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CHRYSLER PARTS – SPEAKERS AND STEREOS 14

Chrysler Parts: Speakers and Stereos

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Running head: CHRYSLER PARTS – SPEAKERS AND STEREOS 1

Executive Summary

This paper proposes to research about the company’s supply chain strategy, with the focus placed on the production of its stereo and speaker systems. It is noteworthy that, since 1987, Chrysler Company has been using the Dynasty series of speakers and stereo. These parts are acquired and assembled from outside the country. Precisely pointing out, they are imported from Dynasty Automobile Sound Systems manufacturers in Mexico, before being installed into the Chrysler vehicles and sold to the American population. Various factors play a role in the manufacture of these products from outside the country, including the low cost of production, free market trade between US and Mexico, as well as the short shipping distance between the two countries (Hill, 2007). This paper analyzes the supply chain strategy that the company applies in relation to global logistics management. More specifically, the paper will delve deep at three core components of supply chain that are discussed in three sections. The first section briefly outlines the current supply chain that is in use by the company followed by an analysis of this chain. The third section is a discussion of whether the supply chain supports the business objectives of the company.

Chrysler Parts: Speakers and Stereos
Business Plan

Chrysler Limited Liability Company is one of the leading automobile manufacturers in the United Sates, with operations in various parts of the world, including Europe, Mexico, North America and Egypt in Africa. The company has had a long mixed history of failure and success since it began its operations in 1925 under its founder, Walter Chrysler. It was not after being sold to one corporation after the other and nearing total bankruptcy and eventual collapse that the company was revamped by donations from various external players, including the government of the US which contributed up to $8 billion to rescue the company. It was in the same year that the company was renamed to Chrysler Group LLC after, which it registered a remarkable improvement in operations. As it is, the company is currently under foreign ownership, with the majority of shares being owned by Fiat of Italy (Reich & Donahue, 2005).

Recently, there has been an increased interest of marketing and global logistics researchers on the operations of Chrysler LLC automobile manufacturers. However, very little literature that fully examines this company’s operations interested groups can rely upon as a reference exists. To fill the information gap, this paper seeks to analyze the supply chain of the company against its primary objectives. This report succinctly outlines some of the core operatives of the business that will help the reader to find out how the company meets its set objectives and goals using its supply chain in the processing of stereo speakers that is used in all its vehicles. This is based on the knowledge that, while the company operates in USA, with a larger majority of its market being in North America, its stereo and automobile speakers are imported from Mexico because of the reduced operational costs involved.

Business Objectives

The company’s main objective is to create a worldwide phenomenon by expanding its operations in regions in which it does not have branches, or those in which it has minimal impact, including Europe and the Middle East. Another key objective that the company has is to increase its involvement in environmental sustenance programs and community development projects by supporting and engaging in environmental friendly manufacturing procedures and charity programs (Krugman, 2004). Another important objective for the company is to make sure it has good internal relationships with the government of the source country, which is Mexico as well as foreign relationships with Germany, which is one of the target countries.

PEST Analysis of Supplier Country
Political Status

The home country of the suppliers for the speaker and stereo system is Mexico, which is located to the south of the United States of America, in the North America. Various political factors affect trade between companies within Mexico and those carrying out international trade between it and other countries. According to .Edward (2013), the factors include government legislations on issues of taxes, labor, environment, trades and tariff rates. The country is currently headed by Pena Nieto, whose presidency is based on democracy and representation. The country is structured in a liberal political framework where foreign direct investments are permissible.

Like the United States and a few other courtiers, Mexico is made up of thirty-one (31) states each of which has its unique constitution. However, all of these states are harmonized and brought together under the federal government, although each state can independently create its laws that govern all legal operations in the land. These factors make Mexico an ideal place for Chrysler to base its Speaker and stereo processing supplies before shipping them to the North where they are finally sold (Edward, 2013).

Economic Status

Economically, Krugman (2004) argues that the country has reported an increased amount of debts over the last few years, with public reports revealing that the gap increased from 1% to 1.5% between 2007/8, which translated to approximately one billion dollars. Among other factors, issues such as reduced earnings from oil, lower financial remittance from Mexicans in the Diaspora, reduction in tourists as well as poor credit and investment returns were blamed for the increased debt (Krugman, 2004). In 2009, the country was hit by an outbreak of flu and increased illegal drug abuse, which saw the economy catapult downwards by nearly 6%. Together with US and Canada, it is a member of OECD and NAFTA. Mexico has a notable number of free trade contracts between it and other nations, from both South America and the rest of the world, including Japan and Guatemala. The modest Mexican economy, compounded with the free trade agreements between it and the US reduces the cost of operations for Chrysler, giving it a cost advantage over manufacturing in the US (.Edward, 2013).

Social Status

The country boasts of a large group of citizens who fall in the age bracket of between 18 and 65, who can still be considered actively productive since only about 6% of its entire population is over 65 (Krugman, 2004). In the last one and a half decade, there has been a rapid increase in the number of students in the country, forcing the government to formulate means by which it can accommodate its student population. In the recent past, Mexico has been recognized to offer high quality education in its institutions of higher learning. In terms of health, the country is split into two social divides, with the North being predisposed to better and more efficient healthcare systems than the South. This is because the North is mostly comprised of the elite whereas the South is majorly inhabited by poverty-stricken citizens. This means that, not only does Chrysler speaker manufacturing subsidiary have an advantage regarding cheap labor, but it also has a potential team of high skilled workers, which can be tapped from the emerging fresh college leavers (.Edward, 2013).

Moreover, Mexico had a low rate of unemployment of four percent in comparison to its counterparts like Brazil and others, which registered over eight percent rate. One of the major challenges for Mexico is dealing with illegal immigration, most of which is related to its citizens illegal entry into the US. The government of Mexico has further initialed plans for universal healthcare provision in which Mexicans will not have to pay for minor medical procedures (Krugman, 2004). Apart from increasing the medical efficiency provision to the poor communities, this program will also allow the country to have a national health standard to all its citizens. The unemployment levels are still high enough to make it possible for the Speaker manufacturer to find labor at a less competitive job market, thereby reducing the cost of employment (Edward, 2013).

Technology

Though the country’s technology is poor, there is an increasing growth of technology in Mexico, in partnership with other foreign countries like India as well as private corporations. On the other hand, reports have indicated that the government does not show much support to various sectors of technology, of note being the disregarded biotechnological sector (Krugman, 2004). One of the factors that have facilitated the rapid technological developments is its available and ready labor that is relatively cheap compared to the US. Whereas most developed countries are in charge of processing the detailed components of engineering equipments, assembling of these parts has been sourced to developing nations like Mexico, India and China, among others.

Moreover, there is increased government support for student education, especially for those enrolling into engineering classes, which is another motivating factor for technology development. The future of technology in Mexico is promising, which means that Chrysler can count on having improved sound systems in the near future, although what they are using currently is still of superior quality (Edward, 2013).

SWOT Analysis of the company
Strengths

Some of the most notable strengths of the company include the exceptional performance of the High fleet in the market, with a record of over one million sales per year. Secondly, the Chrysler brand is highly regarded by its target customers in the North, especially for the V – 8 Engines and the minivans. In addition, over the past four years, the company’s HR and general management has regained focus, thereby managing to rise from bankruptcy level to profit-making level. Since its inception, one of the greatest strengths of Chrysler has been its captivating automobile sound systems, which have attracted people, especially the market in North America such as US and Canada. All these factors are partly related to the fact that the company imports its high quality Stereo Systems from the Mexican manufacturer at reduced operations cost, making it possible to offer competitive prices.

Weaknesses

The company faces three major weaknesses that include lack of complete appreciation for other brands of cars manufactured by the company due to high preference for the high fleets. In addition, the company nearly collapsed because of mismanagement and some of the managers responsible for the previous performance are still retained. This raises questions on the credibility of management thereby soiling the otherwise good name of the new Chrysler team of managers, which may scare away investors. Lastly, the company’s market is continuously growing smaller compared to its size in the previous years, which is attributed to a rapidly growing automobile industry. This growth provides customers with alternate options, making the emerging stiff competition a reality, which Chrysler must deal with in the most effective manner (Dyer, 2006).

Opportunities

There are several opportunities that lie in the grasp of the company, as long as it is ready to apply a few adjustments in its management and policy strategy. Firstly, the company has shown that it has the ability to appeal to its customers because of its high quality brands in addition to the lucrative speaker and stereo systems installed in its vehicles. Since most competitors may have brands that are equally as impressive as theirs are, then their superb speaker systems give them the distinction of difference. Secondly, the company has shown that ever since the ownership and management of the company was changed, there has been numerous productive advances. This means there is a better opportunity for the company to grow in terms of management to a higher level than it is currently (Dyer, 2006).

Threats

One of the company’s biggest threats is the fact that it does not manufacture small cars, as it is known to produce only big vehicles unlike most of its rival counterparts like Mercedes Benz. This is seen as a threat because it offers the company a smaller market compared to what it could have otherwise achieved were it not for the narrowed focus of the company limited to the production of larger vehicles. Another imminent threat is the declining economy of the US, which has exposed the company’s major customers to reduced spending. This has led to the reduction in number of vehicle sales as consumers are now opting for smaller vehicles that utilize minimal fuels, which the company does not manufacture. In addition, apart from the parts that are imported from Mexico, the company has very little other businesses that are internationally based, making them to be confined to a small trading bloc. Finally, over the recent past, there has been a rapid increase in the cost of production of Automobile speakers and stereo, which is bound to impact negatively on Chrysler’s profitability (Levin, 2013).

Chrysler Supply chain

The supply chain of Chrysler is detailed and contains the documentation of all the processes that occurs as goods are obtained from the suppliers and utilized in the company. The following section provides a preview of the supply chain of the Chrysler in relation to its speakers and stereos acquired from Dynasty in Mexico. In 2010, the state of California made legal a law, which stipulates that no company shall encourage any transactions that promotes or supports trafficking of workers or slavery (Fitzgerald, 2008). In addition, the Californian courts passed a mandate to the effect that all companies, which participate in business in that jurisdiction, must provide publications that show their operations. In this regard, Chrysler produced papers showing their disclosure and the fact that their operations with Dynasty Stereo and speakers manufacturing company is within the low (Fitzgerald, 2008).

In their supply chain management policy, the company has succinctly stated that they completely do not tolerate any labor abuses, including the use of children or forceful labor in their organization or with their suppliers. In their mandate and ethics code, they have further stated that, as one of the requirements for Dynasty, there must be a deal that the law will be obeyed and that all employees shall be treated with respect to their human value.

The supply chain management at Chrysler also organizes regular review of the status of their suppliers’ working environment, just making sure that there is no abuse of authority to force employees into working under deplorable conditions. Dynasty of Mexico fills routine checkup forms, which shows it sticks to the company supplier’s agreements of enduring ethical work standards are maintained in its organization structure. In fact, the company has also recently proposed a possible use of audited reports in future for assessing this important ethical standard in their suppliers’ organizations (Brown, 2011).

In addition to the policies and proposed auditing of the assessments, the company has also ensured that, since 2009, its Audio products supplier, Dynasty Speakers and Stereo Manufacturers alongside other suppliers have abuse-free orders. This to say that the style of writing and wording in all orders made by Chrysler do not show any signs of child or forced working conditions to workers. Such requirement was sealed between Chrysler and Dynasty when the two signed certificates of compliance with each other (Brenna, 2007).

Supply chain model

Supply chain models for planning and execution in Chrysler

In Chrysler Company, there are two levels of tactical planning performed by two mixed integer programming (MIP) models. Tactical planning model at the first level produces a monthly master production schedule and a stock transfer plan over the 6-month horizon. Tactical planning model at the second level produces a detailed machine schedule over the 12-week horizon.

The purpose of the simulation model is to replicate the operating environment in which the plans recommended by the MIP models are to be executed. During the execution of the plans, demand, lead-time and supply uncertainties are introduced. As a result, at the end of the planning period, the stock balances vary from what was planned, and there may be extra inventory or orders that were not fulfilled due to shortages. The differences that appear at the end of the planning period need to be input into the next planning cycle. Thus, models interact continually to model a supply chain environment where plans are made, executed and then updated. The details of the planning models and their interaction with the simulation model are described below in detail.

Interaction of planning and simulation models

(1) The first-level MIP model creates a production and stock transfer plan over a 6-month horizon. Inputs to the model are the demand forecast, pending orders, beginning inventory levels, and shipments-in-transit. The outputs are the monthly production quantities, planned backorder quantities and ending inventory levels for each component in each plant, and the stock transfer quantities between the two plants, Chrysler and with departure and arrival dates within the next 6 months.

(2) The second-level MIP model optimizes the production schedule. In the first week of a month, production targets are the outputs of Step 1 for that particular month. In the second, third, and fourth weeks of a month, production requirements are the outputs of the previous week’s simulation run. The model then generates the production schedule for the next 12 weeks

Training

Chrysler requires that Dynasty provides at least basic training for its workers that employees are all aware of their duties as employees and the needs for them to ensure that their work environment is favorable. This requirement cuts across the board for all companies that supply products to Chrysler as a way of ensuring that the company’s engagement with other companies sticks to the company’s policy of a non-enforced labor and no instance of child labor as well. In addition to making employees more assertive of their individual rights, this move also makes them able to determine the risky behaviors the supplier organizations might be planning to engage in Brenna, M., (2007).

In line with the above paragraph, the company has also made efforts in its supply chain department to get in touch with interested NGOs with which it could work towards its global mandate. That is, to make sure that all employees around the globe are taught about civil rights and employee rights, including the right of an employee to demand that their work environment is clean and tolerable. This quest makes the company to focus on fulfilling other details of its organizational objective – that of providing support to help in community development and environment friendly manufacturing procedures (Brenna, 2007).

Apart from direct involvement with the welfare of the consumers, Chrysler has also invested some of its Supply Chain Management budget to support suppliers’ training. As one of its suppliers, Chrysler invited Dynasty’s management to attend the mandatory training program that it sponsors together with other companies. Such training is especially recommended to Dynasty because this supplier is known to deal with risky manufacturing tools, such as regular interaction with electric power during the design of electronics. Another blatant fact is that every session attended must yield thoughts for the suppliers to pass down their employees regarding latest employment issues (Brenna, M., (2007).

End User Requirement

The supply chain has a mandate of ensuring that the end users receive as minimal costs of products as possible, while at the same time, enjoying the provision of high quality products. Another additional requirement is that views of the consumers are added during the processing of stereos and speakers at Dynasty so that there are no extra costs due to last minute changes in design. Similarly, the supply chain enacted a project dubbed SCORE in which it targeted to save up to $350 million, most of which was to be used in lowering the cost of products for the end consumers. This could be achieved because the company recently announced that, in pursuit of its objective of providing high quality products at a cheaper cost, next year it will offer its latest brands at a cheaper price than the retail price for this year. The proposed reduction is up to 1%, which is a significant reduction in the ever-skyrocketing prices of the automobile industry (Brenna, 2007).

Supply Management Summary

This generally means how the process of purchasing items that a company needs is organized to fit within the organizational objectives. The supply management of Chrysler is focused primarily on three important areas highlighted below, that offer a slight difference to the composition of the supply chain. Firstly, the supply management initiates the dialog between the company and suppliers to settle contracts, services and final goods. Secondly, the supply management is in charge of the newest technology that the company uses to facilitate the process of purchase of company’s products (Martin, 2006). Finally, this management also controls the type of relationship that the company shall have with its suppliers. In summary, the supply management is responsible for overseeing all operations related to the company and its various suppliers, which include risk evasion and cost savings.

References

.Edward, G. (2013). A PEST analysis of Mexico. Journal of Supply Management and supply chain, 34(45), 233-254.

Brenna, M. (2007). “Auto Manufacturer Designing Data Pipelines to Suppliers,” Sacramento Bee, McClatchy Newspapers.

Brown, E. (2011). “The Push to Streamline Supply Chains,” Fortune.

Dyer, J. H. (2006). “How Chrysler Created an American Keiretsu.” Harvard Business Review pp. 2-11.

Fitzgerald, K. R. (2008). “Show Suppliers the Money,” Purchasing. pp. 40-47.

Flint, J. (2012). “Rediscovering Chrysler,” Forbes, pp. 83-87.

Hill, C. (2007). International Business: Competing in the Global Marketplace, 2nd edition. Boston, Massachusetts: Richard D. Irwin publishers.

Krugman, P. (2004). The Age of Diminished Expectations. Cambridge, Massachusetts: The MIT Press.

Levin, D.P., (2013). Behind the Wheel at Chrysler, The Iacocca Legacy. New York: Harcourt Brace & Company.

Martin, J. (2006). “Are You as Good as You Think You Are?” Fortune, 30 September 1996.

McCormick, J., (2013). “Interview with Thomas Stallkamp, Chrysler’s Head of Purchasing,” Automotive Sourcing.

Reich, R. B. & Donahue, J.D., (2005).New Deals, The Chrysler Revised and the American System. London: Times Books.

Thomas, Q., (3007). “Supplier Cost-Reduction Efforts at Chrysler,” Journal of Manufacturing Engineering, pp. 107-108.