Hyundais Supply Chain Management

Hyundais issue stove Management1.0 Introduction deliver compass management is bear on with the management of upstream and downstream interactions and activities between various entities/organizations in company to maximize the value creation to the benefit of the customer (Christopher, 2005). globalisation has resulted in append chains crossing international b sends and so leading to greater exposure to disruptive risks.Hyundai Motors is an automaker with a strong global presence. Its supplement chain entities, from manufacturing to retail, include external supp equivocationrs dresss manufacturing intermediate and/or finished products dispersion centers contract zones and trans gondolariageation assets.Between 20th June and 6th August 2003, thither was a major fracture in the companys ability to deliver rider cars to its customers receivable to a prod stumble at its biggest production demonstrate. Although labour strikes are richlyly probable, the duration of this strike (47days) was highly unforeseen. The timing was likewise critical as the labour union rumped the strike to a clock when domestic help gross gross revenue were expected to rise due to newly apply excise-tax cuts for new car buyers by the Korean G overnment. The impact of the hoo-hah was and so highly significant a staggering $1.1billion in lost sales together with other unquantifiable losses, as a result of the inability of the tot up network to remain jazzly resolute during the strike.2.0 Literature Review add chain disruptions are the outcomes of the materialization of threats which results in a serious spirited of the operations of one or more production or diffusion entities and afterward affects other entities/nodes within the supplement. Handfield et al. (2008) suggest that the likelihood of disruption in* Global sourcing append networks characterized by workforce instability, customs regulations, potential for terrorism, lifelike disasters, number of tra nsfer points etc.* Supply networks with constrained dependencies characterised by limitations on number of sources, uniqueness of sourced parts etc.Kleindorfer Saad (2005) classified sources of disruption risks into trinity groups* Operational contingencies such(prenominal)(prenominal)(prenominal) as equipment malfunction and systemic failure, loss of a supplier and human centred issues like labour strike and fraud.* pictorial disasters such as hurricanes, earthquakes and storms.* Terrorism and political instability.Sheffi (2005) suggests that in order to build resilience against disruption risks into a come out chain, each type of disruption should be anticipated and guarded against individually. Handfield et al. (2008) suggest two types of resilience proactive e.g. tractability, in which the add chain is re-routed away from the anticipated source of the disruption and unstable e.g. redundancy and responsiveness, in which supply chain resources are coordinated to respond to a supply chain disruption.2.1 Global Operations (Hyundai Motor Company)As at 2003, Hyundai Motor Company (HMC) was the seventh largest automobile manufacturer in the world in terms of volume. HMC had 3 manufacturing plants and 8 CKD concourse plants. Hyundais target markets were classified into 3 types innovational emerging and developing markets.Table 1.1- Hyundais Global OperationsPlant TypeLocationRegions SuppliedType of Markets SuppliedManufacturing PlantsS. KoreaDomestic mating AmericaAdvancedChinaDomestic Australia emergentIndiaDomesticEmergingAssembly PlantsEgyptAfricaDevelopingPakistan in-between EastDevelopingMalaysiaAsiaDevelopingRussia east europiumEmergingTaiwanAsiaDevelopingIndonesiaEast AsiaDevelopingbrazil nutSouth AmericaEmerging turkeyWestern Europe Middle EastAdvancedThe company located manufacturing plants in the emerging markets such as China and India, in order to meet growing domestic demand as well as take advantage of comparatively humbled labour be in the countries.HMC however did not call for any manufacturing plants in the advanced markets but relied on im carriages to meet demands in the zones. In order to compete with established automotive manufacturers in the advanced markets, especially the United States of America, HMC focussed its strategy on improving tonus and maintaining low costs using TQM and supply chain strategies such as just in time and congregation postponement.HMC operated the largest integrated automobile plant in the world, the Ulsan plant located in South Korea, with an output of close to 1.6 million units annually, in form of cars and Completely Knockdown (CKD) kits. The plant had a co-located privately owned port which make export convenient. In order to respond quickly to specific customer demands, at minimal costs, Hyundai practices JIT and holds confine finished goods inventory of not more than 7days, at its plants and distribution centre. oral communication lead time for export vehicles was 45days with shipping lead time of 30days (Hahn et al., 2000). 2.2 Hyundais European Supply ChainImporting passenger cars into European Union (EU) was relatively easy beca uptake as at 2003, the 15 fellow members and 10 aspiring members of the EU shared import and export policies at that placefrom had no local content regulations on car imports.Turkey was chosen as a locating of the CKD plant to supply Western Europe because of its low labour costs and surface transport links to Western European countries.The other CKD plant supplying European nations was located in Russia, a non EU member which probably had its own peculiar automotive import regulations. til now due to domestic demand opportunities in Russia, its influence and available transportation links to other landlocked easterly European countries it was a good quality to locate a CKD plant.The Korean plants produced CKD kits which were exported to the Russian and Turkish assembly plants. This supply strategy meant freight charges and other logistics costs were reduced by producing safe and sound cars in form of parts and modules in Korea shipping to CKD plants located in Europe, assembling based on customer demands in Europe and distributing assembled cars, in general via surface transport, to the customers around Europe.However, the dependence on the Ulsan plant as the solely plant capable of supplying passenger car CKD kits to the Turkish and Russian plants, which were responsible for supplying the European market, had a major risk inherent, as would be shown subsequently.3.0 RESILIENCE FRAMEWORK 3.1 Theoretical FrameworkThe possibility of disruption is a reality to every modern global supply network. Supply chain resilience should therefore involve more than simply regain from disruptions but must be a proactive, systematic and integrated geographic expedition of capabilities within the supply chain to make out with unforeseen events. The framework infra uses this approach.The differ ent parts of the resilience framework are consistent with supply chain resilience literature. For congressman The framework proposes the use of excess/ wasted resources as a reactive strategy to mitigate risks. Another testimony is to improve the ability to detect disruptions and subsequently improve responsiveness finished and through investment in visibility systems. Supply chain planning and coaction would help to aid the robustness of the supply network. Finally, the framework proposes that the supply chain should be redesigned if the moment of the disruption is so enormous that it cannot be efficiently mitigated.* Continuous cycle of monitoring and reassessing disruption risks.3.2 Mapping the Supply Chain Identifying RisksThe map shows the paths through which materials move in the supply network as well as major risks at various critical nodes.The identify risks are grouped in Table 3.1. The most probable disruption risk is selected at each node and its potential primar y effect on the supply chain is determined.TABLE 3.1- Hyundais European Supply durance Risk AssessmentNODESRISK TYPESDISRUPTION RISKSMOST PROBABLE/ dissipated EVENTSPRIMARY EFFECTSKorean PlantsOperational roil disputes Pilferage Quality issues split damage, Loss of critical suppliers churn Strikes Loss of critical supplier breach of supply of cars to domestic and export markets(mainly US) Failure to supply CKD kits to European plants internal disastersTyphoonsTerrorism/ semipoliticalDevaluation of the Korean currency (Won) Terrorist attacksUlsan PortOperationalLabour disputes Dispatch errors Parts damage PilferageTyphoons Dispatch errors Port Closure break in ability to ship finished cars and CKD kitsNatural disastersTyphoonsTerrorism/ PoliticalTerrorist attacksTurkey CKD PlantOperationalLabour dispute Turkish port closureseisms Terrorist attacks Disruption of plants operations. Disruption of transportation links to Western European markets( a high demand zone)Natural disaste rsEarthquakesTerrorism/ PoliticalChanges in governments import export policies Terrorist attacksRussia CKD PlantOperationalLabour dispute, Turkish port closureNatural disaster Political instability Disruption plants operations Disruption of assembled cars exports to Eastern European marketsNatural disastersEarthquakes Floods TornadoesTerrorism/ PoliticalChanges in Russian governments import export policies Terrorist attacks Eastern Europes political instabilityEuropean Union CountriesOperational displace demand Transport links disruptionsFluctuating demand Sales disruptionNatural disastersEarthquakes Floods Tornadoes HurricanesTerrorism/ PoliticalChanges in European Unions import export policies Terrorist attacksGrouping the disruptive events into the vulnerability hyaloplasm shown below would help to prioritize resilience strategies to the high severity disruptions. However the low severity events are not entirely ignored. For instance, dispatch errors at the Ulsan port are ope rational risks can be managed by actions such as introducing RFID succession political instability can be managed through maintenance of good relationships with Government.Steps for making supply networks hot against high severity disruptions* Identify nodes with high impact disruptive risks* Identify opportunity of occurrence of the disruption* Select degree of flexibility Higher degrees of flexibility would be required for high probability risks, while lower degrees of flexibility would be required for low probability risks.4.0 Hyundais European Supply Networks resiliency 4.1 Hyundais Resilience of the Labour Strike DisruptionRedundancy Excess resources were utilize reactively by Hyundai to maintain operations while the disruption lasted and also to subsequently recover.Speed of recovery As shown in figure 4.2, Hyundais monthly sales grew pelt alongily within 1-3 months after the disruption ended. The following inferences/ assumptions are made about how this was achieved* Hy undais redundant production capacity at its plants aided the speed of recovery. The plants must have used production ramp up strategies to increment output.* Logistics of the CKD kits away from the plants was enhanced by the co-located shipping port. It is assumed that some CKD kits were flown by air to the CKD plants.* Management at Ulsan plant had visibility and control over the entire supply network. This aided the co-ordination of expedited international logistics of the cars to the customers.Although excess resources proved to be a useful resilience strategy, it can be quite expensive. Moreover, as observed, the extent of the disruption was difficult to predict and eventually resulted in complete depletion of some inventories.On the other hand, inhibit levels of redundancy combined with appropriate levels of supply chain flexibility is believed to enable organizations to not only cope with unanticipated events but also improves normal operations efficiency while providing opp ourtunity to utilize disruptions to gain competitive advantage ( Sheffi Rice, 2005Fawcett et al., 1996 and Skipper Hanna, 2009).Hyundais European supply network however lacked the required flexibility because of dependence on the Korean plants for CKD kits. A major supply chain redesign (as suggested by the framework), is thus required to mitigate impact and/ or ensure business persistency in the event of occurrence of these types of high severity disruptions.4.2 Avoidance/ thermolabile Strategies business continuity (for the high impact/high probability disruptions) 4.2.1 Labour strike in KoreaTo cope with a future occurrence of this, Hyundai inevitably to reduce dependence of the Turkish and Russian CKD plants on the Ulsan plants by increase the manufacturing flexibility of the CKD kits.The India plant was the only plant not affected by the labour disruption. This was attributed to its minimal dependence on any supplies from Korea. It can thus be easily made an alternative m anufacturer of European CKD kits.Also, Hyundai whitethorn adopt outsourcing complete components design and manufacture to suppliers. This would eliminate the lead for manufacturing plants to supply the4.2.2 Loss of a critical supplier at Ulsan Plant 4.2.3 Natural Disasters or Terrorism at Assembly Plants RegionsTwo common risks crosswise both CKD nodes of Hyundais supply network are natural disasters and terrorism. These are low probability external threats thus redesigning to avoid them may be pricey and eventually unjustified. Rather, the supply chain charters to be made reactively resilient against them. This can be achieved by designing a robust supply network.To cope with effect of any of these disruptions to any of the CKD plants redundant capabilities would be required. For instance the Russian plant should have the capability of assembling passenger car models made in the Turkish plant. However for economic reasons, this capability should lie redundant until actual occurr ence of the disruption risk.However Russias exclusion from EU countries may make it difficult for it to supply the Western European markets (all EU countries) because of trade regulations. Thus another plant located in the EU may be required to supply Western Europe if there is a disruption at Turkey. However this plant would not use redundant capability but should constantly supply both Eastern and Western Europe.As at June 2008, the EU country with the lowest tub was Czechoslovakian Republic. Assuming this was the case in January, 2004, when it joined the EU, this would make Czech a good location for the alternative manufacturing or CKD plant.DEMAND sport AT EU DISTRIBUTION CENTERSThe distribution of the passenger cars across Europe can be made flexible across both European zonesTable 4.1- Proposals EvaluationsResilience StrategyRequirementsProposalsImplicationsManufacturing flexibilityParts Standardisation capacitor increasesManufacture CKD in IndiaRelatively lower transportati on costsincrease manufacturing costsManufacture CKD in a low wage European Union countryMuch lower transportation costs increase manufacturing costs Long term investment in new facility.Modularization undefendable suppliersOutsource components design and manufactureSignificant cost reduction increase efficiency of JIT technical difficultiesTHE ROBUST SUPPLY CHAINCombining the manufacturing, assembly and distribution nodes would give the new supply chain design shown below. test the New Supply ChainScenarioManufacturingAssembly EffectDistributionLabour strike at Korean plant closure of Korean plantRamp up manufacturing at Indian plant strain on Indian plants resources to supply both Turkey and Russia CKDsTurkish and Russian plants operate as usual little or no impactEU distributions operate as usual little or no impactEarthquake at Turkey closure of Turkish CKD plantIndian and Korean plants operate as usual, but supply all CKD kits to Russian CKD plantsRamp up assembly operations at Russian CKDStrain on Russian plants resources to Supply passenger cars to Western European countriesEU distribution operates as normal little or no impactSudden demand growth in France with simultaneous settle in Portuguese demandIndian and Korean plants operate as usualTurkish and Russian plants operate as usual little or no impactPortuguese distribution center re- routes supply to French retailers.SOURCES OF COPETITIVE profitThe robustness of manufacturing, assembly and distribution would help* The supply chain fit out demand more responsively. This would lead to reduction in inventory holdings* flexibility to customize to customer requirements is enhanced.5.0 Recommendations (Business Continuity)Hyundai should develop contingency plans for each of the identified risks. The major flexibility and redundant resources available in the supply network would need to be coordinated for the supply chain to remain resilient in the event of a major disruption.Also the supply chain propo sed is for dead term implementation. To build resilience in the long term Hyundai would need to build a facility in the EU and depending on demand