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Introduction1
st
Table 1. The relationship between product characteristics and supply chain strategies
Product characteristics
Type of product
Demand uncertainty
Predictable demand
Unpredictable demand
Market winner
Cost
Availability
Forecasting
Relatively accurate
Demand driven
Product variety
Table 2. The relationship between manufacturing characteristics and supply chain strategies
Manufacturing characteristics
Manufacturing strategies
MTS
Manufacturing cost
Inventory holding
Changes in manufacturing
Manufacturing process
Push supply
Pull supply
where they want to position themselves in the tradeoff between responsiveness and efficiency (Nel &
Badenhorst-Weiss, 2010, p. 210). Holding large
amounts of inventory allows a company or an entire
supply chain to be extremely responsive to
fluctuations in customer demand (Bowersox et al.,
2010, p. 157). However, the creation and storage of
inventory are a cost, and to achieve high levels of
efficiency, the cost of inventory should be kept as
low as possible. An organisation can be responsive
by stocking high levels of inventory for a wide range
of products (Chopra and Meindl, 2010, p. 65). With
respect to location, these decisions relate to the
activities that should be performed in each facility.
The responsiveness versus efficiency trade-off is the
decision whether to centralise activities in fewer
locations to gain economies of scale and efficiency,
or to decentralize activities in many locations close to
customers and suppliers in order for operations to be
more responsive (Chopra & Meindl, 2010, p. 63).
When making location decisions, managers need to
consider a range of factors relating to a given
location, including the cost of facilities; the cost of
labor; skills available in the workforce; infrastructure
conditions; taxes and tariffs; and proximity to
suppliers and customers. Location decisions tend to
be strategic decisions because they commit large
amounts of money to long-term plans (Waters,
2003, p. 105).
In transportation decision, the trade-off between
responsiveness and efficiency is manifested in the
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Production
Excess capacity
Flexible manufacturing
Many small factories
Inventory
Location
Transportation
Frequent shipments
Fast and flexible mode
Information
Sourcing
Pricing
Table 4. Light vehicle manufacturers and local manufactured models in South Africa, 2011
Passenger vehicles (2011)
Manufacturer
Models
Manufacturers
Models
BMW
3-series, 4-door
Nissan
Mercedes-Benz
C-Class 4-door
Toyota
Hilux
Bantam and Rangers
Nissan
Ford
Toyota
General Motors
Ford
Mercedes-Benz
Mitsubishi Triton
Statements
The model is a standard vehicle (no customization)
SD
SA
25.0%
25.0%
0.0%
33.3%
16.7%
8.3%
8.3%
0.0%
75.0%
8.3%
The market winner (most important sales criteria/point) for the model is cost
16.7%
33.3%
8.3%
16.7%
25.0%
The order lead time (order to delivery) takes more than three months
16.7%
50.0%
25.0%
8.3%
0.0%
8.3%
0.0%
16.7%
75.0%
0.0%
Statements
SD
SA
8.3%
8.3%
8.3%
50.0%
25.0%
0.0%
8.3%
8.3%
50.0%
33.3%
8.3%
33.3%
16.7%
41.7%
0.0%
We customize some parts in our production process to meet certain customers orders
16.7%
25.0%
8.3%
33.3%
16.7%
0.0%
0.0%
16.7%
33.3%
50.0%
0.0%
0.0%
0.0%
66.7%
33.3%
8.3%
16.7%
8.3%
33.3%
33.3%
Percentage
Make-to-stock (MTS)
58.3%
Make-to-order (MTO)
41.7%
Transportation
Information
Supplier selection
Pricing strategy
Mean
Median
2.92
3.00
2.91
3.00
We work on a strict JIT system and, therefore, keep inventory holding in the production process to a
minimum
4.17
4.00
2.75
2.00
Our local strategic suppliers are located close to our production plant
3.67
3.50
4.00
4.25
3.92
4.00
We make use of the low cost mode of transportation for parts purchase from our strategic suppliers
3.83
4.00
We make use of the low cost mode of transportation for vehicles to our dealers
3.50
4.00
Information helps us to build master production schedule (forecasts) and create delivery dates
4.58
5.00
Information is used on actual demand to be transmitted quickly to reflect real demand accurately.
3.92
4.50
3.83
4.00
4.42
4.50
3.75
3.50
3.42
3.50
3.42
3.50
Our pricing strategy is based on low margins (low margins based on high volume).
2.58
3.00
2.83
3.50
Production. The results indicated that manufacturers tended to implement excess capacity and
flexible manufacturing (means of 2.92 and 2.91
respectively) to a moderate extent, which
indicated a lean supply chain. An agile supply
chain is characterized by excess capacity and
flexibility.
Inventory. The respondents indicated that they
implemented the practice of working on a strict
JIT system and keeping inventory holding in the
production process to a minimum (a mean of
4.17). A strict JIT system is a characteristic of a
lean supply chain strategy.
Location. Respondents tended to use
decentralized distribution centres (stores) to
serve dealers to a moderate extent (a mean of
2.75). Local strategic suppliers tended to be
located close to the production plant to a greater
extent (a mean of 3.67). Decentralized distri-
Percentage
100.0%
0.0%
Percentage
66.7%
33.3%
many organizations. Thirdly, light vehicle manufacturers do not always align their practices to the
chosen strategy which results in a misalignment of
supply chain strategy. A limitation of the article is
that one of the light vehicle manufacturers of local
models was unwilling to participate in the study
(90%). It is not known if the findings would have
been different if this company were involved. For
further research, it is recommended that the study
also be carried out for light vehicle manufacturers in
other countries.
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