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SUPPLY CHAIN OF THAILAND PRODUCT CHAMPION:

CASE STUDY OF PASSENGER CAR TIRE INDUSTRY


by
Duangpun Kritchanchai
Department of Industrial Engineering, Mahidol University
25/25 Phuttamonthon 4 Rd, Phuttamonthon, Salaya,
Nakhonpathom, Thailand
E-mail: egdkc@mahidol.ac.th
Tuanjai Somboonwiwat
Department of Industrial Engineering,
King Mongkuts University of Technology Thonburi
126 Pracha-utid Rd, Bangmod, Toongkru, Bangkok, Thailand
E-mail: tuanjai.som@kmutt.ac.th
and
Wirachchaya Chanpuypetch
Centre of Logistics Management, Mahidol University
25/25 Phuttamonthon 4 Rd, Phuttamonthon, Salaya,
Nakhonpathom, Thailand
E-mail: wirachchaya@gmail.com
ABSTRACT
The direction of Thailand logistics research is geared toward enhancing the countrys competitiveness. To
achieve that, logistics research must be conducted under the perspective of supply chain. In this paper, supply chain of
Thailand product champion is determined. We found that passenger car tire industry is one of the product champions of
Thailand. It is one of the highest exporting values with high demand in the world market. We then analyze the flow from
upstream to downstream. The proportion of rubber products flow in each area from upstream to midstream and
midstream to downstream are exhibited. Forecasting for future productivity is also taken into account. It is found that
capacity balance in the chain is the major problem. Future location and capacity needed for passenger car tire production
is proposed. The direction of industrys competitiveness is also presented in this paper.
KEYWORDS
Supply Chain, Product Champion, Tire, Forecasting, Productivity
INTRODUCTION
The direction of Thailand logistics research has been geared toward enhancing countrys competitiveness. Three
performance indicators are considered namely; cost reduction, efficiency improvement, and value creation. The logistics
system improvement should help costs reduction and enable Thailand to compete effectively. It has been recommended
that the potential industry of Thailand must be determined in order to identify the champion. Then, the concept of
logistics and supply chain management must be applied.
This paper is a part of the project of The Supply Chain Champion in Thailand. The main purpose is to identify
the product champion for Thailands competitiveness. The study begins with selecting the potential industry in Thailand.
It is found that rubber industry is one of the potential industry groups in Thailand Competitiveness Matrix (TCM). TCM
was created by National Economic and Social Development Board of Thailand for comparing the international
competitiveness of various industrial sectors and the attractiveness of different business types in the global market.
According to the TCM, Thai industries can be classified into three categories: potential industries, improving industries,
and survival industries, illustrated in Figure 1. All industries are considered by exporting value, government support, and
value creation. Within the potential industry groups, rubber products, fish and seafood, and canning are more attractive
and competitive than other groups.

FIGURE 1
THAILAND COMPETITIVENESS MATRIX 2005: INDUSTRIAL SECTOR

Source: Office of National Economic and Social Development Board, Thailand


From the authors previous work (Kritchanchai et al.,2010), it has been proofed that rubber is the most potential
sector selected as one of the champions. The focus of this paper is to explore the supply chain of this product champion.
Passenger car tire has been selected as the represented product (Kritchanchai et al., 2010).
The paper is structured as follows. The product champion selection for rubber industry in Thailand is depicted in
section 2. The criteria are determined and the product champion is identified. In section 3, supply chain of passenger car
tire industry is analyzed. The problem is defined from upstream to downstream. The direction for passenger car tire
industrys competitiveness will be proposed in section 4 and conclusions are shown in section 5.
THE PRODUCT CHAMPION SELECTION FOR RUBBER INDUSTRY IN THAILAND
Rubber production has been one of the countrys major industries contributing to the growth of Thai economy.
It is found that rubber industry is one of the highest exporting values with high demand in the global market. The major
rubber exporting products of Thailand are tire and gloves. Exporting value are 31,642.62 million THB and 9,262.80
million THB in year 2009 respectively (The Office of Industrial Economics, Thailand, 2010). Then we list down the top
five products from these 2 groups. This will be considered as the alternatives for product champion evaluation. The top
five rubber products are selected for the alternatives for further identifying the product champion. The alternatives are
passenger car tire, gloves, motorcycle tire, motorcycle inner tube, and bus/truck inner tube. Then, we rank the alternatives
for identify the product champion in rubber industry by using Analytic Hierarchy Process (AHP).
AHP is an approach that is suitable for dealing with complex systems. It is to provide choices from among
several alternatives which provide comparison for the considered options. It is firstly proposed by Thomas L. Saaty in the
1970s (Bhushan and Rai, 2004). The AHP is based on the subdivision of the problem in a hierarchy form. The AHP helps
organizing the rational analysis of the problem by dividing it into part. The analysis then provides the decision makers to
make several pair-wise comparisons. The AHP can be used for analyzing different problems. It uses both qualitative and
quantitative variables. The fundamental principle of the analysis is the possibility of connecting information based on
knowledge to make decisions. In applying AHP, three steps are processed, the description of a complex decision problem
as a hierarchy, the prioritization procedure and the calculation of result (Chauhan et al., 2008).
The first step in developing the AHP is to identify and then define the criteria. In this study, the criteria which
has been used in Thailand Competitiveness Matrix are adopted. Group of criteria can be devided to five catagories
namely factor inputs and production, global demand, domestic importance, degree of competition, and external effect.
Then, thirteen criteria are selected from TCM and used for product champion selection. The criteria for Thailand product
champion selection are shown in Table 1.

TABLE 1
THE CRITERIA FOR THAILAND PRODUCT CHAMPION SELECTION
Group of criteria
Criteria
Factor inputs and
% of local content
production
Value added
Value chain linkage
No. of Employment
Global demand
World market share
World market size
World market growth
Domestic
Local demand growth
importance
Local demand size
Degree of
number of competitors
competition
Product Differentiation
Free Trade Agreement
(FTA)
External effect
Environmental impact

Definition of criteria
Percentage of local content usage for
production
Opportunity for value creation
Opportunity for value chain linkage
Number of employment in the industry
Share of the product in world market
Market size of the product in world market
The growth rate in world market
The growth rate in local market
Demand in local market
Number of competitors in the market
the uniqueness of products
Benefit from Free Trade Agreement (FTA)
Impact of industry on environment

The relative importance of criteria are determined through the pair-wise comparison method in AHP. We use the
nine-point (1-9) numerical scale of AHP. The importance of the criteria were evaluated by group of expert. The relative
weights of the criteria were next used to assess the alternatives of rubber product. The analysis aims to identify the
ranking of the criteria. Based on the responses on the evaluation, the finding shows that the top three criteria are value
added, world market, and world market share. Value added is given the highest weight of 0.2229 while world market and
world market share is 0.1783 and 0.1309, respectively. Then, the results in rank of rubber products order are: passenger
car tire (0.3393), gloves (0.2430), motorcycle tire (0.1829), motorcycle inner tube (0.1257), and bus/truck inner tube
(0.1092). As a result from AHP model, passenger car tire is identified as the product champion of Thailand. Criteria
rankings and the evaluation for product champion in rubber industry is illustrated in Figure 2.
FIGURE 2
THE EVALUATION FOR PRODUCT CHAMPION
SELECTION PASSENGER CAR TIRE INDUSTRY IN THAILAND
Evaluation for product champion selection

Weights for factor


Value added

0.2229

World market

0.1783

World market share

0.1309

% of local content

0.1172

No. of competitors

Local demand
Value chain linkage
Product
No. of employment
Environment impact
FTA

0.3393

Gloves

0.2430

Motorcycle tire
Motorcycle inner tube
Bus/truck inner tube

0.1829
0.1257
0.1092

0.0859

World market size


Local demand size

Passenger car tire

0.0665
0.0535
0.0399
0.0328
0.0230
0.0201
0.0169

Product champion
for Thailand rubber industry
Passenger car tire

0.0120

*C.R. = 0.06
The following sections will depict a review of passenger car tire industry in Thailand and analyze problem of
rubber products flow from upstream to downstream.

CURRENT SITUATIONS
According to the AHP model, passenger car tire industry was selected as the product champion of rubber
industry in Thailand. The result accords with experts opinion in the field of rubber industry. They consider that tire is
one of the highest potential industries and should be supported. A structure of passenger car tire industry supply chain is
illustrated in Figure 3.
FIGURE 3
A STRUCTURE OF TIRE INDUSTRY SUPPLY CHAIN

In Thailand, rubber planting areas are located in Southern, Eastern, and Northeastern region. Mostly, rubbers are
supplied to midstream firms nearby the planting areas. Then, natural rubber products from midstream manufacturing
(such as ribbed smoked sheet and block rubber) are sent to local tire manufacturing. Passenger car tire manufacturers are
mostly located in the Central and the East of Thailand.
From focus group and in-depth interview with midstream and downstream manufacturers in Thailand, we found
that midstream manufacturers use raw materials in their own area. Except for Eastern region, 10 and 30 percent of
midstream products are produced by using raw material from Southern and Northeastern areas, respectively. Then,
midstream products (ribbed smoked sheet and block rubber) are sent to passenger car tire plant in Eastern and Central
areas. The proportion of rubber products flow from upstream to downstream are shown in Table 2.
TABLE 2
THE PROPORTION OF RUBBER PRODUCTS FROM RAW MATERIAL LOCATION
Location
Northeastern region

Eastern region

Upstream

Midstream

100%

30%
60%
10%

Southern region

Downstream*

20%
80%

100%

* Mostly, downstream plants (passenger car tire manufacturers) locate in the East and Central of
Thailand.
Source: in-depth interview (2010)

PROBLEM DESCRIPTION
The Flow from Upstream to Midstream
From previous section, mostly, midstream manufacturers use raw materials within their area. Except for Eastern
region, this area consumes more raw materials from Northeastern and Southern areas. It can be seen that 30% of raw
material fed into Eastern part are from Northeastern part. As a new growing area, there are still few midstream
manufacturing plants in the Northeastern part.
Moreover, rubbers in Northeastern area are increasing as a result of the governments The One Million Rai
Rubber Plantation Project phase I program in 2003 which can be harvested in 2010. We realize that the capacity of
midstream plants in this area may not be adequate for support the rapid increase of rubber growth. This situation will
affect the capacity balance and transportation cost in the passenger car tire supply chain in the near future.
From the problem stated above, we realize that to improve the passenger car tire supply chain, the product flows from
upstream need to be managed. From the authors previous work (Kritchanchai et al, 2009), it is found that there is no
policy support and manage the product in this new growing area - Northeastern.
Most of rubber in Northeastern region flow to the Eastern part for midstream manufacturing. This results in over
flown capacity at midstream plant together with high transportation cost. This urges us to consider about adding up
capacity for midstream process in Northeastern region. That means number of midstream manufacturing must be
increased in Northeastern region in order to consume its own areas raw material. We then investigate the current
situation capacity in each region in Table 3.
TABLE 3
THE CURRENT SITUATION CAPACITY IN EACH REGION
Midstream capacity available
Midstream capacity
Upstream dry rubber and cup-lump
(tons)2
status
(tons)1
Northeastern
104,601.43
13,980
Over capacity
Eastern
263,307.08
288,420
Slightly over capacity3
Upper Southern
37,964.98
Southern
2,330,378.25
3,162,936.00
Under capacity
1
92% of all upstream rubbers flow in the form of rubber latex and 8% is in the form of cup-lump.
90% of rubber latex supply to dry rubber industry and 10% supply to concentrated latex industry. (Department of Trade
Negotiations, 2004)
2
Capacity of Midstream plant (block rubber and ribbed smoked sheet) in 2006 (based on data from Department of
Industrial Work (2009))
3
For Upper Southern, upstream dry rubber and cup-lump are sent to midstream plants in Eastern area.
Location

From Table 3, it can be seen that the midstream manufacturing in Northeastern is inadequate. Furthermore the
rubber from the government project on The One Million Rai Rubber Plantation Project (1 rai=1,600 m2) will be
harvested in year 2016. Here we consider the production rate in year 2016 in comparison with the capacity available. The
Northeastern production rate in year 2016 comes from 2 sources.
Firstly, we use trend analysis method to forecast the Northeastern outcomes in year 2016 which results in
327,910.90 tons. The forecasting of rubber production in year 2016 is shown in Table 4.

TABLE 4
THE FORECASTING OF UPSTREAM RUBBER PRODUCTION IN YEAR 2016
MAPE

Production
Region
2016 (tons)

1 18,891.90
3.31

Province
Prachinburi

3,974.50

Chachoengsao

5 27,205.20

Srakao

3 74,473.90

Chantaburi

4.8

9,580.70

Eastern

Yt = 7669.5 +
935.2*t
Yt = 1076.5 +
Nongbualumphu
241.5*t
Yt = 9624 +
UdonThani
1465.1*t
Yt = 16931.5 +
Nong Khai
4795.2*t
Yt = 2199.5 +
Sakonnakhon
615.1*t
Yt = 4619 +
Nakhon Panom
930.9*t
Yt = 3627.5 +
Mukdahan
859.1*t
Yt = 4619 +
Yasothon
930.9*t
Yt = -71 +
Amnatcharoen
241.7*t
Yt = 4541.5 +
UbonRatchathani
1085.8*t
Yt = 7444.5 +
Sisaket
1517.4*t
Yt = 2513 +
Surin
1925.5*t
Yt = 5086 +
Buriram
4091.2*t
Yt = 152.5 +
Mahasarakam
75*t
Yt = 1760 +
Roiet
154.9*t
Yt = 2538.5 +
Kalasin
586.8*t
Yt = 1360.5 +
Khonkean
129.1*t
Yt = 923 +
Chaiyaphum
154.8*t
Yt = 325.5 +
Nakhonratchasima
179*t
Loei

Northeastern

Equation

Trad

3.2 15,789.80

Rayong

4.8 13,936.70

Chonburi

MAPE

Production
2016 (tons)

Yt = 66.0 + 165*t 11.69

2,046.00

Equation

Yt = 8697 +
2683*t
Yt = 2230.0 +
15.8*t
Yt = 69707 +
4996*t
Yt = 40090 +
1704*t
Yt = 109615 +
9306*t
Yt = 25348 +
2515*t

3.2 15,789.80
7.78

2,829.40

0.9 25,653.30
12 25,619.00
8 54,180.40
1,052.50

1.89

3,618.80

1.65

9,580.10

2.41

2,909.70

4.68

2,780.60

5.71

2,473.50

Total 327,910.90

Yt = 102543 +
1181*t
Yt = 27846 Ranong
1357.00*t
Yt = 446671 SuratThani
7989.50*t
Yt = 166861 PhangNga
6315.40*t
Yt = 29413 Pukhet
1332.10*t
Yt = 134529 +
Krabi
893*t
Yt = 335984 Trang
1610.60*t
Yt = 130099 +
Pattalung
3171*t
Yt = 355711 +
Songkhla
3113*t
Yt = 59902 +
Satun
1638*t
Yt = 53539 +
Pattani
3587*t
Yt = 201412 +
Yala
12085*t
Yt = 218471 +
Narathiwat
9634*t
Nakhon
Yt = 321634 SiThammarat 9091.40*t
Chumporn

4 17,571.10

3.34

40,893.00

1.18

2,419.60

1 129,659.00
2

60,538.00

1 221,287.00
2
Total

Southern

Province

Region

55,528.00
512,370.60

2 116,715.00
4

11,562.00

4 350,797.00
3

91,076.20

13,427.80

0.2 145,245.00
1 316,656.80
2 168,151.00
0 393,067.00
2

79,558.00

96,583.00

2 346,432.00
1 334,079.00
2 212,537.20

Total 2,675,887.00
Source: Final report The Implementation of Logistics and Supply Chain Management in Thailand (2010)
Secondly, the additional of 146,565.65 tons of rubber products from One Million Rai Project are included in the
consideration (Rubber Research Institute of Thailand of Nong Khai province, 2010). Thus, the Northeastern production
rate in year 2016 will be 474,476.55 tons. This again compares to the overall capacity shown in Table 5.

TABLE 5
THE RUBBER PRODUCTION RATE IN YEAR 2016
Location

Upstream production in
2016 (tons)

Upstream dry rubber and


cup-lump in 2016 (tons)1

Midstream capacity for dry


rubber
(if not increasing) (tons)
13,980
288,420

Northeastern
474,476.55
423,100.23
Eastern
512,370.60
456,891.11
Upper
48,133.30
42,921.43
Southern
Southern
2,664,325.00
2,375,831.89
3,162,936
Overall
3,699,305.45
3,298,744.66
3,465,336
1
92% of all upstream rubbers flow in the form of rubber latex and 8% is in the form of cup-lump.
90% of rubber latex supply to dry rubber industry and 10% supply to concentrated latex industry. (Department of Trade
Negotiations, 2004)
It can be seen that when the outcomes from One Million Rai Project in new growing areas bloom, the midstream
capacity for dry rubber and cup-lump, which are the main raw material for tire industry, will be shortage. This convinces
the idea of adding up midstream plant in the new growing area - Northeastern region.
THE FLOW FROM MIDSTREAM TO DOWNSTREAM
In this section, the supply chain of the passenger car tire shows the flow of midstream products to downstream
processing plants. We have viewed at the direction of the passenger car tire industry in Thailand by studying industrial
growth trends to determine the natural rubber production volumes consumed.
According to the data from factories in the year 2008, it was found that there were passenger car tires
entrepreneurs totaling 10 establishments. We also carried out questionnaires and interviews with those entrepreneurs in
order to know the production quantities of the passenger car tires of the country to assess the situation of the passenger
car tire production as well as to indicate the natural rubber production volumes in the industry. From the interviews with
the car tire manufacturers, we learnt that to manufacture one passenger car tire needs natural rubber products about 3.5
kilograms or about 22 percent by weight (average weight equals 16 kg per tire). This was used to calculate the natural
rubber production quantities used for passenger car tire industry in Thailand in 2008, which were approximately 73,878
tons/year as shown in Table 6.
TABLE 6
PASSENGER CAR TIRE PRODUCTION AND USAGE
QUANTITIES OF MIDSTREAM PRODUCTS IN YEAR 2008
Midstream products for passenger car tire
Passenger car tire production
industry (ton/year)2
(tires/year)1
Nakhonpathom
578,028
2,023
Samutsakorn
1,187,481
4,156
Central Saraburi
1,486,896
5,204
Patumthani
4,648,668
16,270
Samutprakarn
2,503,359
8,762
Chonburi
4,071,364
14,250
Eastern
Rayong
6,632,123
23,212
Total
21,107,920
73,878
1
Questionnaires and In-depth interviews with passenger car tire manufacturers
2
22% by weight of passenger car tires are natural rubber product (in-depth interviews with passenger car tire
manufacturers)
Region

Province

According to the study of the flow patterns and quantities of the rubber products in the supply chain, it was
found that the flow of the rubber products into the midstream processing plants varied directly with the product quantities
in the area. Hence, this may conclude that the midstream products that flow into the automobile tire industry have come
from different areas with proportions according to the quantities of the production occurred as in Table 7, which shows
the flow quantity of the natural rubber products from different areas.

TABLE 7
QUANTITY OF BLOCK RUBBER AND RIBBED SMOKED SHEET
FOR PASSENGER CAR TIRE INDUSTRY IN YEAR 2008
Quantity of block rubber and ribbed smoked
Upstream dry rubber
Proportion (%) sheet for passenger car tire industry in 2008
and
(tons)
cup-lump in 2008 (tons)1
Northeastern
138,142.59
4.90
3,618.23
Eastern
306,005.31
10.85
8,014.90
Upper Southern
39,585.23
1.40
1,036.82
Southern
2,336,895.83
82.85
61,208.05
Overall
2,820,628.96
100.00
73,878.00
1
92% of all upstream rubbers flow in the form of rubber latex and 8% is in the form of cup-lump.
90% of rubber latex supply to dry rubber industry and 10% supply to concentrated latex industry. (Department of
Trade Negotiations, 2004)
Location

To encourage the use of the midstream products in processing within the country, an increase of the production
of the passenger car tires of the country, which is considered the national product champion, is regarded as one way to
meet both the enhancement of the use of the natural rubber for domestic industry and the promotion of the growth of
Thailand product champion industry. Therefore, the quantities of the rubber to be used in the future have been predicted
to design the supply chain of the passenger car tires through a study that by the year 2016, the year that the One Million
Rai of Rubber Plantation Project in the Northeast will have been expected the most productive year.
Because of this, we use trend analysis method to forecast passenger car tire outcomes in year 2016 by using the
quantity of passenger car tire production in year 2003 to 2008 (The Office of Industrial Economics, 2009). In trend
analysis, time in year is one independent variable (t) while annual passenger car tire production (At) trend can be
calculated by using the forecasting model At= 15,469,229 + 874,031*t (Mean absolute percentage error; MAPE = 5.4).
Results of the modeling predicted that passenger car tire production increase from 21,107,920 to 27,705,663 tires in year
2016. Thus, midstream rubber products must be served to passenger car tire industry in Thailand about 96,970 tons. The
passenger car tire production forecast in year 2009 to 2016 is shown in Table 8.
TABLE 8
THE FORECAST OF PASSENGER CAR TIRE PRODUCTION
AND USAGE QUANTITY OF MIDSTREAM PRODUCTS IN YEAR 2009 TO 2016
Passenger car tire
Midstream products for passenger car tire industry
(tires)1
(tons)2
2009
21,587,446
75,556
2010
22,461,477
78,615
2011
23,335,508
81,674
2012
24,209,539
84,733
2013
25,083,570
87,792
2014
25,957,601
90,852
2015
26,831,632
93,911
2016
27,705,663
96,970
1
MAPE = 5.4
2
22% by weight of passenger car tire are natural rubber product (in-depth interviews with passenger car tire
manufacturers)
Year

In year 2016, the forecast value shows the passenger car tire production increasing around 6,597,743 tires from
year 2008. This volume consumes the midstream products around 23,092 tons.

TABLE 9
EXPECTED QUANTITY OF BLOCK RUBBER AND RIBBED
SMOKED SHEET TO PASSENGER CAR TIRE INDUSTRY IN YEAR 2016
Expected quantity of block rubber and ribbed
Upstream dry rubber
Proportion
smoked sheet for passenger car tire industry in
and
(%)
2016 (tons)
cup-lump in 2016 (tons)1
Northeastern
423,100.23
12.83
12,437.47
Eastern
456,891.11
13.85
13,430.79
Upper Southern
42,921.43
1.30
1,261.72
Southern
2,375,831.89
72.02
69,840.03
Overall
3,298,744.66
100.00
96,970.00
1
92% of all upstream rubbers flow in the form of rubber latex and 8% is in the form of cup-lump.
90% of rubber latex supply to dry rubber industry and 10% supply to concentrated latex industry. (Department of
Trade Negotiations, 2004)
Location

From Table 9, it can be seen that the quantity of the midstream products for the passenger car tire industry will
increase especially in the Northeastern area. For this reason, capacity of the downstream manufacturing should be added.
THE DIRECTION FOR PASSENGER CAR TIRE INDUSTRYS COMPETITIVENESS
After we analyze the flow from upstream to downstream of the passenger car tire industry in Thailand, the
proportions of raw material flows in each area both from upstream to midstream and midstream to downstream are
exhibited. It is found that capacity balance in the chain will be a major problem. In this section, future location and
capacity needed for the passenger car tire production is recommended. The direction for the industrys competitiveness is
also proposed by redesigning the supply chain.
CAPACITY AND LOCATION PLANNING
Midstream Plants for Block Rubber and Ribbed Smoked Sheet Production
We determine the location of the cluster for allocating the midstream manufacturing. It is expected that
investment and supports from the government should be encouraged.
Northeastern region is divided into group of provinces. In each group, collecting stations are determined. First,
the break-even point distance for transportation from upstream to midstream is calculated based on the break-even point
of the transportation cost for farmers in the Northeastern area which is 5,299.33 THB/tons. Then, variable cost and fixed
cost are considered. The distance of the break-even point is resulted in 132 kilometers (at fuel price of 28 THB/ litre)
(Maersuntea and Wongsawat, 2006). This can be interpreted that the provinces within the radius of less than 132
kilometers should be grouped as a cluster. The rubber volume in the cluster is then consolidated at a representative
province which has the largest volumes of rubber in the group. After that, seven locations are selected as locations of the
midstream plants in this region namely; Nong Khai, Leoi, Udon Thani, Mukdahan, Kalasin, Si Saket, and Burirum
provinces. Locations of the midstream plants in the Northeastern region are illustrated in Figure 4.
FIGURE 4
LOCATIONS OF MIDSTREAM PLANTS IN NORTHEASTERN REGION

These seven locations should be able to absorb the production from upstream to midstream processes. The
recommended capacities in each location are calculated based on the rubber plantation area in each cluster. This is shown
in Table 10.
TABLE 10
RECOMMENDED CAPACITY OF MIDSTREAM PLANTS IN EACH LOCATION
Production in year
Proportion
Production from One Expected capacity in year 2016
2016
(%)
Million Rai Project (tons)
(tons)2
1
(tons)
Nong Khai
66,409.87
22.71
29,683.08
96,092.95
Leoi
16,846.29
5.76
7,529.75
24,376.03
Udon Thani
30,398.20
10.40
13,587.02
43,985.22
Mukdahan
35,051.02
11.99
15,666.68
50,717.70
Kalasin
12,708.26
4.35
5,680.18
18,388.44
Si Saket
55,147.17
18.86
24,649.02
79,796.19
Burirum
75,843.91
25.94
33,899.79
109,743.70
Total
292,404.71
100.00
130,695.52
423,100.23
1
92% of all upstream rubbers flow in the form of rubber latex and 8% is in the form of cup-lump.
90% of rubber latex supply to dry rubber industry and 10% supply to concentrated latex industry. (Department of Trade
Negotiations, 2004)
2
Capacity for block rubber and ribbed smoked sheet production in 2016
Location

When the flows from the Northeastern upstream have been redesigned to midstream within the region, while
midstream capacity is provided, it is expected that the transportation cost will be reduced.
DOWNSTREAM PLANT FOR PASSENGER CAR TIRE PRODUCTION
In this section, the new location of the downstream plant is determined by using the center of gravity (CG)
method. Expected quantities of the passenger car tires which increase from 21,107,920 in 2008 to 27,705,663 tires in
2016 will be considered. It means that the new downstream plant should provide capacities about 6,597,743 tires/year.
This volume of the tires consumes the midstream products of 23,092 tons. We then consider that the total expected
quantity of the midstream products for the tire industry from the Northeastern area in year 2016 to be fed for the new
downstream plant will be 12,437.47 tons. This flow can support some outcomes from the One Million Rai Project in the
new growing area. Therefore, some of the midstream products from the Eastern area will be served to this new plant.
Moreover, location of port, passenger car industry, and tire suppliers are taken into consideration. Formula for calculating
the center of gravity (CG) is as follow:
n

X=

XiWi
i 1
n

Wi
i 1

By

X, Y
Xi, Yi
Wi

,Y=

YiWi
i 1
n

Wi
i 1

= The most appropriate location for downstream plant (center of gravity; CG)
= The location of rubber plantation area, port, passenger car industry, and tire suppliers i
= Quantity of rubber product in each area (tons)

FIGURE 5
INPUT AND OUTPUT FOR DETERMINING
THE NEW LOCATION OF PASSENGER CAR TIRE PLANT

INPUT
(by location)

Northeastern region

OUTPUT

NEW LOCATION OF
PASSENGER CAR TIRE PLANT
12,437.47 tons

10,654.54 tons

16,422.16 tons

Center-of-Gravity

Passenger car industry

5,588.98 tons

Laem Chabang Port

Eastern region
(LCB)
1,080.96 tons

- ton

Southern region
Tire suppliers
After the calculation, the result represents the area of the new downstream plant at location (X,Y) is
(815466.3881, 1554153.226). Then, we add an X,Y coordinates to the map of Thailand by using ArcGIS. It is located at
Prachinburi province in the Eastern region. The new location of the passenger car tire plant is illustrated in Figure 6.
FIGURE 6
THE NEW LOCATION OF PASSENGER CAR TIRE PLANT

Northeastern
12,437.47 tons

Passenger car industry


16,422.16 tons
Tire suppliers
1,080.96 tons
LCB port
5,588.98 tons

Eastern
10,654.54 tons

Southern
0 ton

SUPPLY CHAIN REDESIGN


After the future location and capacity were recommended, material flow in the chain should be designed to
improve the efficiency of the passenger car tire supply chain. It is expected that in the new growing area the
Northeastern region, upstream - midstream connection within the same region will result in lower transportation cost.
Capacity of the downstream manufacturing should be added to encourage the growth of the local tire industry.
Consequently, at this stage, we compare three scenarios of raw material flow in the chain of the passenger car
tire industry. Those three scenarios are as follows.

Scenario 0 (AS-IS in 2008) The current flow for passenger car tire industry with quantity of rubber products in year
2008
Scenario I (AS-IS in 2016) The current flow for passenger car tire industry with quantity of rubber products in year
2016
Scenario II (TO-BE)
The new flow for passenger car tire industry with quantity of rubber products in year 2016
The raw material quantity and the transportation cost in each scenario are presented in Table 11.
TABLE 11
PRODUCTION FLOW FOR PASSENGER CAR TIRE INDUSTRY AND TRANSPORTATION COST
Production flow for
Transportation
passenger car tire
Scenar
cost (THB/kg)2
1
industry (tons)
io
Mid UpMid Midstrea Downstrea
Upstream
Up- Mid
Down
Mid
Down
m
m
Northeaster
3,618.23
0.9
n
0
Eastern
0.34
Eastern
8,014.90 12,669.95 0.5
Eastern
Upper
and Central 1,036.82
0.8
(AS-IS
Southern
in
61,208.0
2008) Southern
Southern
61,208.05 0.5
0.65
5
Overall
73,878.00
Northeaster
12,437.4
0.5
n
7
Flow

Eastern

(AS-IS Upper
in Southern
2016)
Southern

Eastern
Eastern
and Central

13,430.7 27,129.97
9
1,261.72

Southern

69,840.0 69,840.03
3
Overall
96,970.00
Northeaster Northeast
12,437.4
12,437.47
Eastern
n
ern
7
(new
Eastern
location)
13,430.7 10,654.54
II Eastern
(2)
9
(TO- Upper
Eastern
4,037.97
BE) Southern
Eastern
(1)
1,261.72
and Central 69,840.0
Southern
Southern
69,840.03
3
Overall
96,970.00

0.5

0.34

0.8
0.5

Transportation cost
(THB)
Up- Mid

Mid Down

3,256,411
4,007,450 4,307,784
829,454

82,790,353

30,604,024 39,785,230
38,697,339 44,093,014
11,193,721
6,715,393 9,224,191
1,009,376

0.65

Total

108,458,713

34,920,014 45,396,018
53,838,504 54,620,209

0.5

0.5

6,218,734 6,218,735

0.5

0.34

6,715,393 3,622,544

0.8

0.34

1,009,376 1,372,910

0.5

0.65

34,920,014 45,396,020

105,473,726

48,863,517 56,610,209

The expected situation of the new flows is then compared with the current situation where midstream plants are
located in the Eastern area (AS-IS). It is found that the transportation cost will be decreased from 108,458,713 to
105,473,726 THB/year.
From Table 11, scenario II can be illustrated in the Table 12 with the future proportion of the rubber product
flow from upstream to downstream.

TABLE 12
PASSENGER CAR TIRE SUPPLY CHAIN AND RUBBER FLOW
Location
Northeastern
region

Upstream

Midstream

12,437.47 tons

100%

Downstream

12,437.47 tons
53.86%

13,430.79 tons

Eastern region

91.41%
8.59%

10654.54 tons

46.14%

23,092 tons
(6,597,743 tires)
New location

4037.97 tons
5.47%
94.53%

1,261.72 tons

73,878 tons
(21,107,920 tires)

69,840.03 tons

Southern region

69,840.03 tons

100%

CONCLUSION
Passenger car tire industry is identified as one of the product champions in Thailand. It is one of the highest
exporting values with high demand in the global market.
By using the supply chain concept, we found that capacity of the midstream plants in the Northeast of Thailand may
not be adequate for supporting the rapid increase of the rubber growth. This problem convinces that the midstream plants
in the Northeastern area must be increased. For this industrial sector, strong development and increasing of the plants in
this new growing area is a must.
Although, the current situation capacity could still absorb the upstream productivity, the outcomes from the
governments project (The One Million Rai Project) will overflow the available capacity midstream. The locations for the
midstream manufacturing plants in the Northeastern region are recommended. It is expected that in this new growing
area, the linkage of upstream - midstream within the same region will result in supply chain cost reduction.
In addition, the rubber flow from midstream to passenger car tire plants was analyzed. The results reveal that the
midstream products which flow into the passenger car tire industry came from different areas with proportions according
to the quantities of the upstream rubber production. To reduce the transportation cost, the passenger tire industry should
increase in consumption the raw material from the new growing area Northeastern area. The new location of passenger
car tire industry is recommended for the capacity expansion. Finally, the rubber flow in this supply chain is redesigned
for connecting and balancing the upstream rubber production to midstream plants and downstream passenger car tire
plants along the chain.
ACKNOWLEDGEMENTS
The authors are grateful to the generous support from Thailand Research Fund (TRF).

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