of trust or failure to perform by any member within the chain is costly to other members of the chain. However, building effective relations with other players in the chain ensures the success of the company (Coe, 2005).
Toyota shares data freely with everyone including its customers. Collaboration with its Original Equipment Manufacturers (OEMs) has enabled the company to cut its costs of production and ensured that the OEMs produce high quality products (Gottschalk & Kalmbach, 2007). Collaboration with various players via the internet (E-collaboration) is one of the principal forms of collaboration in contemporary times. GM has created an E-collaboration platform with its suppliers to enhance the standardization and improvement in the quality of products. This has led to the reduction of the design-to-production cycle for new models to 18 months (Bidgoli, 2004).
Toyota and General Motors are market leaders in automotive manufacture industry. An analysis of how the supply chain management of the companies clearly explains the reasons that make the companies leaders in the motor vehicle manufacture industry. Warehousing management, transportation management, inventory management, reverse logistics, and partnerships and collaborations of these companies are exemplary.