The Smart Car and Smart Logistics

Created to Fulfill
Technology and Operations Managements Assignment

Alvian Tamba – 18/436896/PEK/24420

MM UGM
International 7
2019
I. Case Overview

The case presents a company that shows a distinct way of supply chain. This company
produces a product with brand name is Smart, a two-seater car released first time for the
European market. The company called Micro Compact Car AG, a subsidiary of Daimler-
Benz. As said before, the supply chain model is very different compared to the other existing
players in the market. MCC integrate not only supplier but also outsources and modular
production in their supply chain.

The case shows that MCC is utilizing a modular production and effectively integrate the
model into conservative supply chain settings thus differentiate them. Modules such as audio
or interiors are assembled on the production site and suppliers are deeply involved in the
process. This modular model is made to give the company a competitive advantages and as a
respond to customer needs. MCC has succeed in developing an innovative production model
that integrated not only modular production but also involve suppliers and interactive
marketing as their business model under their wings. Even though everything is modular, but
MCC makes sure every of their product has commonality and interchangeable.

Having this strong advantages, MCC only add 15% of total value added from their products,
making this as a challenge for MCC in managing and controlling their supply chain. In brief,
MCC can be seen as project for implementing mass-customization in an traditional
automotive supply chain. There also some users that complained that they didn’t get what
they order and had to wait for another week to get their modular panel such as mats or
specific color seats. MCC is also open to risk that their suppliers are taking-over their
business and gain the control of the existing supply chain thus increasing the overall
production cost. So, how MCC can handle this immediate and longer-term issues and overall
control over the supply chain?

II. Case Analysis

Looking back to the theory, MCC is trying to separate their supply chain management by
utilizing differentiation strategy. It is characterized by using modular process that able them
to mass costumization. MCC even able to reduce the car producing lead time to two or three
weeks based on production flexibility, compared to other brand (Volkswagen currently has a
lead-time up to six months for some models). Currently, Smart product line up is very limited
but they manage to postpone their differentiation again by using modular design.

For the sales channel, MCC is very segmented, they are aiming to target the DINKies (double
income, no kids) market but through time the senior citizen and students in Europe also found
the model attractive, so they include the young and fashion conscious market. Their dealer,
work as a point of sales and also place to customized the car based on client specification, in
brief you can assembly the car at the centres. The single-stage sales concept allows Smart
centres to acquire their units via logistics department – directly from the production site. This
model is very different compared to traditional automotive industry which existence of
another layer between dealers and manufacturer. Through this model, the company aim to
minimize ordering and delivery time to reduce cost, in the other word, to mitigate the process
risk. MCC aim to have not only flexibility but also just-in-time process. They also well know
for their short supply lead-times for their products.

MCC is using few suppliers, in order to have better and reliable resources from each of the
suppliers. MCC is using software to help to calculate which modules is use more to help
efficient ordering. This whole process can be done in the Smart-ville (so called production
plant for Smart cars) because MCC has developed a very strong bond and understanding to
both integrated and non-integrated suppliers. Thus, MCC is exercising what called vertical
integration.

Understanding the whole case, we can see that Smart is running a very good model of
production and that can be an additional factor for their competitive advantages. The only
concern about their production is about supplier relations, as stated before on the case
overview. MCC should map the suppliers, process and sub-process involved. They also need
to build a contracts with suppliers based on what they produced (modules) so the whole
supply chain will not be at risk if something going wrong. To manage and make sure
everything going well, MCC should make mutual agreements with the suppliers. The
agreements should be beyond selling or buying goods, both parties need to have a clear
vision and mission of the agreement, adding economic value to each organization and
maximizing the total outcome of the products.

Furthermore, trust should be the foundation of the agreements. Both parties need to have
clear understanding and shares information actively. The relationship are more likely success
if not only profit but also risk and cost are shared. As a suggestion to limit the bullwhip effect,
Smart dealer can integrate a visual catalogue that is integrated to the production site thus, by
collecting data from what consumer preference, their system can create a better
understanding for what is the demand created. MCC can furthermore implement a sharper
just in time model.

In the effect of environment, automotive sector is traditionally received a lot of attention due
to the pollution effects caused not only by the products but also the production. Smart’s cars
can be the answer to this issue. From the product wise, Smart car is small compare to the
conventional car, allowing it to reduce traffic on roads and in parking spots. By using a
smaller machine under the hood, the car also reduce the emission produced by the fuel
burning. Furthermore, you can fully recycle the car and the components after use. MCC can
also focus on lowering and avoiding for excessive on ineffective material and energies
consumption both in their production and logistics.

Figure 1 Environmental friendly Supply Chain

This flow can be applied to the automotive business that make sure their supply chain is
environmental friendly (Hoek, 2001). The success of the eco-friendly supply chain is also
supported by application of incentive throughout the human resources that involved in the
organization and also resources reduction.

If we access the official website, per 2019, Smart car is fully available in electric power,
giving it more eco-friendly factor. Smart car can start to aim Asia market especially
Indonesia because the government is starting to pay more attention to the usage of renewable
energies. The only problem that need to be cater by MCC about for Indonesia market is about
the consumer behavior. Indonesian market still look car as a symbol of prestige thus they
want a bigger car (SUV type), more horse-power (less fuel efficiency) rather than an eco
friendly with less power available. As a suggestion, MCC can firstly arrange a deal with
Indonesian government to reduce the tax upon importing the products or even incentives to
start a production site in Indonesia. Then develop a special designed alternative for Asian
market that is lower in cost.