Flexible Strategic Framework for Managing Forces of Continuity and Change: A Status Study of Outbound Supply Chain Management of

Automotive Industry in India1

Vijay Gupta Institute of Management Technology, Raj Nagar, Ghaziabad - India

Abstract--Continuity and Change are the main parameters

of any Strategy paradigm. Traditionally these have been treated on ‘either’ or ‘basis’. A lot of work has been done on managing continuity with incremental improvements. In recent past significant changes have taken place in the automotive sector in the world and India is no exception. Most of the literature has focused on strategic change and gradual transformation. However, dealing with flexibility, continuity and change has been an area of growing interest as a large number of organizations in the auto sector are faced with turbulence. This research work focuses on study of Outbound Supply Chain Management of a leading Auto Company in India and brings out how they are coping up with the forces of continuity and change. A study using secondary research and primary research with a structured questionnaire survey of a number of leading automotive dealers in India was carried out to find out the exact state of outbound supply chain management of the Auto M�C operating in India. Based on this research, the aim was to develop a flexible framework for effectively managing continuity and change in managing automotive supply chains. 1

I. INTRODUCTION

One of the major changes in the automotive industry has been the opening up of several emerging markets, with critical mass in Europe, Japan and the US. Globally, there has been a wave of consolidation with stronger players acquiring whole or part of smaller companies. There is not enough room for everyone. It is not a profitable business for everyone anymore. Costs have long been a focus of the auto business. Globally, the auto business has been a cradle of innovation in the areas of manufacturing practices and supply chain management.

Increased outsourcing and larger involvement of vendors is one of the strongest trends to emerge in the industry. Auto business is an input-heavy business, i.e., the supply chain is more complex on the inbound side. A typical automobile has over 2500 components and subassemblies. This means that the manufacturers would be dealing with a large number of vendors – often more than 1000 in numbers. Managing such a huge number of components and vendors is not easy. Ensuring quality and timeliness of shipments is much more difficult. The trend, therefore, has been to reduce the number

1 This study is based secondary research from available sources and perception of senior executives of their dealers interviewed and therefore conclusions drawn and recommendations made are only suggestive and not conclusive. However, the study represents a fair view of the status of outbound supply chain of automotive industry in India and the learning’s can be applied by other auto companies operating in India.

of components and vendors. Materials are a significant part of cost of production for the automotive industry. Outsourcing of components is a means of lowering costs and reducing risks. In the past, in India, there were no long-term contracts or relationship with suppliers. Now, competitive environment requires suppliers to meet stringent quality standards, regularly improve technology and remain cost competitive. In fact by integrating the supplier value chain with their own value chain, companies can gain sustainable competitive advantage. By giving the suppliers insight into the supply needs and materials schedules for the coming months, they can anticipate much better the future requirements, which will lead to a higher level of service and lower logistics costs for both parties.

Outbound supply chains have been equally complex and prone to introduce defects in finished cars during transportation and higher costs due to delays, multiple handling and mismatched inventories. This research paper takes a close look into the outbound supply chain and studies how leading auto companies are trying to strike a delicate balance between forces of continuity and change.

II. OBJECTIVE 1. To carryout an in-depth study of the design and

management process of outbound supply chain of a leading Auto Company in India

2. Based on the above study develop a flexible framework for managing forces of Continuity and Change in Supply chain of the automotive companies in India.

Primary Objective: • To study the Strategic framework of Continuity and

change forces in Outbound supply chain at a leading Auto Co in India.

Secondary Objective: • To study the effect of continuity and change forces in

outbound processes • To study the role of dealers in success of the auto

company selected for study. Research methodology: Research Design: descriptive in nature. Data Collection Techniques: • Published secondary data and internet databases

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• Personal interview of senior executives of the selected company and leading dealers using structured questionnaire

III. LITERATURE REVIEW

Flexibility, Continuity and Change have separately

fascinated the researchers for centuries. Most of the studies have focused on partially one or two factors out of these. Flexibility however is process of change. Flexibility is not about extremes, but about dynamically balancing these extremes Sushil [32]. Flexibility leads to generating spontaneity and agility much needed in today’s business environment especially the automotive sector. TQM has been defined as an effective tool for managing flexibility by Oakland [27] as an approach for improving the effectiveness of flexibility and improving the whole organization. Continuity and change are key parameters of strategic management. According to Quinn [30] during the pre liberalization era in the world and developing countries, most of the strategies revolved around continuity and gradual incementlisation. The strategy of gradual incrementalization also included continuity with gradual change to evolve by itself. However the focus remained on stability and continuity.

According to Gupta and Sagar [8] and Gupta [9] [10] [11] forces of continuity and incremental changes were not enough to decide the future strategies for the organization; they had to build a flexible infrastructure, flexible workforce and flexible processes to ensure growth and continuity of the business. In the last decade the global environment has become very turbulent and the need to include change in the strategic thinking and strategy has become essential ( Mintzberg [25] , strategic flexibility, Violberda [35] ), complexity and chaos [37] and strategic change and transformation. The evidence of continuity and change has been discussed in various contexts such as corporate governance [20], and addressed the issue of change as key factor why transformation efforts fail. Jackson [17] has discussed on organization identity [3]. Porter [29] has covered the effect of change in the competitive strategy aspects in his book,

According to KPMG Business Continuity report [21], traditional approaches to business continuity no longer address a widening array of threats due to the changes taking place in the world scenario. It introduces a framework of managing the continuity of organizations information assets from disaster risk perspective. Dyer [5] discusses how companies in US and Japan manage the suppliers at arm’s length and strategic segmentation perspective. All companies should not have a one size fits all solution for all aspects of SCM. Michael Hammer [13] has suggested a process based transformation model for companies dealing with continuity with incremental change. Nunes, Wilson and Kambil [28], have discussed the impact of Internet over traditional business models which is one of the major change

phenomenon for all types of organizations. According to them, many companies by focusing only on traditional models have left big opportunity due to changing delivery mechanisms open to the competition. David Arnold in [4], focused on the strategy adopted by many MNCs to enter developing countries through local partners in forward supply chain. But many such relationships have already blown, in his view.

The drivers of change in auto sector are far less connected to the cyclic factors, and are more a function of structurally embedded problems in the industry, that they have been avoiding for some time now, Benko and McDuffie [1]. As the auto companies pressurize part suppliers to reduce costs to survive competition and maintain continuity, they run the risk of causing a long term harm to their own business. Macduffie states that GM has been loosing by maintaining the policy on the benefits of economies of scale, even through the competitors, mostly Asian, have been eating into their market share. Michael and Singh [34] have brought out the impact of tougher corporate governance laws in India and its effect on auto companies. Various factors have been discussed for reasons of failure of good strategies [16] such a difficulty to manage change process, cultural factors demanding continuity and gaps between planning and execution.

In Driving Change [38], Ford Motors Co’s Jacques Nasser led a leadership initiative to change the mindset of people to become more flexible and sensitive to change. Kaplan [18] has focused on the gaps between top and operation level strategies, which are not able to respond to the demands of changes in real life compared to the assumptions made for maintaining continuity at the time of planning. Wadhwa [36] has brought out another dimension of impact of suppliers collaborations in SCM on the customer service level and working capital. Bill Gates [7] has brought into focus the web based economy and how each organizations need to build their businesses around it. Kaplan and Norton [19] have focused on how to implement a new strategy without disrupting an organization, another dimension of continuity. One of the way suggested by Abernathy [6] is to control inventory while managing the continuity in retail. He has suggested a need for rethinking at sourcing strategy level to manage the change in the customer’s requirements while maintaining the business continuity. However no clear guidelines or model have been mentioned.

Mohanty and Deshmukh [26] have carried out a detailed study of Supply Chain Managment in Indian organizations including automotive. However the question of managing continuity and change simultaneously have not been addressed. Shimchi and Levi [22] has focused on impact of IT in SCM design, however the continuity and change aspects have been treated separately. Vivek [31] has focused on the need of real-time business and develops strategies that anticipate customer needs and create opportunities. This work is proprietary and a business secret of the company providing services to its clients. Sushil [33] has suggested a general

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need for developing a flexible framework for managing continuity and change.

Prahald [12] and Hammer [14] have focused on discontinuity as the way to manage the transition and change, however the continuity is not taken care of. Cannon [2] focused on the paradox of continuity and change, and many other tensions and dilemma has created a new strategy revolution. Even though the traditional approach is, why should we change, if we are at the best. The latest thinking [15] is, we should change, since we are at the best, hence manage continuity and change. Macduffie [23] studied Nissan turnaround and strategies followed by Carlos to bring Nissan back into profit. GM has instituted a study of the Renault Nissan to understand the key factors for their turnaround especially the supply chain issues.

Some of the leading automakers, such as Toyota and Honda [23] have been able to build agile supply chains to manage continuity. The key for these companies is more on managing relationships rather than use any common framework, which ultimately result in maintaining their leadership position through well-known Toyota Production System. Even though many publications are available on different aspects of Toyota model, however no literature is available in public domain at present, which focuses on how to manage flexibility, continuity and change.

There was a need, therefore, to study the real life supply chain system of a select auto company and identify the continuity and change forces and their impact on SCM and come out with a strategic framework

IV. INDIAN AUTOMOBILE INDUSTRY

The Indian automobile industry has four major segments - commercial vehicles (CVs), passenger vehicles, three wheelers, and two wheelers. According to the Society of Indian Automobile Manufacturers (SIAM), the Indian passenger vehicle market has three categories - passenger cars, multi-purpose vehicles (MPVs), and utility vehicles (UVs). The passenger car market is further divided into various segments based on the length of the car. The Indian automobile industry was a highly protected slow-growth industry with very few players till the opening up of the Indian economy in 1991. Low manufacturing costs, availability of skilled labor, an organized component industry, and the capability to supply in large volumes attracted global auto majors to set up their operations in India after the opening up of the sector.

For example, Fiat and DaimlerChrysler started outsourcing their component requirements to India. Fully owned Indian subsidiaries of global players, like Delphi Automotive Systems and Visteon , exported components to other parts of the world. Macroeconomic factors like government regulations, low interest rates, and availability of retail finance played an important role in the rapid development of the automobile industry in India during the late nineties.

Pre-liberalization

The Indian passenger car market was characterized by Government protection for a period of over four decades after independence. Prior to the 1990s, there was little choice for the Indian consumer as there were only a few major automobile manufacturers like Hindustan Motors, Premier Automobiles, and Maruti Udyog Limited ( MUL now MSIL ). Hindustan Motors’ ‘Ambassador’ had ruled the roads for nearly three decades. The ruggedness, comfort, and spaciousness made the Ambassador immensely popular. In 1982, the Government of India entered into a joint venture with Suzuki Motor Corporation (SMC) of Japan. MSIL’s plant was established at Gurgaon near Delhi and it rolled out its first model, the M-800 in December 1983. It was the most successful model of MSIL and enjoyed a near-monopoly status till the mid-1990s. Post-liberalization

Liberalization of the Indian economy in 1991 and de-licensing of the passenger car industry in 1993 paved way for the entry of global players like Hyundai, Ford, General Motors, Toyota, Volkswagen, Daewoo, and Honda. Hyundai Motors, the Korean giant, entered India with its small car ‘Santro’ in direct competition with MSIL’s Zen. Santro’s sales picked up momentum and the model was a huge success. Tata Engineering and Locomotive Company (renamed Tata Motors in 2003), which was primarily engaged in the production of commercial vehicles and utility vehicles till the mid-1990s, rolled out its small car “Indica’ in 1998. Indica was well received in the market and emerged as one of the prime competitors to MSIL . V. UNDERSTANDING SUPPLY CHAIN MANAGEMENT

Supply Chain Management is the organized movement of materials and information. The term was first associated with the military but gradually spread to cover business activities. Supply Chain Management is defined as a business planning framework for the management of material, service, information and capital flows. It includes the increasingly complex information, communication and control systems required in today's business environment. The process of supply chain management differs from one firm to another. In some companies, all these activities are placed within a single logistics department; in others, they are shared among the departments. Based on our study, the following functions were identified as being performed by the companies’ outbound supply chain management: 1. Customer Service: All the activities that are done to

keep the existing customers satisfied come under the gamut of customer service.

2. Demand Forecasting: This process includes various statistical measures that enable the firm to estimate the demand in the future, which inturn helps in proper demand management.

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3. Documentation Flow: This process covers the movement of the paperwork that accompanies the movement of physical product.

4. Interplant Movements: This is only applicable to those firms where production process is accomplished in more than one plant, requiring the movement of semi-finished products from one plant to another.

5. Inventory Management: Inventory management requires a cost effective maintenance of stocks of goods and materials.

6. Order Processing: Order processing starts with the receipt of an order from a customer and ends when the order is ready for packaging.

7. Packaging: Packaging is done mainly to protect the product when it is being transported from the source to the destination. It can also be used for promotional purposes.

8. Spare Parts and Service Support: This covers the whole after-sales service process.

9. Plant and Warehouse Site Selection: This function is carried to determine where the plant and the warehouse are going to be located, keeping cost-benefit analysis in mind.

10. Production Scheduling: This function's task is to balance demand for products with the existing plant capacity and availability of inputs.

11. Purchasing: This is a very important function in the logistics management as the quality of inputs that are purchased determines the quality of the finished product. Vendor selection is an important sub-process of this function.

12. Returned Products: There are many categories of returned products. A few are subjects of product recalls, meaning that a safety defect or hazard has been discovered. E.g. laptop battery recall by Dell. These products are removed from the shelves, and both retailers and consumers attempt to return them to the manufacturer. This is a form of reverse distribution, with goods moving in the opposite direction of their usual flow.

13. Salvage Scrap Disposal: How a firm takes care of its waste material is covered in this function. The firm might recycle its waste or sell the waste to various processors who specialize in recycling it.

14. Traffic Management: All the transport requirements needed to move a firm's freight is known as traffic management.

15. Warehouse and Distribution Centre Management: This logistics activity involves management of the locations where the firm's inventories are stored.

A. Supply Chain Management in Automobile Industry in India

Global automobile manufacturers are consistently streamlining their business process by outsourcing their non-core activities to low-cost countries like India. They are under

tremendous pressures to innovate their manufacturing process and at the same time, reduce costs. In view of the present global competitiveness, they must not only develop new features to strengthen their customer requirements but also follow the environmental and safety standards. In addition, the base price of a car is expected to remain same over the next decade. As a result, companies are forced to source more components from low-cost countries like India. Given the potential of India’s automobile sector, multinationals can take the full advantage of its huge resources. India with its large young population and abundant skilled labour force can become a major player in the automobile sector across the world. B. Role of SCM in Automotive Industry

The automobile industry has undergone significant structural and other changes in the last decade or so. In view of the present globalization, implementation of lean production and the development of modularization have changed the relationships between automobile assemblers (OEMs) and their suppliers, especially those in the first tier. Stiff competition among manufacturers will result in more mergers or acquisitions. The challenges automobile manufacturers and suppliers face include improving quality, meeting cost reduction targets and developing time to market.

VI. OUTBOUND SUPPLY CHAIN AT MSIL

Outbound supply chain goes beyond mere distribution management. It is improving the quality of the supply chain itself to achieve a cost-effective distribution mechanism. Driven by this philosophy, MSIL, India’s largest passenger car manufacturer, has created a new supply chain paradigm that has helped it achieve substantial cost reduction, from production to distribution. Dependent on over 300 suppliers for some 7,000 components that go into nine major models and their 200 variants, the company realized the need to keep control over costs at every stage to remain competitive. For this, it realized, supply chain management was critical.

"Cost management is crucial for effective supply chain management in Auto Business,” as per a senior executive during the interview. This was achieved only through close coordination with the vendors, 3rd Party Logistics Partners and dealers. This not only helped in cost rationalization of the materials used by MSIL, but also in passing the benefits of cost control and quality products to the vendors. The exercise began by implementing innovative materials handling solutions in-house, resulting in cost savings by reducing wastage. MSIL also gained considerably by collaborating with its vendors in localizing components supply with great impact on productivity and removing uncertainties in supply.

By rationalizing the inventory holding process by precise planning of schedules for indenting components, the company not only saved on holding costs but also reduced wastage. The delivery instruction was revised from monthly schedules to daily and made location wise to indent only

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components to meet the assembly line and spare part requirements for the dealers. The strategy was adopted to tackle the fluctuating market demand, accentuated by the intense competition in the automobile business now. The streamlining of the supply chain management was done after a thorough value analysis and engineering that helped it improve operator and machine productivity and reducing waste. While these practices helped MSIL reduce its logistics cost considerably, its IT efforts added to efficiencies and savings.

Firm schedules issued every fortnight were further fine-tuned by an online system for replenishment of inventory on an electronic card system. This avoided inventory build up or unanticipated deliveries by vendors as supplies were made only after receipt of the indent card from MSIL. This brought inventory management down to the doorsteps of the vendors, who would produce only what was indented. MSIL plans to extend the electronic card system for another 16 suppliers and for 250 components, following the successful implementation with 10 vendors delivering 66 voluminous and high-value parts. MSIL designed special transport trailers to transport cars and though innovation increased capacity per trailer by 20-30%. Flexible Strategic framework for managing forces of continuity and change

The framework for managing forces of continuity and change has been suggested [32] as follows: Continuity forces 1. Customer Base. 2. Infrastructure. 3. Technology. 4. Core competence. 5. Supply Chain and Distribution network. 6. Culture. 7. Performance. Change Forces 1. Globalization. 2. New Opportunities. 3. Competition.

4. Customer Needs. 5. Technology. 6. Mergers and Acquisitions. 7. Government policy. Continuity-Change Matrix

Strategies for confluence of continuity and change could be generated by understanding the balance of continuity and change forces. The continuity and change forces, as discussed in the previous sections, would be different for different industries and business organizations. In order to map the position of an industry or enterprise with respect to these forces a Continuity-Change (C-C) matrix has been developed. This matrix has continuity forces on the x-axis and change forces on the y-axis. The level of either of these forces could be ‘Low’ or ‘High’. These forces could be assessed independently for each category, such as customer base, infrastructure, technology and so on and agregated as ‘continuity forces’. Similarly, the ‘change forces’ can be assessed for globalization, new opportunities, change in customer needs and so on, as given in the previous section, and an aggregate score can be obtained. As per the proposed C-C matrix, there can be four possible combinations of the continuity and change forces, which are named according to the characteristics of that category. These combinations are: a) High Continuity Force and Low Change Force b. Low Continuity Force and Low Change Force c. Low Continuity Force and High Change Force d. High Continuity Force and High Change Force Flexible Strategies for managing various Continuity-Change Combinations

Flexible strategies for different continuity-change combinations are proposed [32], The selection of strategy would depend upon the balance of continuity and change forces acting on an organization. There are four extreme categories of strategies that are proposed according to the combinations given in C-C matrix. The organizations lying at the interface of Low or High continuity/ change forces may explore to evolve hybrid strategies. The four major strategies, Fig. 1, as per the ‘Flexible Strategy Matrix’ are discussed below.

Cha

nge

Forc

es

High

Change Masters (Wind) c

Synthesizers (Flowing Stream) d

Low

b Quick Encashers (Mushroom)

a Stabilizers (Tree)

Fig. 1 : Continuity and Change Matrix

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a. Incrementalism and Evolution For organizations that are ‘stabilizers’, operating under

‘high’ continuity forces and ‘low’ change forces, the major strategic path could be of ‘Incrementalism and Evolution’ or continuous and gradual change. This can be metaphorically typified as ‘Tree Strategy’, as this resembles the characteristics of a tree that gradually evolves from a seed to a fully grown tree and gets renewed everyday. Though the change takes place in such an organization, it is very slow and the strategy is predominantly guided by the forces of

continuity. An organization following this strategy would nurture continuity and grow in the existing areas in a stepby- step manner by enlarging infrastructure, improving technology, strengthening core competence and culture, streamlining and expanding supply chain and distribution network and ultimately enriching the customer base and improving business performance. b. Freewheeling and Experimentation

The strategy of ‘Freewheeling and Experimentation’ can be adopted by organizations that are not under major pressure of either continuity or change forces. This can be metaphorically stated as ‘Mushrooming Strategy’, which is characterized by quickly encashing the opportunity and moving fast to other lucrative opportunities, if they come in the way. As these organizations do not have a major continuity pull, may be because of low customer base, limited infrastructure and low investment in technology, they can easily opt for freewheeling to any new areas and experiment to en cash even small opportunities.

c. Strategic Renewal and Transformation

The ‘Change Masters’, that are subject to ‘low’ continuity forces and ‘high’ change forces, are driven by the strong wind and may follow a strategy of ‘Strategic Renewal and Transformation’. This strategy may be typified as ‘Wind Strategy’ as the predominant driver as well as outcome of the strategy is ‘change’. These organizations have low continuity pull due to less elaborate infrastructure, faster technological obsolescence (such as Information Technology), and flexible and flatter distribution network (particularly in case of services). Thus, the strategy would be to follow the wind of change and adopt a path of a combination of strategic renewal and radical transformation. d. Strategic Flexibility for Integrating Opposites

The fourth category of organizations that are under high continuity forces as well as high change forces are ‘Synthesizers’ and are supposed to exhibit strategic flexibility to integrate the opposing forces acting simultaneously. These are the leading organizations that usually have big customer base, huge infrastructure, a lot of investment in technology, unique core competencies, complex supply chain and distribution network, well established culture and leader in performance. The leaders in their own area are also subject to high change forces owing to globalization, stiff competition,

changing customer requirements, advances in technology and so on. The strategy proposed for this category is most challenging and comprise of ‘Strategic Flexibility for Integrating Opposites’ and can be metaphorically started as ‘Flowing Stream Strategy’. A flowing stream is continuously changing its course, and at times radically, while maintaining its continuity at the same time. This strategy frontier needs to be explored further for a right balance and synthesis of opposing forces acting on well established organizations, so as to divert their inertia on new frontiers without losing the benefits of continuity. This would require to explore a range of strategy options in view of the various types of continuity and change forces. For example, to take advantage of existing huge customer base for change the strategic option could be of ‘cannibalization’. The inertia of vast infrastructure can be dealt with by way of ‘outsourcing’. The widening of scope to ‘offer solutions’ in place of individual product and services can aid in tapping new opportunities and change in customer requirements by utilizing the strengths of existing products and services. The force of new opportunities can also be beneficially channelized by ‘extending the application of core competence’. Some lead examples of a few of these strategic options are discussed below. The strategic option of ‘cannibalization’ is effectively used by ‘Microsoft’ and ‘Intel’ to offer upgraded products with new technology using the existing large customer base as the experimentation ground. The strategic option of ‘outsourcing’ is used by quite a few, but one unique example is of ‘Bharti Televenture’ which has dared to even outsource the core activity of management of large telecom network to IBM and hardware to Nokia and keeping largely the marketing and branding functions with it. This has provided the organization with benefits of strategic flexibility to experiment new schemes coupled with savings in cost.

VII. RESEARCH FINDINGS

The Study was conducted across North India through personal meetings and interviews of the company executives and leading auto dealers. The purpose of the study was to gather insights about the continuity and change forces affecting the outbound logistics of MSIL. The study is based on personal interviews with experienced managers from the industry using a structured questionnaire. The questionnaire consisted of questions relating to seven factors for forces of continuity and seven factors for forces of change. To measure the impact of each factor, a number of questions were included. The response was recorded on a five point scale from 1 to 5. In all there were 29 questions for all the seven factors of continuity and 21 questions for seven factors of change. Since the executives and dealers interviewed were quite experienced and had in-depth knowledge of the outbound supply chain of the organization, the responses are based on the individual perception and no weights or normalization has been done to further influence the outcome of the research. The summary of the scores obtained in the

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research for above mentioned factors of forces and continuity and change is given in Table 1. Dealer wise Continuity Forces Scores and Change Forces Scores have been summarized in Table 2. The variation of perceptions of status of factors contributing to the forces of continuity and forces of change brings out a fact that the company is not paying equal attention to all the dealers hence the difference in their perception. This could be due to resource pressure on the marketing team to focus on better performing dealers for quick results in this highly competitive market. One more possible reason during the competitor’s onslaught and slow response to many new products coming to Indian market such as Nano from Tata Motors and other small cars entering into their hitherto dominant small car segment, where MSIL was undisputed leader in India. Due to this the new initiatives are being rolled through a few dealers who have shown comparatively higher Change Forces Score compared to their counterparts. Naturally a balanced focus on new initiatives for all dealers would help the organization more in the long

run as it is difficult to forecast which dealers or segments would do well in future.

The findings therefore are based on their opinion and perception of the industry experts. Fig. 2 gives the summary of the continuity and change matrix and position of overall outbound supply chain of the company as per findings of the survey. � The Average score on the continuity & change matrix was

(3.8 , 3.0) . � Outbound SCM of MSIL is in the Flowing Stream

category, showing flexibility. � Leading organization with big customer base, huge

infrastructure, a lot of investment in technology, unique core competencies, complex supply chain and distribution network, well established culture and leader in performance.

� Exhibit strategic flexibility to integrate the opposing forces.

� Facing Competition with numerous competitors. � Considerable Spending on new technologies and R&D .

VIII. SUMMARY OF OVERALL OUTBOUND SUPPLY CHAIN OF MSIL

F

orce

s of C

hang

e

5 High 2.5

5,5 (3.8,3.0)

(MSIL)

Low 0

2.5 5

Forces of Continuity

Fig. 2 Outbound Supply Chain of MSIL

Strategy suggested for MSIL to improve its outwards supply chain performance

From the above Fig. 2, it is evident that even though MSIL is in the Flowing Stream strategy segment, it is still on the lower end and therefore tough completion or internal factors may lead it to slip it into any of the other segments. So far MSIL, having a major market share and over 26 years of presence in Indian Auto Segment, has depended heavily upon the strength of its close relationship with its partners including suppliers, dealers and 3 PLs. However to have a flexible strategy for managing the forces of continuity and change, it needs to focus more on the forces of change. With the global meltdown and pressure on all Auto Companies to focus on India and China for survival and growth, the

traditional approach followed by MSIL may not give it the success it has had so far. Following suggestions would help it to build a truly flexible strategic framework, it needs to embrace new technologies for its outbound supply chain management and follow some of the practices successfully implemented by Toyota – Lean Management and fast response such as by Wall Mart to maintain their undisputed leadership position in their respective industries. � The Company should be continuously changing its

response to consumer requirements, at times radically, while maintaining its continuity at the same time.

� The Company should divert invest in new SCM technologies without losing the benefits of continuity.

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TAB

LE 1

Su

mm

ary

of

ques

tionn

aire

s

Lead

ing

Aut

o D

eale

rs

in In

dia

A

ctua

l Sc

ore

S.

No.

C

ontin

uity

Fa

ctor

s

Max

Po

ssib

le

Scor

e A

B

C

D

E

F G

H

I

J K

L

M

N

O

P To

tal

Scor

e

Ave

rage

Sco

re

acro

ss th

e de

aler

s

1

Cus

tom

er B

ase

20

15

17

15

14

16

15

16

17

17

17

18

16

17

13

17

16

25

6.0

16.0

2

Infr

astru

ctur

e 20

17

17

13

18

14

17

14

17

18

17

13

17

16

16

17

241.

0 15

.1

3 Te

chno

logy

20

18

18

8

16

15

18

8 16

16

18

12

18

11

18

16

13

23

9.0

14.9

4

Cor

e C

ompe

tenc

e 15

9

13

11

11

11

10

11

13

13

13

17

12

11

13

10

12

190.

0 11

.9

5 Su

pply

Cha

in

&D

istri

butio

n 25

21

20

6

20

18

21

6 13

20

18

17

21

23

21

20

16

28

1.0

17.6

6

Cul

ture

25

16

17

20

18

17

16

20

18

17

18

18

16

21

16

18

13

27

9.0

17.4

7

Perf

orm

ance

20

16

16

17

16

17

16

16

17

17

15

17

16

17

16

15

18

26

2.0

16.4

112

118

90

113

108

113

91

111

118

116

112

116

116

113

113

88

1748

.0

C

ontu

nuity

Sc

ore

3.

9 4.

1 3.

1 3.

9 3.

7 3.

9 3.

1 3.

8 4.

1 4.

0 3.

9 4.

0 4.

0 3.

9 3.

9 3.

0 60

.3

3.8

3.8

C

hang

e Fa

ctor

s

1

Glo

baliz

atio

n 10

3

2 6

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� Take advantage of existing huge customer base for change the strategic option.

� The inertia of vast infrastructure can be dealt with by way of ‘outsourcing’.

� The force of new opportunities can also be beneficially channelized by ‘extending the application of core competence’

� Integrated a large number of services, such as financing, insurance, after sales services, reverse logistics and so on by way of strategic alliances to add value under a highly competitive situation with reducing margins.

� It should enhance on its degree of differentiating advantage.

� Should focus on core competencies and not try to do everything inhouse

� Should be decreasing its inventory costs by implementing concepts like JIT .

� Needs to work on the change forces with emphasis on Outsourcing in areas of Forward Logistics.

� Needs to capitalize on the numerous new opportunities. � IT implementation needs to be strengthened. � Needs to work on the supply chain and distribution

network. � Invest more on R&D on innovative SCM technologies

and solutions.

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