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Need and Challenges in Minimizing Wastes in a SME Automotive Firm: Case Study of Janus Auto*

CASE STUDY, OPERATIONS MANAGEMENT
ET Cases - FLAME, 14 Pages
AUTHOR(S) : Dr. Mridula Goel- Associate Professor, Yash Sharma- Bachelor of Engineering - BITS Pilani K.K. Birla Goa Campus

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Need and Challenges in Minimizing Wastes in a SME Automotive Firm: Case Study of Janus Auto

 

Efficient supply chain management and adoption of best practices as laid out by by well-known global companies like Toyota are integral for modern businesses to be competitive and profitable. Standardised procedures follow stipulated guidelines and large multinational companies can comfortably adopt these with ease as they have access to adequate resources for implementation.

However, for smaller companies resources are limited. The company is well aware that adoption of best practices will enhance efficiency in the long run and it is often forced to make choices related to optimizing initial resource deployment, incorporating new production processes and practices, establishing cost effective network of suppliers and agents, etc.

One such MNC ‘Janus Auto’ that faces problems faced by firms in similar segments. What are the tradeoffs made by them to make sure they are able to minimize the 7 wastes as defined by the Toyota Production System? For instance we observe in this case that the unavailability of a full automated production line in their facility results in ‘Motion’, with ‘Over-Processing’. However, they minimize the transportation costs by accepting larger batch size and store products at their own facility.

Successful supply chains can significantly benefit the competitiveness in firms. The automobile and the automotive sector have been two of those sectors which have benefited a lot from the advancements in supply chain management.............................

Supply Chain Challenges in India’s Automotive Industry

The automotive industry has proved to be a major driver of growth in the global economy. The sector involves high level of engineering and demand arises from the ‘pull’ of the automobile industry. The marketing and sales teams usually project a calculated guess of the market demand and then using the information and assessment provided by the design, engineering, financial and manufacturing departments the production volumes are forecast.

In India as well the automotive sector has seen an impressive growth in the last three decades after economic liberalization. The automotive manufacturing companies in the world are willing to establish both manufacturing and R&D plants in India due to a large pool of cheap and easily available skilled and unskilled workers, low production costs, better design processes and the country’s status as an emerging market..............

Janus Auto

Janus Auto is a manufacturer and supplier of different types of Automotive Spare Parts. Being in the automotive manufacturing business for about 40 years now, it has a wide product range comprising of, Automotive Withdrawal Plates, Automotive Brake Linings and Brake Shoes, Automotive Disc Pads, Industrial Spare Parts, Automotive Clutch Facings and Precision Machined Components. Founded by a visionary Late Mr. Y. N Sharma in 1987, Janus Auto is now an ISO: 9001:2008 Company, accredited with the Det Norske Veritas, Netherlands. The company has been growing at a considerable pace and has been successful in carving a niche position in the Indian auto component sector.................

Production Processes in Janus Auto

All the Janus products can be classified on the basis of their frequency and interval of production. Some of them are required at frequent intervals and are produced regularly and continuously (Exhibit V).

These also include those products for which Janus Auto is itself an Original Equipment Manufacturer. For instance various kinds of Withdrawal plates and Levers for Ashok Leyland are manufactured by Janus Auto. Products like these are manufactured regularly. Some companies make products only after receiving orders from their customers while others plan out in advance and either store them in inventory or sell to dealers where customers buy at their discretion..............

Production Planning and Scheduling in Janus Auto

Apart from Chase and Level, there areave several more strategies in Production Planning & Scheduling. The aggregate plan is based on targeted sales forecasts, production levels, inventory levels, and customer backlogs. The schedule is intended to satisfy the forecasted demand at a minimum cost, factoring in the aforementioned levels.

Some of these strategies are:..................

Demand Forecasting as a Critical factor in Supply Chain Management

Janus Auto, a small-medium manufacturing industry and like other players in that segment uses a mix of Qualitative and Time series methods of demand forecasting. Experienced judgment of the management and senior personnel guides demand forecasts in response to changes in external macroeconomic factors like interest rates and economic slowdown. Being a supplier and OEM for big giants of the industry since many years, the company follows the trend based on historical data, which also, guides how much inventory should be kept. However, proper intimation by the customer a month before also helps the company to reschedule their production which helps in reallocating the resources and capital...........

Outsourcing to reduce waste of Waiting

Outsourcing is another aspect of supply chain management which one cannot miss. It is actually contracting out of a business process to an outside party. This is mainly done so as to reduce costs and time. This increases flexibility and allows the company to focus on their mainstream and core competencies. Janus Auto also, outsources one of the processes.............

Role of Procurement and Sourcing in Supply Chain

Procurement is the act of acquiring, buying goods, services or works from an external source. And here we are referring to the raw materials procured for the production of various automotive parts. Procurement is the business management function that ensures identification, sourcing, access and management of the external resources that an organization needs or may need to fulfill its strategic objectives6. Purchasing decisions include several factors which are integral to an efficient supply chain such as transportation, handling, quality, marginal benefit, and the most important price...........

Inventory Management

Another major Muda arises due to Inventories, goods awaiting further processing or consumption. As Janus uses a pull strategy, it requires fewer inventories as compared to a push one. Reliable suppliers and small batch sizes help the company to keep fewer inventories. Also, due to less storage space and the costs of new space force the company to keep low inventory. On the other hand, following a level (regular) production for some products Janus does stock some inventory. The stock is acceptable to the company until an extra storage space is required..............

Assignment Questions
I. What is the role of demand forecasting in inventory management?
II. .................

Teaching Note Preview

Need and Challenges in Minimizing Wastes in a SME Automotive Firm: Case Study of Janus Auto

 

Synopsis

Supply Chain Management (SCM) in today’s globalized world is a key to business efficiency. As logistics have become complex and networks grown across space, SCM became important for many industries, especially, for the automobile and related automotive industries. The well-known Toyota Production System is a bench mark in this area. It chalks out 7 major wastes called ‘Mudas’ which a company must focus on and try to minimize in order to have an efficient supply chain.

The concept focuses on eliminating non-value added activities or “waste” from the viewpoint of the customer and has been around in one form or another for many years, at least in manufacturing. It is only recently from 1990s that it is being identified as Lean and applied to the supply chain & logistics management area.

One of the key steps in Lean and TPS is the identification of which steps add value and which do not. The Toyota Production System talks about three types of deviation from optimal allocation of resources (Muda, Mura, Muri). They adopted these three words beginning with the prefix ‘mu’ as in Japan they are widely recognized as a campaign for waste improvement.

However, every company has its own priorities of which of these wastes will be considered as most important and be tackled with priority. All big companies are directed to make arrangements that make sure that all the wastes are being looked after. But a SME supplier, even to a big multinational company, may not always be capable enough to minimize all the wastes simultaneously due its limited resources. Owing to this, many affordable compromises have to be made by an SME, depending upon the sourcing company requirements and the nature and structure of the supplier firm. These compromises may mean that all the wastes are not minimized but it does not necessarily mean that it does not fulfill the profit function for the company.

This case study focuses on one such company ‘Janus Auto’ and finds out the problems faced by players in this segment. Janus Auto introduces itself as a Manufacturer and supplier of different types of Automotive Spare Parts, being in the automotive manufacturing business for about 40 years now................

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Abstract

A company’s success in the market is often due to its efficient management of Supply Chain practices and logistics. International best practices like Just in Time and Lean Manufacturing have become integral in achieving profitability; their adoption in the automobile and automotive sectors is common. Standard guidelines are stipulated and large multinational companies in these sectors have the required resources to easily adopt and implement these systems.

However, for many SMEs resources are limited. Thus, while MNCs are aware that adoption of best practices will enhance efficiency in the long run; they have to make a choice about initial resource deployment, incorporate new production processes and practices and evaluate the costs of accessing an efficient network of suppliers and agents.

This case study focuses on one such SME ‘Janus Auto’ and finds out the problems faced by players in this segment. What are the affordable tradeoffs made by the company to make sure they are able to minimize the 7 wastes mentioned by Toyota Production System? How does Janus Auto manage to prioritize between the two critical tradeoffs of Inventory and Transportation?

The unavailability of a full automated production line in its facility results in ‘Motion’ and ‘Over-Processing’ being at the bottom of its priority list.

Janus Auto is able to efficiently minimize the transportation costs by accepting larger batch sizes and store products at its own facility, thereby streamlining the inventory costs. It is observed that motion and over-processing does not create significant inefficiencies in its supply chain. However, there is obviously scope for further improvement in the systems to minimize costs and gain efficiency.



Pedagogical Objectives

The objectives of this case is to understand:

  • Whether small supplier companies in the automotive sector of India are able to focus on all the 7 wastes or Mudas which are mentioned in the well-known Toyota Production System.
  • How can these companies tackle the problem of tradeoffs between any two wastes or Mudas?
  • Can the tradeoff decisions by small supplier company maintain efficiency in the supply chain?
  • Will the compromises or tradeoffs made by these types of companies in their production systems be considered as unnecessary and ‘wastes’?
  • Does the presence of one or more of the ‘Mudas’ always imply lower profitability for a company?
  • What is the role of accurate demand forecasting in efficient supply chain management?

Case Positioning and Setting

  • For MBA teaching of courses on Supply Chain Management or Operations management
  • For BE Mechanical Engineering curriculum on Supply Chain Management


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