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Abstract Number: 002-0426
The Strategic Material Positioning Matrix – The Automobile Dealership
Case
Second World Conference on POM and 15th Annual POM Conference,
Cancun, Mexico, April 30 - May 3, 2004
Marcelo Klippel ([email protected])
Universidade do Valle do Rio dos Sinos – UNISINOS – Av. Unisinos, 450, São Leopoldo / RS - Brazil
Phone/ Fax: 55-51-590 8186
Ricardo Augusto Cassel ([email protected])
Universidade do Valle do Rio dos Sinos – UNISINOS – Av. Unisinos, 450, São Leopoldo / RS – Brazil
Phone/ Fax: 55-51-3346 8256
José Antonio Valle Antunes Júnior ([email protected])
Universidade do Valle do Rio dos Sinos – UNISINOS – Av. Unisinos, 450, São Leopoldo / RS - Brazil
Phone/ Fax: 55-51-590 8186
Rodrigo Pinto Leis ([email protected])
Faculdades Rio-Grandenses – FARGS – St. 24 de Outubro 111, 1103, Porto Alegre / RS - Brazil
Phone/ Fax: 55-51-3346 5536
Abstract
The effective management of materials represents an important issue in a company’s
management, as these can have an impact on the business global results. The article is divided in
two primary objectives: 1) it presents the primary theoretical concepts which support and
implement the Strategic Material Positioning Matrix, adapted to the service segment; 2)
supports the potential contribution and benefits of the Matrix implementation by presenting its
applicability case in an automobile dealership. The authors aim to demonstrate the necessity to
manage effectively the materials, as they have a significant impact on the company’s global
results. The authors also demonstrate the procedures to implement the Matrix, as well as the set
of resulting benefits of this application through a pilot project in an automobile dealership.
Finally, they emphasize the importance of material continuous management, involving the
management segmentation at the different quadrants of the Matrix and supported by a
mechanism of performance measurement adopted by the Company.
1. Problematic Characterization of the Materials Supply
During the 80’s and 90’s, the industrial segment underwent profound changes at worldwide
level. The hard inter-capitalist competition which started from the Oil Internationals Crisis
(Petroleum), in 1973 and 1979, induced the companies to improve their competitive performance
in the markets.
In Brazil, the confrontation of these competitive conditions was accomplished basically by the
adoption of modern principles of Operations Management (Production Engineering) like: Toyota
Production System – TPS, Just-In-Time / Lean Production, Total Quality Control – TQC, Theory
Of Constraints – TOC, etc. However, the axis of improvement efforts was mainly focused on the
internal improvements of the Production Systems. Although, these efforts remain relevant, it
becomes all the more clear that there is a necessity to enlarge and continuously improve the
efforts in the Supply Chain as a whole.
According to what has been observed at last years, a significant portion of industrial costs
associated with manufactured products is related to the materials supply. At industrial
companies, in average, this portion is around 60% from the manufactured products cost
(Harmon, 1993). Thus, the companies will tend, more and more, to invest at Suppliers
Development Projects, specifically in terms of materials supply management.
The core justification for the development of projects related to Supply Chain Management is
linked to the economic-financial problematic involved with materials supply. This justification
has been widely diffused by several authors, like Dobler (1996) that suggests a theoretical
exercise in order to evaluate the materials costs impact and the inventories amount involved with
a typical operation of Industrials Companies. Dobler (1996) shows that the company can increase
its ROI – Return On Investment, by three basics ways:
• Cost reduction associated to sales activities;
• Sales increase with the same available assets (or also the sales increase proportionally
faster of the investments)
• A combined strategy of costs reduction and sales increase with the same assets.
It can be observed that there is a necessity to act in two directions in terms of materials issues: i)
materials and raw materials prices /costs reduction, by a set of actions jointly with the suppliers;
ii) general levels reduction of inventories in terms of raw material, work in process and finished
product, by the improvements at logistics chain and Production Control, Scheduling and
Planning.
These features presented up to now, are related to the observed reality from the industrials
companies scope. The core idea of this article consists in applying the techniques and concepts of
materials management, in the specific case of Strategic Material Positioning Matrix – SMPM in
a company from the services segment.
2. The Automobile Dealerships
The considerable increase of the quantity and difficulty of management decisions is caused by
the complexity of modern companies, their high level competitive and from the recent
technological advances. The traditional management principles developed before the industrial
revolution are not sufficient to solve the decision problems in that the managers are confronted
with at the present. If on one side the technologic conquests can be assimilated by technical
efforts, on other side, the modern managerial techniques require a higher level of adaptation in
order to accommodate themselves to the dynamic social-economic environment to which they
are applied.
In that context, Brazil’s automobile dealerships are highlighted, jointly with the Brazilian
automobile segment, once they increase very rapidly and in an accentuated manner since the
beginning of 90’s. Since the beginning of this period, the authorized automobile dealerships
segment was constituted of an oligopoly, where there were in operation only four large
manufacturers in the country – Ford, Volkswagen, Fiat and General Motors. Another fact that
contributes to the oligopoly invigoration was the barriers existent both to the installation of new
factories from other manufacturers as to the vehicles importation. The dealerships also disposed
their own protection mechanisms and enjoyed with high profits, mainly with the sales of new
vehicles.
This closed national economic policy to foreign markets extended until the beginning of 90’s,
when a reopening of the national market occured. This made possible an increase of international
investments in several national economic segments. Among the segments with higher
investments during this period in Brazil, the automotive segment can be outstanding.
The authorized automobile dealerships are, nowadays, the principal means of distribution of
manufactured vehicles by the automobile manufacturers installed in the country. Therefore, in
order to study this segment it is important first to understand the relationship between
consumers, automobile dealerships and suppliers. This work becomes even more important due
to the lack of literature on the issue, like reviews and magazines, newspapers and periodicals,
books and technical articles among others.
The automobile dealerships segment has a proportional increase in relation with the number of
manufacturers as well as the number of manufactured vehicles in the same period, existing about
3,300 automobiles dealerships from several brands in Brazil (FENABRAVE, 2001). The
automobile fleet in Brazil is approximately 18 millions of units (ANFAVEA, 2001).
However, the authorized automobile dealerships suffered a stagnation period due to the
worldwide recession that affeced all the automobile industry. Faced with these challenges, the
companies must turn theirs business profitable, as in last years they had a continuous fall in their
financial performance.
The dealerships act in four segment of business: i) sales of new vehicles; ii) sales of used
vehicles; iii) sales of accessories and parts and; iv) technical assistance services.
Among these four segments of business, the technical assistance segment is leading and it is
divided in mechanic shop and tin shop. These services are responsible for the majority of
problems in which the automobile dealerships suffered. This is because, in the experience of
many customers that use the automobile dealerships services, these services and the vehicles are
not delivered on time in addition the prices tending to be higher than the independent and
particular mechanics shops.
In this new environment, bringing higher competition at all levels (price, time, quality, etc.), the
customer profile was modified (the customer is more expert, more demanding and has a higher
decision power) and the profits of new vehicles sales are no larger able to cover the wastes of
others business, the automobile dealership is necessary to reevaluate the business strategic model
adopted.
It can be concluded that, in that context, the Brazilian automobile dealerships need to develop a
mechanism of continuous management improvements. In order for this to occur is indispensable
that the dealerships develop a systemic view of the company, as well as develop creative
solutions that could offer the desired competitiveness.
At the technical assistance area, responsible for the service sales, the Company analyzed in the
present article, has equipments with advanced technology and a trained team to extract the
maximum out of this technology in order to provide for the satisfaction of customers. For the
company, the important is to assure the full satisfaction of customers with the provided services
and for this to really happen, the Company strives for interaction, comprehension, friendship and
interest in the customers, because this is the essential elements to achieve the right solution.
This area is divided in mechanic shop, tim-shop and painting. The mechanic shop is specialized
in corrective and preventive mechanicals maintenance. The technicians always are updated with
technologic innovations, once they participate actively in trainings, instructed by the internal
qualification plan that allow them to know technically the cars as a whole. The mechanical
available services are: periodic reviews – maintenance plan, air conditioned system maintenance,
cooling system maintenance, electronic systems reviews and maintenances, clutch repairs and
maintenance, steering wheel systems repairs and maintenance, computerized geometry, breaks
systems repairs and maintenance, gearbox and differential repairs and maintenance, potency test,
escape system gas analysis, complex diagnostics, gasoline and alcohol vehicles conversion to
vehicle natural gas, windshield replacement and internal finishes set replacement.
The Company also holds in the mechanics office area, a sector specially structured to assist small
repairs, called Pit Stop. The small repairs are the services with the execution time forecast up to
2 hours. The services performed by Pit Stop are: computerized geometry, balancing, light
alignment, injections beak cleanness, electric/electronic system test, replacement of: veil, veil
cable, filters, belts, hoses, oils and fluid, breaks chip and canvas, break disks, lights, flashlight,
lamps, fuses, cleaner blades, shock absorbers, springs cables, wheels, rolling and batteries. The
tim-shop and painting services also are part of the technical assistance area, but this kind of
service specializes in doing repairs at damaged vehicles (accident vehicles).
The fundamental issue for the development of this research consists in the treatment of the issues
related to the parts storeroom, namely, the materials supply for the dealership in query. The
theme in line consists in Materials Management for the dealership analyzed, seeking a different
treatment for the several kind of materials involved.
Thereby, the present article is developed from the following question: What would be the impact
of applying the SMPM strategy with the suppliers from the metal-mechanic industrial segment at
the services provides company?
The authors seek to answer this question through a presentation of a case study developed at a
services provides company, specifically at the automobile dealership described above.
3. Methodologic Approach
For the elaboration of this article were used two information sources:
1. The theoretical concepts available in the literature where some advances in terms of
method and techniques development to the treatment of materials management issues (for
instance, ABC curve technique) were observed.
2. It Case Study from the SMPM implementation in an industrial company from the metal-
mechanic segment. The SMPM construction was done in the Company founded in the
Preliminary Work General Method proposed by Antunes & Klippel (2002).
The methodology of the Case Study was chosen due to its appropriateness to the purpose of this
article. Considering the issues concern the justifications for the use of the Case Study as research
instrument the following can be slated:
1. The research is proposed to understand in depth the Materials Management problematic
at the services company analyzed, considering their suppliers.
2. The theme is contemporary and important to the development of the called Lean
Production Systems historically derived from the Toyota Production System.
3. The choice of the Case Study as the research method is validated as the researcher does
not have control under the behavior events.
4. In the same way, the Case Study is also characterized by the study in depth of the
Materials Management process and phenomenon in the context of the analyzed company.
The means used to the development of this Case Study are:
1. Document Research: several documents and reports that treat the Materials Management
problematic at the company and at its segment were analyzed in detail.
2. Field Research: the whole physical structure and operation logic of the Materials
Management issue at the service Company was studied.
3. Interviews: several structured interviews took place in accordance to the proposed
methodologic by SMPM, presented above.
The methodologic approach launched by a wide bibliographic research in national and
international publications seeking a theoretical foundations in terms of Materials Management
and specifically in terms of SMPM. Once having this, a necessary document for the SMPM
application was elaborated at the Company. For the remaining, the authors followed the Work
Method proposed in terms of SMPM implementation, described below.
4. Work Method – Presentation of Preliminary Work General Method (Antunes & Klippel
(2002))
According to Yin (2001, p.112) “the interviews are the one of the most important sources of
information for the driving of a Case Study”. The interviewees are defined according to the
SMPM methodology as well as the driving structured way of the “interviews” according to the
voting logic described in the following.
This topic has the objective of present the intervention method of SMPM implementation at a
company. This method is called Preliminary Work General Method and it was proposed by
Antunes & Klippel (2002). Figure 1 presents the Method.
Step 1 consists in the general presentation of the methodology to the Managerial Group of the
Company. This step has the objective to present the theoretical issues and principals results
expected from the SMPM implementation. According to Antunes & Klippel (2002), it is
necessary to emphasize the significant importance of the theme (strategic issues, economic-
financials issues, issues related to quality, etc.) and the necessity to specific treatment of the
aspects related to the materials supply at each Matrix quadrant.
Following the approval of SMPM implementation, Step 2 consists in the definition of Work
Team – WT that will conduct and perform the project activities and tasks. The WT must include
professionals from different areas of the company. In an industrial company, for instance, the
WT could be includes professionals from the following areas: Process and Product / Design
Engineering, Quality Department, Purchasing, Production Control, Scheduling and Planning,
Information Technology, Costs Control and Production Managerial.
The next is Step 3 with the definition of materials and products to be treated at the proposed
methodology. In this case, instead of materials and products must be used materials and services.
Firstly, the WT select the products/services which are more significant to the Company from an
economic strategic view. Immediately after the Step 3, the Step 4 consists in the basics
methodology training. It is proposed that this training must be performed in terms of technology
review for the WT.
According to Antunes & Klippel (2002), the application of SMPM properly said is done from
Step 5, that consists of as set of voting in order to position and classify each material according
to theoretical criterions presented above. Each WT member must perform the voting in an
individual manner, not occurring interference with other professionals as to preserve the points
of view of each team member.
1- General Presentation of Methodology Direction
2- Work Team Definition
3- Materials and Products Definition
4- Basic Training of Methodology
5- Preliminary Elaboration of SMPM –Strategic Material Positioning Matrix
6- Data Treatment and Positioning at the SMPM
7- Critical Analysis of Obtained Results
8- Action and Management Purposes for each SMPM segment
9- Results Presentation for Management / Administration
10- Consolidation of the Action Plans and Management Manners for the
several SMPM segments
11- Execution of the Action Plan
12- Control of Action Plan
13- Actions Re-planning
WHAT? WHO? HOW?A + CR
WT
A
WT + A
A
WT
WT + A’
WT + A’
WT + A’
WT + A’
WT + A’
WT + A’
Workshop
Team WorkA + CR
Team Work
Technological Training / Workshop
Team Work
Internal Work (Software)
Team Work
Team Work
Management / Administration Meeting
Team Work
Field Work
Field Work + Team Work
Team Work
LEGENDAA Consultant Direct InvolvementA’ Consultant AccompanimentCR Company ResponsibleWT Work Team
Figure 1 – Flowchart of Implementation Method of Strategic Material Positioning Methodologic (Source
Antunes & Klippel (2002)
At Step 6 – Data Treatment – the data are coming from voting and these are tabulated to define
the index that translates the material/service influence at the company results and performance.
According to Antunes & Klippel (2002), this number is obtained from a mediated influence of
two weights: the product relative weight at the competition and the material influence.
Specifically to the voting of product/service relative weight at the competition it must be
considered only these products/services in relation to the market, following the four pre-defined
factors: Cost, Quality, Time and Technology. In that case, each voting must sum a total of 1,0,
and it must distribute the weights according to the importance that each WT professional
indicates to each factor at the service analyzed. In relation to the material influence, it must
consider the same factors described above, but the weights must be between 0 and 5 (0
represents low influence and 5 represents high influence), and each specific material must be
considered relating to their relevance at the service in theme. Thus, it must be emphasized that
the same material can have a different influence at the result, depending from the service
considered (for instance, a material A can be a common/standard item to service X and a security
item to service Y). In that case, the voting is different although the analyzed item (material A) is
the same). From these two weights calculated, the mediated influence can be calculated, that
represents one of the two matrix indexes.
Another index to be considered consists in the procurement risk of each material. In that
moment, it considers each material according to the four factors presented previously:
1. Bargaining Power: it is about the negotiation power that is with the buyer or the supplier,
and it has intensity from 0 to 5, respectively;
2. Substitution: it is about the possibility of replacing a material by another kind of material,
without be necessary to change the original process. In the same way, this factor has
intensity from 0 to 5, being that 0 is to easy substitution and 5 is to very hard substitution;
3. Rivalry: it is about the existent competition between the suppliers to each specific
material, that is, if a material has many suppliers, the procurement risk is very low,
representing values closer to 0;
4. Entry Barriers: it is represents the possibility of development a new specific supplier for
a material, and it must vary between weak, easy to penetrate or hard to be developed;
The final results of voting and tabulations is turned to a materials list for each service classified
according to the four quadrant of the matrix, as showed at the Figure 2:
Figure 2 – Strategic Material Positioning Matrix
Step 7 consists of the Critical Analysis of the Results and the necessity to validate the voting
realized by the WT elements, as it is very common to appear discrepancies between the obtained
results and the Company reality. If there are doubts, it must to redo the voting that is necessary or
until to re-evaluate the materials definition, because sometimes some materials must be
segmented in two or more new materials and, again, redo the voting. After the necessaries voting
it must be return to Step 6.
Step 8 consists of elaborating strategic proposes to the management and action for each SMPM
segments. To different matrix segments, there are distinct management manners.
Step 9 the results are presented to the Company Administration or Management. At Step 10,
after the results presentation and approval, it must to consolidate the actions plans and
managements manners. This step finalizes the process planning as a whole.
Step 11 includes the execution of the actions plan. Step 12 consists in the control of the Action
Plans. Finally, Step 13 consists in the actions re-planning, once these actions may not have
produced the expected result or also these can not be sufficient to the process maintenance.
5. Conceptual Issues Involved
In general, the national and international companies use ABC curves. The ABC Classification,
although it is relevant to focus the efforts to the Items Purchases Costs Structure and Services of
the Companies, it presents some limitations when the materials management point of view is
observed in a wide form. The principal limitations observed in terms of issues related to ABC
Classification are:
1. This kind of classification does not consider the issues related to the purchasing process
quality performed along the companies activities;
2. It is does not consider the strategic relevance of the items and services acquired by the
company;
3. It is does not consider the issues related to the value created by the acquisitions in
direction of products and service value aggregation.
Thus, there is the necessity to amplify the scope of the discussion concerning the purchasing
activities performed into the companies. Therefore, the possibility arises to addresses to the logic
of Supply Segmentation (Cartier, 1999). This logic can be more conveniently visualized from the
called SMPM – Strategic Material Positioning Matrix – showed at Figure 2 above.
The construction of SMPM above is based in two basics theoretical references: i) the notion of
the Competitive Forces proposed by Porter (1986); ii) the called dimensions of Production
Strategy.
The logic proposed by Porter (1986) it is based on five competitive forces that, according to the
author, define the Company profitability. Figure 3 presents the five competitive forces:
Figure 3 – Competitive Dimensions According to Michael Porter (1986)
Having as the conceptual reference the matrix proposed by Porter (1986), Carter (1999) and
Grieco (1995) developed an axle X considering the global dimension of the materials risk. For
the analys of risks related to the materials supply the following elements must be considered:
i) bargaining power of suppliers; ii) substitution potentiality of materials supplier; iii) rivalry at
supply – companies competing by the materials supply; iv) entry barriers of the suppliers. It
adopts the notion of five competitive forces proposed by Porter and it has the materials area like
study object.
At the field of Production Strategy six competitive dimensions are usually considered: i) quality;
ii) cost; iii) fulfillment; iv) flexibility; v) innovation; vi) lead time. From these concepts, Carter
(1999) and Grieco (1995) build the global dimension of materials value/cost (influence on
Company results) into the context of Company services/products. At really, the authors
consider just four dimensions of competitive strategy: i) quality; ii) cost; iii) time; iv)
technology. The time dimension tends to embody the notions of fulfillment and lead time. The
flexibility dimension is not directly consider at the analyses and the innovation dimension is
related to the methodology with the technology dimension.
Although the authors (Carter (1999) and Grieco (1995)) originally considered just the four
competitive dimensions; these can be amplified to the reality of each company, summed the
other competitive dimensions according to the criterions established by the Company Work
Team.
From these two dimensions (Procurement Risk and Influence on Company Results) is possible to
build a SMPM by classifying the materials into four wide segments, according to Table 1:
Table 1 – Quadrants of the SMPM
Components Procurement Risks Influence on Company Results
Non-Critical Low Low
Strategic High High
Bottleneck High Low
Leverage Low High
6. Case Study
This section has the objective to present the principal issues and steps involving the
implementation of the SMPM at a service company, specifically at an automobile dealership. At
this first moment, the objective was to implement a pilot project. From the obtained results, the
own professionals of the company can drive the remaining of the implementation, amplifying the
SMPM application to the other company services and materials.
Before initiating the description of the case study, it is important to emphasize the necessary
distinction in terms of theoretical application of the SMPM. Originally, the SMPM Methodology
had its principal focus in the Industrial Companies, as it considered manufactured products and
purchased materials. But, the authors look for an adaptation of the original SMPM, as this case
considers services instead of products. In the case of this company, the logic is the following:
from the definition of a service delivered by the dealership and, at a second moment, from list of
all items (materials) that can be used by this specific service. These are the materials that must be
treated by the SMPM Methodology.
The departure point for the implementation of the SMPM methodology was consisted by the
convincing of the managerial people front of the importance of the theme and of the potential
results that could be achieved with the adoption of new moderns practices of materials
management at the company. Primarily, a presentation of the SMPM methodology was
structured containing the theory SMPM and the principal benefits that it will potentially provide
the economic-financial and managerial improvement of the company.
From the convincing and the Administration/Management decision by the adoption of this
strategy, the next step was a meeting with the professionals involved with the Materials
Management in order to treat the preliminaries issues of the implementation. Besides these
professionals, the other areas also were present in order to participate of the work team: quality,
supplier development, logistics, purchasing department, costs department, parts storeroom, etc.
In the first meeting, the objective was the definition of the services and materials to be treated by
the pilot project of the SMPM implementation. In this step, the work team defined the relevant
services and materials for the job through a brainstorming process, where all the points of view
were considered. At the end of the jobs, there was an agreement in giving the final list of the
services and materials to be considered. For illustrative instance, the selection for the Warranty
Service for 30.000 km (approximately 18.750 mph) is given as following:
Table 2 – Service: Warranty for 30.000 Km
Service Materials
Warranty for 30.000 km Direction Pointer
Warranty for 30.000 km Oil Filter
Warranty for 30.000 km Break chip
Warranty for 30.000 km Radiator Addictive
From the initial list of services and materials chosen, the next step consists in the teaching of the
methodology, where it was presented the basics points and the first voting and calculus were
performed in order to transmit the concepts according to the Company reality.
After a general consensus, it starts the preliminary elaboration of the SMPM. For it, the work
team received two forms: i) one requesting to collect the necessary data for the construction of
the Influence on Company Results Index; and ii) another requesting to collect the data for the
formation of the materials Procurement Risk Index.
According to the methodology, each participant must receive a Data Collection form for
Influence on Company Results for each specific service (in that case it was necessary only the
use of one form, once just one service is contemplated at the pilot project). The first voting for
each form consists in the Competitive Relative Weight in terms of Costs, Quality, Time and
Technology. The second moment consists of performing the voting for the materials that
compose the service, also in function of the same factors. It is interesting to remember that a
same material can be related in different services and thus it must be treated separately, because
the influence on Company results can be totally divergent from the one to another. Again, in the
present case, just one service was selected and therefore it not has the necessity to analyses the
materials of other services, into the pilot project scope.
After that it was distributed another form for each participant, containing the relation of all
materials that were selected and it must be analyzed the Procurement Risk of the specific
material, not interesting which service this material is associated to. At the end of the meeting, it
starts the collected data tabulation in order to generate the necessary information for the
company.
To assist in the collect of data a spreadsheet previously prepared was used, where all data were
informed at the system and the correspondent position at the quadrant is automatically indicated
for each analyzed material. After the inclusion of the respective data of each service and
material, the system generates a report summarizing the average index indicated by the work
team participants. Figure 4 presents an example of the relation between Warranty Service for
30.000km and the Direction Pointer material:
Figure 4 – Warranty Service for 30.000 km x Direction Pointer
The report presented the mediated average in relation to the Influence on Company Results (at
this case is 3,75) and the average to the Procurement Risk (at this case is 3,38). At the same time,
the system composes the SMPM graphically, indicating the respective quadrant of the calculated
indexes, according to the Figure 5:
Figure 5 – Position at the Matrix – Warranty Service for 30.000 Km x Direction Pointer
In that case, the resultant quadrant at the matrix is the correspondent to the Strategic
Components. This same process was repeated for all relations between services and materials.
The Table 3 presents the finals results of the preliminary elaboration of the SMPM for the
Warranty Service for 30.000 Km:
Table 3 – Results for the Warranty Service for 30.000 Km
Material Positioning
Direction Pointer Strategic
Serrated Belt Strategic
Poly V Belt Leverage
Motor Oil Filter Non-Critical
Air Filter Non-Critical
Oil Filter Non-Critical
Break Chip Bottleneck
Trapezoidal Belt Bottleneck
In the following meeting, it was presented the tabulated results for all work team. At this
moment, the idea consists in stimulate a wide debate concern the achieved results. Each situation
must be analyzed separately and a consensus must be achieved related to the positioning of each
material into SMPM. At these results analyzes meetings, some divergences of points of view that
emerge during the meeting are settled at the end of it, but other must be verified or until changed.
In that case, it is necessary to generate a new voting for the materials that need to be re-analyzed.
At the Company analyzed, it was occurred a typical situation of re-analyze.
After completing the re-analysis and the new tabulations of services and materials that were
necessary, the work team advanced to the next step that consists of elaborating the action and
management proposes for each one of the SMPM segment. Table 4 presents some proposals
suggested by the work team:
Table 4 – Actions Proposals
Positioning Proposals
Strategic
Components
• Knowledge concern the supply potential market for the dealerships;
• Re-definition of the selection process of the strategic suppliers;
• Definition of long term agreements with the strategic suppliers;
• Reduction of transaction and operation global costs;
Non-Critical
Components
• Reduction of suppliers;
• Strategies to costs reduction: suppliers’ subsidiaries near the company,
electronic auction, corporative purchasing.
Leverage
Components
• Reduction of suppliers base;
• Qualification of current suppliers base;
• Better knowledge of the regional market;
• Improvements of component quality;
• Components standardization;
Bottleneck
Components
• To re-design the components;
• Components standardization supplied for the company;
• Long term agreements celebration;
• Development of new suppliers;
• Suppliers’ substitution.
The Company also adopted a set of performance measurements in order to assure the strategic
control of materials along the time. At follow, the set of measurements selected are presented:
• Items migration: periodical verification in terms of items migration between the
matrix quadrants, that is, to verify if a certain material remains allocated at the
same quadrant after a determined period of time;
• Inventory turn: to accompany the evolution of materials inventory turns and to
register the improvements happened from the actions plans elaborated from the
SMPM implementation;
• Suppliers with insured quality: to monitor the number of Company suppliers
with supply and product quality;
According to the planning realized at the beginning of the SMPM pilot implementation, the
following moment stayed reserved for the elaboration of material and documental that was
presented for the company managerial group.
7. Some Considerations for the Matrix Segmentations Management
Finally, another extremely important point are the questions associated with the management
issues of the SMPM methodology, namely: What management mechanisms must be used for
each SMPM quadrant? How to treat the materials in a strategic one way from the four matrix
quadrants?
Each SMPM quadrant, therefore each component king, must be managed from a strategic prism.
It is suggested the following general approach for the four matrix quadrants that must be
subjected to specifics realities of the Company:
• The Leverage Components – that present low procurement risk and high influence on
Company results - can be managed by the sectors / areas responsible by the quality and
productivity performance improvements, once the strategies to costs reduction are
essential to decrease the impact that these components discharged on the company result.
It is important to emphasize that many improvements can be implemented during the
time, as for instance the structuring of a Productivity and Quality Improvements
Department;
• The Non-Critical Components must be organized according to a general logic of
reduction of the suppliers’ variety and a logic of gain of scale associated on the increment
of the materials purchasing volume. Usually, in this case the management can be related
directly with the corporative purchasing department of the Company;
• The Bottleneck Components are extremely critical and that it can delay the product
manufacturing and delivery to the customers, once it presents high procurement risk.
Therefore, it suggest that all efforts are exercised and managed by the Product Design
Engineering once, conceptually, these components need to be rethought and, in many
cases, substituted by other;
• The Strategic Components that are essentials from the strategic performance point of
view of the Company must be treated by the Company High Management. The
management of these materials having as the base the action from the Company
Management it explain as the strategic decisions and actions are involved (for instance,
the construction of long term agreement with suppliers that have high bargaining power
in relation to the customers).
Thus, the importance of a effective materials management can be observed, as some materials
present much relevance for the company and need to be treated as strategic points for the
company business.
8. Final Considerations
As shown during the present research, the article was divided in two primary objectives: i) to
present the theoretical concepts in terms of Strategic Material Positioning Matrix – SMPM; ii) to
describe and present the preliminaries results of a SMPM implementation at a services segment
company.
In terms of the first objective, this article confirms the necessity that the modern Industrials
Companies present front the global strategic concern the materials management. The authors
present the importance of effective treatment of issues related to materials, once these widely
influence on the total cost of the company. The practical proposition for the treatment of this
issue consists in using the SMPM as a strategic tool and methodology for the materials
management. As presented along the text, this methodology consists in segmenting the materials
in four distinct quadrants: i) Non-Critical Components; ii) Strategic Components; iii) Bottleneck
Components; iv) Leverage Components. Thus, for each one of the SMPM quadrant will have the
development of different strategic and actions plans for the Materials Management. Also, in
terms of theoretical concepts presented, the article proposes the utilization of Preliminary Work
General Method for the SMPM implementation (Antunes & Klippel, 2002).
In the second objective it was described the principal steps for the SMPM implementation at the
Company in study, evidencing the procedures, activities and obtained results from the adoption
of this methodology. It was presented the case into the scenario near the reality as possible,
presenting the set of strategic elaborated for the leverage effect of materials management at the
Company. As way of control and monitor the strategic for the materials, it was chosen to create a
set of performance measurements that provided a direct and pragmatic accompaniment of the
managerial evolution into the Company.
It was interesting to show the issues related specifically with the management of the SMPM
quadrants, namely, for each SMPM quadrant it was suggested that a distinct logic of
management must be adopted. The more strategic components of the company must be managed
near of High Management, once these include strategic decisions. The leverage components can
be managed by the improvements department and the principals objectives consist at the actions
turned to costs reduction. The non-critical components not present complex problems for the
company and can be managed by the corporative purchasing department. Finally, the bottleneck
components can be managed and worked by product engineering area, because the general logic
consists at the substitution of this king of material.
In terms of limitations of the present article, it can be related:
1. It was a case study and, therefore, it can not be generalized with its conclusions
(specifically the conclusions related to the manners for the management of the SMPM
quadrants);
2. It is possible to improve the Method through a development of a much larger number
of Cases Study at companies in general, and at services companies in specific way.
3. The SMPM construction was made, however the practical results just will be able to
evaluate through the implementation of the SMPM Management and from the
evolution of Performances Measurements during the time.
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