SUPPLY CHAIN MANAGEMENT

“International Automotive Company”

By: Group 2
Leo Ardi C (09111640000061)
Alifia Salsabila B (09111640000071)
Ananda Dwi K (09111640000072)
Byz Risyad (09111640000090)
Devita Auliana P (09111640000103)

Lecturer: Dewie Saktia Ardiantono, ST., MT.

 Outline
1. Industry Background & IAC Company Profile
2. Overview Case
3. Most Important SCM Elements for IAC
4. Cause of Overusing Premium Freight
5. Areas of Wasted Resources
6. IAC Measures to Improve the Ratios of Orders
7. Challenge for Salinas
Industry Background
• The global auto component market is a highly
diversified sector that involves engine and auto
component manufacturers, including aftermarket
parts manufacturers, suppliers, dealers, and
retailers
• Global auto components market continues to
grow as the demand for new cars
• Auto Component Industry players rapidly added
capacity to meet growing demand from
automobile manufacturers

(IBISWorld,
Source: 2019)(2019)
IBISWorld
 Company Profile
• International Automotive Company (IAC) is a leading
global supplier of automotive components and systems.
• The company produced window regulators, door
systems, seat systems, closure systems and electric
drives.
• In Reynosa Plant, IAC had 403 employees.
• IAC Reynosa produced ABS drives, HVAC climate
and cooling fan modules for customers such as
Ford, BMW, Chrysler, Mitsubishi, Nissan, Toyota, etc
Overview Case
• In 2008, International Automotive Company (IAC), a
German manufacturer of automotive parts, acquired a
plant in Reynosa, Mexico.
• At the time of acquisition, the plant was showing record
losses. After conducting a deep analysis, the company
discovered that a lack of proper management in the
supply chain system was leading to a large amount of
wasted resources.

• Thus, managers looked for opportunities to save money

and facilitate improvements mainly in areas such as
packaging, warehousing, and transportation.

• One of the greatest obstacles involved IAC’s employees,

who were falling short in terms of knowledge and
motivation.
Among the SCM elements/benefits listed in the case,
which two were the most important for IAC?
 Among the SCM ele
Planning the entire supply
ments/benefit listed i chain with accurate
n the case, which tw Manually forecasting. Early involvement

o were the most impo Excel of customers and suppliers

could increase the accuracy

rtant for IAC? -> SAP of forecasting and thus the

accuracy of planning.

Answer:

1. Transparency
2. Standardization
3. Optimization Standardization meant
4. Flexibility using one standardized
method through the use of
41
5. Planning
standardized tools. Through
6. Innovation standardization, wasting %
7. Problem Solving resources in duplicated
8. Lean Management efforts could be avoided.
9. Closeness of suppliers
10. Cooperative orientation
$5.000.000/$12.000.000
What was the cause of overusing premium freight? Do you
think that issue has been addressed by IAC?
• Premium freight was used so frequently
because of emergency orders, the plant
would run out of certain components.
• This is caused by Logistic Department that do
not record adequate inventory levels. Data
recording is done manually with an excel
sheet so it is difficult to have accurate access.

• This issue has been addressed by IAC through new

logistic planners standardized the process and
replaced the manual Excel lists with SAP software.
• In addition, IAC makes improvements in warehouse
management by using standard bar codes that
can reduce errors in inventory reports
As far as warehousing is concerned, identify all the areas in
which resources were being wasted. Do you believe they
have all been addressed? Explain.
 Areas/Cause of Wasted Resources
Mc Allen
3 Warehouses was
Unnecessary and Wasteful
It multiplied the total cost
(storage, handling, and other
costs)
Warehouse
Management
Reynosa, Mexico Canada
• This issue was addressed by
eliminating the warehouses in
Canada and McAllen. Reduce fixed costs and reduce
• IAC use VMI system to maintain the uncertainty
a lower investory level
 Areas/Cause of Wasted Resources
Empty Space Manual Data Entry Leads to
Many Mistakes
Under the fixed-location in the It resulted in surplus or out-of-
original warehouse management stock materials, in both cases
there was a waste of space causing higher costs.

This issue was addressed by

This issue was addressed by
scanning of bar codes, the error
implementing the chaotic
ratio has been minimized as well
warehouse management
as the marginal cost

The lack of using SAP This issue was addressed by

upgrading to a newer version and
it caused the inventory level to training employees with a wider
be only periodically actualized. scope
According to the information provided in this case, how
would you interpret the following ratios? What measures
did IAC take in order to improve these ratios ?

• Three operators to one office worker

• 765 employees to $7 million in monthly sales.
 Ratio 1 :
Three operators to one office
worker Measures to improve :
1. Applying the right amount of
employees to get more efficiency
of worker.
In every 3 productive worker that In logistics department, they
adding value to the manufacture combine the buyers and planner
goods, there are 1 office worker that team (10 person) to a new logistics
handle only administrative work.
team that only consist by 5 person
The lower ratio means company must
pay higher unproductive salary, 2. They use the technologies such
because there are more administrative as EDI and SAP to reduce the
worker in company.
administrative work.
Company must find right amount of
ratio, because they still need
administrative worker in case to provide
better management in the company.
 Ratio 2 :
765 employees to $7 million in monthly
sales.
This is a productivity ratio, with 765
employees (input), the company can
generate 7$ million monthly of sales.
Productivity is a relative terms, so to
know the productivity level of a
warehouse is good or not they must
compare to another warehouse.
Measure to improve
1. Using SCM, such as warehouse and
logistics management to improve
the efficiency level of operations.
2. Applying new technologies such as
EDI and SAP so they can develop
their operations quality.
3. Integrate each department in order
to unify the vision and improve the
teamwork of the company
4. Conduct training in order to
improve the employees skills related
to the new proccesses and system
implementation
What do you believe has been the most difficult challenge
for Salinas?
 Challenge for Salinas
Develop new technology to keep the
time efficient for whole SCM process

Superintend employee’s skill and maintain

their work ethics and also loyalty to
company

Forecast future condition to do the

planning system for SCM
 References
IBISWorld. (2019, June). Global Auto Parts & Accessories Manufacturing Industry - Market
Research Report. Retrieved from IBISWorld: https://www.ibisworld.com/global/market-
research-reports/global-auto-parts-accessories-manufacturing-industry/
Lucintel. (2012). Growth Opportunities in the Global Auto Component Market. Retrieved from
Lucintel: https://www.lucintel.com/auto-component-market-2017.aspx
Thank You