Micro Compact Car

Executive Summary

        In the beginning of the automotive industry, Henry Ford was once noted saying “Coming together is a beginning, staying together is a progress, and working together is a success”. With those words in mind, we look at how the company Micro Compact Car (MCC) and its suppliers were evolutionary in creating an innovative supply chain that delivered a car that met a growing demand of conscientious consumers who desired to inspire a safe and environmentally conscious lifestyle of driving more responsibly. The Smart car was developed as a collaborative effort between Daimler-Benz, several suppliers, and partners to introduce a car that is safe, environmentally friendly, minimal but comfortable, and most importantly a solution to individual mobility within crowded urban environments. It combines the mass customization and standardization of the automotive industry with a world-class industry leading integrated supply chain. MCC and its suppliers were innovative in developing a business model that involved the collaboration of the R&D, manufacturing, marketing, and logistics functions across its entire supply chain. The synergies that were created were so vast and unique that it gave MCC a competitive advantage that resulted in lead times of 3-4 weeks while the competition lagged behind by months. In addition, so much forethought was put into their long-term vision that not only did they build a huge facility called Smart-Ville in Hambach, France from scratch, where the integrated suppliers were co-invested in and operated alongside MCC, but they created a unique facility layout that made their operations transparent to everyone in the process, flexible to innovative ideas, and incredibly agile to accommodate redesigns and implement those changes within months after introduction. These achievements couldn’t have been accomplished though without those aforementioned words said by Henry Ford, “Coming together is a beginning, staying together is a progress, and working together is a success”. MCC and all of its suppliers and partners certainly embodied Henry Ford’s quote.

Question 1

        There are a variety of reasons that I believe that MCC should continue to assemble cars even though their suppliers are substantially integrated in the production process. In the article, it was evident that MCC chose to predominantly compete using the Customer-focused approach in order to achieve a competitive advantage over other small car manufacturers such as FIAT. For this particular reason, MCC should keep the final part of the assembly process under their control in the supply chain since it is part of their core competency. It is cited that even though integrated suppliers deliver about 70-80% of the value in volume production, which only equates to about 30-40% of the value of the finished product, this leaves MCC to deliver about 50% of the finished value to the final consumer. Another reason I think that MCC should continue assembling the final product is that even though they are utilizing a variety of strategic methods to compete such as just-in-time inventory, on-site suppliers, and line-side delivery to drive costs down and increase productivity among their suppliers, it is they who are ultimately delivering the most value in the final product because of their customer-focused approach. In chapter 5 of the text, there are multiple ways a company can compete to gain a competitive advantage and that is by using Assets or Capabilities, Cost or Differentiation, and using a Customer-focused or Competitor approached method. MCC has been able to implement and blend nearly all these methods with the customer-focused approach to sustain their advantage. Therefore, MCC should not relinquish control of the final assembly process because this enables them to control and scrutinize the quality and the finished product of the entire supply chain before delivering the finished product to the final customer at each of their Smart centres.

        One way to make sure that the manufacturer doesn’t become an irrelevant partner in the supply chain is by having it hold onto its core competencies instead of outsourcing them to their suppliers. MCC, for example, more than likely employed some kind of customer value analysis by identifying the customer and then identifying, choosing, providing, communicating, and assessing the delivered value to the final consumer. MCC and other supply chain partners also need to remain dependent on each other or identify areas of interdependency so their collaborative relationship continues to grow and strengthen. In chapter 3, it is stated that collaborative relationships need several key factors for it to be successful such as trust and commitment, cooperative norms, interdependency, and other factors in order for their efforts to fully exploit the synergies found in a their supply chain. MCC and its partners need to work on establishing these factors among themselves to avoid undermining the supply chain and instead help it by creating cohesiveness in which all partners support each other and all of them work towards the same long-term goal. Essentially, by developing more mutual dependencies among the entire supply chain, MCC will be able to maintain its relevance with suppliers and also continue to reap the rewards such as cost savings that can benefit everyone involved in the process.

Question 2

        In an effort to encourage high performance among MCC’s suppliers, every partner should focus on looking for supply chain synergies among each other. When bringing together a variety of suppliers and manufacturers there is a multitude of enablers, impediments, and benefits that come along with such a large collaborative effort. Companies should focus on investing their time, human capital, and other resources to identify enablers in the relationships such as openness, recognizing who and what is important, establishing clear expectations, and sharing benefits as well. Along the way other synergies will enable the company to benefit from each other as well. For example, reductions in inventory, personnel, increased speed to market, and working toward the goals of the supply chain and not the individual companies will all assure that the performance of supply chain partners is augmented. Of course, the effort of collaborating will also involve overcoming impediments such as a limited view of the supply chain, doing things the old way, betrayal, annual negotiation process, and an inability to consistently meet requirements. What is apparent in the case is that MCC had already begun to demonstrate and implement many of the aforementioned synergies and mitigate many of the impediments in achieving collaboration. As an example, MCC had built the supply chain from scratch which meant there were no existing behaviors of doing things the old way, so it didn’t have negative relations to overcome. MCC also got rid of the annual negotiation process and in its place created a coaching environment where MCC management, its suppliers, and partners worked together to resolve challenges by holding meetings in the middle of the facility called the “Market Place”. MCC also formed long term contracts with partners to further encourage collaboration and increase their participation towards the success of their long term goals.