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De La Salle University

College of Business
Business Nanagement Department
Naster of Business Administration Program

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Case Number No. 8:
Service Parts Operations



!n Partial Fulfillment of the Requirements for the Subject
NSC602N- Supply Chain Nanagement


Submitted by:
CROUP 2

CASTAEDA, MARY CHERYL
DE LEON, GEISHA
DUEAS, ERWIN
MORAL, KATHLEEN
WONGCHUKING, LIZSA

Submitted to:
Professor Willy Cuason


October 1S, 2011


Ceneral Notors, Brazil
Case 8: Service Parts for Operations

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'able of Contents


'OP!C
Page
No.
Background !nformation 3
Problem Statement 3
Objective 3
ACA 4
Answer to Case Questions 6
Recommendation 7




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Case 8: Service Parts for Operations

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I 8ackground Informat|on
1here are 472 CM dealers nlne CM auLhorlzed garages and 10 CM parLs dlsLrlbuLers ln
8razll for a LoLal of 491 servlce parLs polnLs of sale CurrenLly CM has approxlmaLely
73000 parL numbers wlLh 700 hlghLurnover parLs supporLlng 20 vehlcle plaLforms 1he
relaLlonshlp of CM 8razll and CM dealers has always been lndependenL 1he supply chaln
neLworks Lhe nodes of Lhe neLwork are managed separaLely
@ 8u||w|p Lffct
Small varlaLlons ln demand downsLream caused lncreaslngly large varlaLlons Loward Lhe
upsLream porLlon of Lhe neLwork ls Lhe bullwhlp effecL 1he demand aL Lhe CM dlsLrlbuLlon
cenLer ls dependenL on Lhe lnvenLory managemenL sysLems and lnvenLory pollcles of Lhe
dealers 1he resulL ls severe lnsLablllLy ln producLlon programs for Lhe companles upsLream
whlch negaLlvely affecL cosL efflclencles ln Lhe supply chaln lanLs are forced Lo work
overLlme when Lhe bullwhlp goes up and Lhen face ldelness when Lhe bullwhlp goes down
1he orlglnal parL boughL from Lhe dealer's counLer cosLs beLween 30100 more Lhan a
slmllar parL boughL on Lhe gray markeL
@ GM So|ut|on Auto G|ro
CM declded Lo launch a naLlonal lnlLlaLlve Lo subsLanLlally change Lhe way lL managed lLs
supply neLwork called AuLo Clro
VMI systm
CM aggregaLes Lhe demand of 472 dealers hence CM assumes Lhe responslblllLy of
managlng lnvenLorles Lach dealer has abouL 6000 acLlve lnvenLory lLems wlLh
approxlmaLely 2300 belng purchased per monLh LoglsLlcs can be achleved lf dellverles Lo
several dealers share Lhe LransporLaLlon cosL uslng a mllkrun Lype of rouLlng ln whlch one
mode of LransporLaLlon makes perlodlc and coordlnaLed dellverles Lo a group of dealers
uue Lo Lhe pasL relaLlonshlp of CM pushlng parLs downsLream ln Lhe chaln Lhere ls
reslsLance 1he followlng are measures Laken
1) CM granLs proLecLlon agalnsL parLs obsolescence and parL sLockouLs
2) CM provldes an lnLerneLbased parLs locaLor"
3) 8eplenlshmenL ls done Lwlce Lhree Llmes or flve Llmes per week dependlng on dealers
demand volume
4) A perlodlc revlew lnvenLory managemenL sysLem ls used




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Case 8: Service Parts for Operations

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II Statmnt of t rob|m

Pow wlll CM lmplemenL Lhe AuLoClro wlLh Lhe leasL posslble reslsLance ln order Lo have a
smooLh relaLlonshlp wlLh lLs dealers?
III b[ct|vs

1 1o be able Lo lmmedlaLely lmplemenL Lhe AuLoClro
2 1o have a beLLer relaLlonshlp beLween CM 8razll and lLs dealers
3 1o be able Lo propose a more effecLlve and cosL efflclenL sysLem ln Lhe operaLlon

IV A|trnat|v Courss of Act|on
n order Lo aLLaln Lhe ob[ecLlves alLernaLlve courses of acLlon musL be assessed Lo come up
wlLh Lhe mosL effecLlve and efflclenL sysLem LhaL musL be uLlllzed L ls besL Lo welgh Lhe
advanLages and dlsadvanLages of Lhe opLlons lald Lo ulLlmaLely declde on whlch plan of
acLlon musL Lhe company manlfesL
AcA No1 lotcbose l1 ooJ telecommoolcotloos loftosttoctote
CM's proposal of lmplemenLlng Lhe AuLoClro falls Lo conslder LhaL some delears lack cash ln
oder Lo lnvesL ln Lhe necessary 1 and LelecommunlcaLlons lnfrasLrucLure 1hls ls also caplLal
lnLenslve as lL needs anLennas large Wlndows n1 server and eLc uealers usually do noL
have cash on hand due Lo Lhe facL LhaL Lhere are 3040 of obsoleLe lnvenLory ln Lhe
warehouse
8Cs
O AuLoClro wlll be lmplemenLed fasLer
O uealers wlll feel LhaL Lhey are valued and parL of CM
O Lase Lhe relaLlonshlp of CM 8razll and dealers
O SysLems are cenLrallzed
O 8educe Lhe obsoleLe lnvenLory ln Lhe warehouse
CCns
O 1hls wlll be caplLal lnLenslve for CM
O CoordlnaLlon and cooperaLlon wlLh Lhe dealers ls necessary


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Case 8: Service Parts for Operations

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AcA No 2 lmplemeot o ceottollzeJ loveototy moooqemeot systems
1here are 120 dlfferenL lnvenLory managemenL sysLems ln Lhe neLwork Lach of Lhese
would generaLe daLa ln a dlfferenL and noncompaLlble formaL CM should also
lmplemenL a cenLrallzed lnvenLory managemenL sysLem ln order Lo have unlformlLy
8Cs
O uaLa ls more accuraLe and rellable
O 1here wlll be no excess of lnvenLory LhaL needs Lo be sLored Lhus reduclng
lnvenLory levels and cosL of sLorage
O CM can provlde easlly provlde a forecasL and provlde a more accuraLe forecasL
CCns
O 8eslsLance Lo adapL Lo Lhls neLwork
O no sLocks Lo fall back on ln case of rush or emergency orders
O More cosLly
AcA No J cooJoct 5emloots ooJ wotksbop
CM ls Lrylng Lo resolve a 73 year confllcLlng relaLlonshlp wlLh lLs dealers n order Lo geL
Lhelr cooperaLlon and commlLmenL would be a long process LhaL would Lake Llme CM
should be able Lo creaLe a new culLure Lo wln Lhelr dealers 1he group proposes for
Lhem Lo undergo semlnars and workshops Lo have a beLLer undersLandlng of Lhe new
sysLems and processes
8Cs
O CM would be able Lo geL Lhelr sLrong commlLmenL from lLs Lop owners and
managers
O More knowledgeable abouL CM's sysLems
O 8eLLer relaLlonshlp wlLh CM 8razll and lLs dealers
CCns
O 1lme cosLly
O CM would lncur more cosL as Lhey would shoulder Lhe semlnar and workshop


Ceneral Notors, Brazil
Case 8: Service Parts for Operations

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V Aras for Cons|drat|on (Answr to ust|ons for D|scuss|on)
1 CM xpects o Jtostlc teJoctloo lo tbe levels of sofety stocks oeeJeJ ot tbe polots of sole ooJ
lo otbet ooJes of tbe sopply oetwotk ooJ slmoltooeoosly expects oo locteose lo tbe potts
ovolloblllty ot eocb of tbe polots of sole xplolo osloq o cbotoctetlstlc of tbe Aoto Clto
moJel tbe totlooole bebloJ tbese CM expectotloos
CM's expecLaLlon ls founded on AuLoClro SysLem's lmprovemenL Lhe demand forecasL
accuracy due Lo Lhree reasons

a beLLer pro[ecLlon models are used Lhan Lhe currenL ones used by Lhe polnLs of sales
b more careful LreaLmenL of Lhe Llme serles eg Lhe conslderaLlon of Lhe losL sales
and
c Lhe recognlLlon of aggregaLed paLLerns of demand such as naLlonal or reglonal
Lrends

AnoLher aspecL of AuLoC8C expecLed Lo help lncrease Lhe avallablllLy of parLs ls Lhe
parLs locaLor" L ls responslble for Lhe lncrease percenLage polnL ln Lhe avallablllLy 1hey
have 94 lmmedlaLe avallablllLy aL Lhe counLer and 93 same day avallablllLy (parLs locaLed
by Lhe potts locotot)

1here ls also a much hlgher frequency of replenlshmenL Lhus cycle sLocks are also expecLed
Lo fall drasLlcally aL Lhe polnLs of sale

2 xplolo bow tbe Aoto Clto 5ystem coo belp mltlqote tbe bollwblp effect lo tbe CM 8tozll
spote potts sopply cbolo
AuLoC8C coordlnaLes supply and demand aL Lhe polnL of sale reduclng Lhe bullwhlp effecL
upsLream ln Lhe neLwork 1herefore safeLy sLocks ln Lhe lnvenLory polnLs upsLream ln Lhe
neLwork are expecLed Lo fall and planLs upsLream ln Lhe neLwork are expecLed Lo have Lhelr
producLlon programs more sLable Lherefore wlLh reduced cosLs of program changes
ldleness and overLlme caused prevlously by Lhe whlpplng of Lhe demand percelved
upsLream

J 8efote AotoClto teseotcb cooJocteJ by CM sboweJ tbot otoooJ 80 of tbe wotk tlme of o
Jeolet potts moooqet wos speot moooqloq loveotloos ooJ mokloq Jeclsloos oboot
tepleolsbmeot wltb AotoClto ootomotloq o qteot pott of tbls bow Jo yoo see tbe oew tole
of tbe potts moooqet ot tbe Jeolets? wbot sboolJ tbey Jo lf ooytbloq to moke sote tbot
tbey ote ptepoteJ fot tbls oew tole?

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Case 8: Service Parts for Operations

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CM expecLs LhaL Lhe parLs managers wlll spend Lhelr Llme dolng someLhlng more such as
developlng cusLomer relaLlonshlps searchlng for new markeL opporLunlLles and acLually
selllng CM can Lurn Lhe parLs managers from wholesale buyers" lnLo reLall salespersons
and markeLeers" n order Lo prepare Lhem for Lhls CM can provlde Lhem wlLh Lralnlng ln
markeLlng and sales ln order LhaL Lhey can beLLer face Lhls new challenge ln Lhelr careers
1hls way CM expecLs Lo lncrease subsLanLlally Lhelr markeL share ln Lhe CM servlce parLs
overall markeL

VI Conc|us|on and kcommndat|on
8ased on Lhe ob[ecLlves seL Lhe group recommends ACA #2 whlch ls Lo lmplemenL a
cenLrallzed lnvenLory managemenL sysLems f CM can convlnce lLs dealers Lo lmplemenL
Lhls ACA lL would generaLe more daLa and Lhe formaL wlll be more unlform 8y
accompllshlng Lhls we are able Lo meeL Lhe ob[ecLlve LhaL AuLoClro wlll be lmplemenLed
Moreover Lhe relaLlonshlp of CM 8razll and lLs dealers would be beLLer
8eneflLs of lmplemenLlng Lhls ACA ls LhaL Lhe daLa LhaL ls provlded by dealers ls accuraLe and
rellable Pavlng Lhls valuable lnformaLlon CM would be able Lo seL reasonable and
aLLalnable forecasLs Moreover cosL would go down slnce Lhere wlll be a reducLlon of
lnvenLory levels and cosL of sLorage
VII arn|ngs

% L ls lmperaLlve Lo geL Lhe commlLmenL and cooperaLlon of Lhese dealers Lo easlly
lmplemenL a new sysLem
% A cenLrallzed lnvenLory managemenL sysLems would provlde accuraLe and rellable daLa
% AuLoClro should be able Lo generaLe an accuraLe forecasL because lL ls a reference Lo
sales
% SLocks LhaL wlll be replenlshed should be aL Lhe rlghL amounL or lL wlll yleld Lo an
obsoleLe lnvenLory ln Lhe warehouse