Page 323 - DMGT523_LOGISTICS_AND_SUPPLY_CHAIN_MANAGEMENT

Logistics and Supply Chain Management

Notes

Tasks Integration between the three macro processes is crucial for successful supply
chain. Use of databases, communication systems, and foremost advanced computer software
are crucial for the development of a modern cost-effective integrated SCM.

The collaboration and coordination costs of the supply chain increase with the speed of change
in the marketplace. A proactive approach to manage customer demands is necessary to stay
competitive. This requires flexibility in the supply chain while cutting hidden costs and reducing
transaction costs.

Example: Speeding up sharing of information through electronic means, can help partners
lower production cycle times and inventory can be viewed on a real-time basis so forecasting
errors can be reduced. This will contribute to the objectives of satisfied customers and low costs.



Caselet TRW Steering Systems

RW Steering Systems is a subsidiary of TRW, an American-owned multinational
company. Mollart is a supplier of gun-drilling tools and services based in suburban
TSurrey, UK. These companies have forged a relationship based on trust and
confidence that has brought Mollart to South Wales as the first tenant of TRW’s new
supplier park, which means that it is now a critical second-tier supplier to automotive
assemblers in the UK and globally.
A key component of a steering system is the rack bar – a steel bar about a meter long with
a rack at one end that engages with the steering column pinion. Along about three-
quarters of the axis of this bar, a thin, deep, accurate hole has to be drilled. Mollart, a
family firm founded in the 1920s, has long specialized in deep hole, or “gun,” drilling. Its
relationship with TRW Steering Systems began 10 years ago when it eased TRW’s peak
capacity problems. Initially at a rate of 100 per week, this built up to 7500 a week by
1997 – a significant proportion of TRW’s weekly output of between 26,000 and 30,000
components.
But the material flow – from British Steel in Sheffield to TRW to Mollart in Chessington
and then back to TRW – was not only wasteful but made fine control and rapid response
impossible. So, Mollart moved to the Neath Vale Supplier Park and started production
there in March 1998. It is machining bars for Honda, Rover, and Land Rover product, with
plans to raise production to 13,000 units a week – half of TRW’s total requirement. Mollart’s
intention is to do 60 percent of its business with TRW and 40 percent for other customers.
Mollart has taken a big risk with no guarantees; it has no unique design or manufacturing
capability to lock the customer in and is a minnow compared with its (currently) sole
customer.
Why, then, does the relationship work so well! Largely, it is a tribute to TRW’s attitude
toward its suppliers. “We have a safety-critical product, so we have to select suppliers
carefully,” states Roger Llewellyn, TRW’s group purchasing manager. “Moreover, external
suppliers account for 52 percent of the product, so our own lean production, however
good, can only address 48 percent of the problem.”

Contd...

318 LOVELY PROFESSIONAL UNIVERSITY