Sourcing Auto Components for High End Car’s

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TABLE OF CONTENTS

Executive summary

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NexAutoParts (NAP) is leading High End Car’s Automotive Parts (Jaguar, Land Rover, BMW, Rolls Royce, Mercedes, & Lamborghini) supplier in Canada. Mission Statement of NAP is “WE KEEP YOUR CAR RUNNING LONGER, STRONGER WITH THE QUALITY PARTS”. NAP started selling Auto Parts in Eastern Ontario since 1976, when there is huge Auto Revolution in industry. Pioneer of NAP were two car racing driver, as they started this business to fulfill their dreams & passion. Over the time this passion turns into huge Business Opportunities and they have appointed distributor all over the Canada, to cater this distributor they have opened 2 new Head office, one in Ontario to cover Central & Eastern Province and 2nd one in Vancouver to cater Western and Prairie province of Canada.

Since the business took over by the 2nd generation since last decade, both new CEO would like to expand the purchasing of parts from different parts of world as they were only buying OEM parts from the manufactures. Due to high competition and profit margin getting thinner and thinner every year. To maintain the profit level without compromising the quality, both the 2nd generation in charge of the NAP started thinking of global sourcing which needs to be looked into to find better source of supply which can maintain quality, low cost, low risk expectations.

After a detailed study, they came to conclusion that same High End Car’s market is significant grew in Asian Market beginning of 21st century due to increasing purchasing power of middle class. South Korea, India and Vietnam are the countries of hub of manufacturing Auto parts and supplying to the car manufactures. NAP has applied to its model has been Layout decisions; "layout establishes and organization's competitive priorities in regard to capacity, processes flexibility, and cost, as well as quality of work life, customer contact, and image.

Issue Identification

NAP Auto Parts sales increased by over 40 % since last decade but the profit margin is not increasing with the align of sales increased. Infect profit margin were more  than 35% of the total sales before 2010, and now it is only between 10-12% since last couple of years. Also warranty on the parts need to be more than 12 months as Car dealer is offering a warranty of 12-18  months now a days with the original parts. Hence NAP has to offer at least 24 months warranty to the end users. To offer a 24 months warranty, NAP has to source the quality manufactured product from globally with the good price.

Tactical issues/ Short terms:

NAP is planning to outsource the Auto Parts, and then below are some of the issues needed to be considered:

• Finding a quality Auto Suppliers from S.Korea, India or from Vietnam.
• To maintain confidence of distributor for buying the parts from Asian market
• Train the current Supply Chain team to procure material from Asian Market.
• Transaction viability & visibility

Strategic issues/ Long Term:

Mission statement of NAP is Longer, Stronger & Quality Parts, and the biggest thread buying from 3rd world country is to maintain the quality with Ethical manufacturing.

• To outsource the parts for all the manufacturing of the cars from one country only
• For India & Vietnam, to deal with the local government & corruptions issues
• To find the country with Highest rating of “Ease of Doing Business”
• Reviewing Incremental Global Business Cost
• Infrastructure and Logistic corridor to bring the material from manufacturing unit to port/ airport.

Environmental issues:

Outsource all parts from one country is bit challenging, but due to globalization South Korea and India has outcome and show the strength of manufacturing capability to the world in last decade.

With the innovation and help of Technology these 2 countries are competing the Europe and North American manufactures. South Korea is leader in manufacturing cars like Kia & Hyundai and globally competing globally with some other well-known brands with their quality product.

At the same time, India has started manufacturing & acquire well-known Luxary car brand of  Jaguar from  British. This reflects the quality and technology power in the country.

Infrastructures in these countries are not up to the mark as per the North America standard due to political instability and corruptions issue in the government.

Root Cause Analysis:

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Supply Chain of NAP has to source the Auto Parts globally but at the same time to keep the Mission statement priority to maintain quality parts, Primary reason to outsource the Auto parts is to generate profit and provide the warranty of parts longer than 18 months (to fulfill one of part of mission statement “ RUNNING LONGER”). Based on the short list of the countries, following SWOT Analysis for each country for sourcing parts.