SUPPLY CHAIN OF AUTOMOTIVE INDUSTRY V/S SUPLLY CHAIN OF FMCG INDUSTRY

8/14/2019 SUPPLY CHAIN OF AUTOMOTIVE INDUSTRY V/S SUPLLY CHAIN OF FMCG INDUSTRY

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NAME: SAMAN MUBIN KHAN

ID NO: 7206 MBA (M)

ASSIGNMENT TOPIC:

SUPPLY CHAIN OF

AUTOMOTIVE INDUSTRY V/S

SUPLLY CHAIN OF FMCG

INDUSTRY

PRESESNTED TO: SIR SOHAIL

MAJEED


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SUPPLY CHAIN MANAGEMENT:

Supply chain management is the process of managing and integrating all

the activities concerned with the flow of goods and services. it integrates

management activities between entities in the chain realize delivery of end

products and services, satisfying customers at minimum cost. The main objective

of supply chain in all the industries is to reduce cost of production and to

maintain high quality of their goods and services.

AUTOMOTIVE INDUSTRY:

The automotive industry is formed by various organizations that are

involved in designing, developing, manufacturing, marketing and selling of all

sorts of motor vehicles.

SUPPLY CHAIN OF AUTOMOTIVE INDUSTRY:

Automotive industry has entered in to the Mega Competition era. The

auto industry has become a highly globalised business. The key function of the

industry is to produce beautiful designs with advanced technology, making the

future vehicles more efficient and powerful. The automotive industry is made up

of supply chain management and physical distribution management. This

industrys supply chain stretches from producers of raw materials and to the

final product and till its distribution. The supply chain activities of automotive

industry are depended on three elements talent, capacity and liquidity. These

three significant challenges, if tackled correctly can lead the automotive industry

to new heights.

The supply chain of the industry flows in this manner.


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DEMAND FORECAST/PLANNING:

Automotive industry depends on the unique designs for its motor

vehicles. This industry adds greatly to the future of automobiles. Being an

extensively heavy industry, it is crucial to forecast the demand correctly. The risk

factor is in this industry is extremely high due to huge investment by the

producer. For example BMW always searches for new and premium designs for

their customers. This approach is known as lean manufacturing.

SOURCING:

Sourcing is purchasing of components and parts from optimal places. The

production of a motor vehicle is a very complex one because it is a combination

various different components. This industry always seeks for long term and

strong relationships with their suppliers.

Automotive industry has two types of suppliers.

Foreign suppliers

Local suppliers

Suppliers choose to relocate near plants for significant integration. The

sourcing in automotive industry is subjected to changes because of fluctuating

international laws and prices.

PRODUCTION:

Motor vehicles are designed classically so that they have a long life. For

this purpose the material used in the production should be of great quality and

high standard. The supply chain management has to ensure that the production

line is getting the right quantity of raw materials and the required output should

be produced with minimum possible cost and time. Over and under production


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can lead to disastrous consequences. Production sequence of automotive

industry is as follows:

Body shop

LOGISTICS:

Logistics includes inbound and outbound transportation of goods and

warehousing.

Transport:

Demand of vehicles has been increasing day by day. Getting the product

made available at their demand destinations requires efficient, predictable and

environmental friendly solutions. The most commonly used mode of

transportation is shipping. Heavy vehicles are transported through sea routes

ensuring efficient and smooth transportation.

Warehousing:

Control and efficiency is the essence of warehouse operations. The

warehouses are used to store finished product stock. This industry takes care of

the following aspects in warehousing.

Finding right level of automation and systems. Inventory management in the warehouse. Freight management. Outsourcing options.

Body shop Paint shop Assembling of components


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DISTRIBUTION:

The distribution process of automobile industry is highly globalised and

complex one. A vehicle can be demanded from anywhere across the world. The

distribution channel is very strong and giant enough to cater the national or

international demand. Supply chain manager keeps a close look at distribution

centers and further integrate the activities of sales and finance department. The

distribution intermediaries can be of two types.

Independent intermediaries: these are independent individuals or companieswhich work on manufacturers behalf on certain commission.

Dependent intermediaries: these are manufactures owned distribution centerwhich the company has designed as vertical integration strategy.

FAST MOVING CONSUMER GOODS INDUSTRY:

This industry is concerned with the production and selling of food and

non-food items. Purchasing of these items is usually take place at grocery stores,

supermarkets and hypermarkets. Some of the FMCG companies are P&G,

Unilever, and Coco Cola etc.

SUPPLY CHAIN OF FMCG INDUSTRY:

The supply chain of FMCG industry is interrelated with all the processes

suppliers, manufacturers, logistics, warehouses, distributors. All these entities

lead the product to the final consumer. As the life of an FMCG product is very

short so its supply chain management should be quick enough to deal with the

daily challenges occurring in business world. Due to a great number of products

availability, FMCG industry is highly competitive and subjected to severe

changes. A supply chain manager of an FMCG company should be dynamic and


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versatile to integrate all the activities involved in production. In production

process value starts to be added in the product at each level. The supply chain of

FMCG industry works in the following manner.

DEMAND FORECAST (PLANNING):

The first and foremost step in supply chain management is to see where

we are and where we want to go. FMCG industry is always in an urge to

optimize their demand with their supply. Which course of action should be

adopted to minimize cost and to maximize your profit. All these critical

questions are answered through intellectual planning. FMCG industry has huge

demands without any break so the planning is being done very strongly to

integrate all the activities that are involved in producing, finishing and

delivering of goods.

SUPPLIERS:

The main motive of FMCG industry is to produce in large quantities and

sell them to the market but for this huge production the quantity of raw

materials should also be huge. The raw materials are purchased (sourced) by a

number of suppliers. FMCG industry always searches for that supplier who can

provide timely availability of raw materials with minimum possible cost. This is

one of the greatest challenges for a supply chain manager because the whole

production activity is based on the availability of quality raw material. FMCG

industry mostly uses multi sourcing instead of single sourcing as it increases risk

factor of raw materials availability.


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FMCG industry focuses on following challenges to develop better

supplier-customer relationship.

Development of long term relationships with suppliers. Greater and earlier involvement of suppliers in product technology. Supplier associations. Benchmarking Common supplier assessment schemes.

PRODUCTION:

Production is another important key driver of supply chain management.

In production process FMCG industry is the fastest because perishable goods are

being used by consumers daily. Production department is responsible for

making quality and quantity goods in a short span of time. A manager has to

keep a very strict eye on the production processes. Shortage of raw materials can

lead to higher cost of production. Moreover, finished goods should further move

smoothly to the next step in their production journey.

LOGISTICS:

Logistics is the process of designing, managing and improving the flow of

products. After the product is being produced, the next important aspect of

supply chain management takes place which is logistics. It includes two core

functions.


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Warehousing:

This is a place where company keeps its products save so that when

demand arise it can be easily fulfilled without waiting. Warehouses are large

rooms and are designed in accordance with the nature of the products. Products

directly come here from the production point and are dispatched to the point of

consumption (distributors, wholesalers, retailers) in FMCG industry the flow of

goods is very fast. Therefore, it is necessary that warehouses should be

maintained with optimum level of stock. Another technique is cross docking.

Companies often use where no storage facility is being utilized.

Transportation:

It is the mode through which goods actually move from one place to

another. FMCG industry has very efficient modes of transportation. It uses every

mode of transport to make huge availability of FMCG goods in the market.

Transport also greatly adds to the cost of product that is why it is important that

supply chain manager should make the transportation ways better and

reasonable.

RETURN:

FMCG industry also has to face returns, whether it is from the customers

or the company itself returning defective raw materials to the suppliers. This

function can be carried out at both the ends. This aspect of supply chainmangement cannot be neglected because returning raw materials to the supplier

can cost a lot to the company in terms of money and time. Similarly, returns from

customers means that production has not been up to grade which in turn has

caused a loyal customer to switch to another brand.


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FMCG INDUSTRY VERSUS AUTOMOTIVE INDUSTRY

Nature of business:

FMCG industry deals with perishable

items

Automotive industry deals in heavy

vehicles.

Risk factor:

Due to low cost per unit, risk factor is

low

Due to high cost per unit, risk factor is

very high.

Production motive:

Bulk production is the main motive. Design and technology is the main

motive.

Demand pattern:

FMCG products are always in demand

and they are quickly produced.

An automotive industry product takes

a lot of time to be produced.

Supply chain:

This industry follows push supply

chain strategy in which products are

manufactured on standardized basis

for anticipated customer orders.

This industry uses pull supply chain

strategy in which products are

procured on the bases of customer

demands.

CONCLUSION:

The workings of both the industries are different from one another and

both have their own supply chain challenges. As the business world is going

globalised the supply chain managers has to be more efficient and versatile to

cater the changing needs of customers at best possible cost as well as they also

have to focus on the competition. Supply chain management is the backbone of

the business, so it has to be effective, efficient as much as possible within the best

cost limitations.

Documents

SUPPLY CHAIN OF AUTOMOTIVE INDUSTRY V/S SUPLLY CHAIN OF FMCG INDUSTRY