Global Supply Chain Management: CPFR, Tier 1 Suppliers

This report delves into the intricacies of global supply chain management, exploring various aspects crucial for business success. It begins by analyzing the advantages of Collaborative Planning, Forecasting, and Replenishment (CPFR) for Original Equipment Manufacturers (OEMs) and their customer...Read More

Global Supply Chain
Management
1

TABLE OF CONTENTS
INTRODUCTION.................................................................................3
1. Advantages of CPFR to work and OEM customers...........................3
2. Role of Tier one supplier in safeguarding the quality of final products.
........................................................................................................5
3. EVALUATION OF THE STAIRCASE MODEL OF IKEA FOR SUSTAINABILITY
AND APPLICATION IN MAGNA GROUP.................................................7
3.1 Evaluation of the staircase model of IKEA.................................................7
3.2 Application of Stair case model in Magna group........................................8
4. THE APPLICATION WRAP APPROACH THROGH AUTO PARTS SUPPLIERS
AND CAR MANUFACTURERS CAN WORK TOGETHER TO INCREASE THE
RECYCLABILITY CARS........................................................................9
5. SHARING OF INFORMATION USING TECHNOLOGY IN SUPPLY CHAINS
AND SOLVING QUALITY
RELATED PROBLEMS.......................................................................11
CONCLUSION.................................................................................. 12
REFERENCES...................................................................................13
2

INTRODUCTION
Supply chain management is considered as a network among diverse
organisations in order to have effective production, work management and
distribution of specific product (Gupta and Boyd, 2008). In other aspect, it
can be stated that any business organisation which uses the services from
another business organisation of overseas market need to focus on supply
chain management. With an effective focus on supply chain management
the business firms can easy manage the work and overcome issues in
effective manner. Logistics is considered as one of most significant and
critical section of supply chain management. It provide great level of
assistance in functions and activities which relates with the production and
delivery of product or service from supplier to client. Moreover, global supply
chain management focuses on integrated work which can provide easy
accessibility to resources, processes, delivery system in order to meet the
needs of end customers.
In this report, learning will focus on various advantages of CPFR to
work with their OEM customers in order to accomplish performance
standards. It will also provide information regarding role of a tier 1 supplier in
safeguarding the quality of final products. It will also focus on effective
evaluation and application of staircase model for better sustainability in
competitive market. Furthermore, it will also focus on use of technology in
order to resolve the issues regarding quality in context of supply chain.
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1. ADVANTAGES OF CPFR TO WORK AND OEM CUSTOMERS
Magna international Inc. is auto mobile supplier firm which operates its
business from Canada. Organisation is considered as a one of largest auto-
mobile parts manufacturer which provides original parts to its customers
(Karlsson and Voss, 2009). Company supplies number parts to various
companies within auto mobile industry. In this respect, it is necessary for
management of Magna to ensure that they have effective supply chain
management and original equipment is delivered to its partners or
customers. In the support of this, it can be said that the management of
Magna can focus on CPFR process model in order to boost the effectiveness
of its supply chain management.
Illustration 1: CPFR Model
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It has been spotted that the CPFR model is adopted by number of
companies in all over the world. It is considered as a standard process model
which provides number of benefits to business organisations by improving
work conditions in context of varied factors related to supply chain (Petersen,
Aase and Heiser, 2011). With an assistance of this process the management
of Magna can effectively develop its supply chain management by
concentrating on customers. In this, supplier and client can also have
collective working at every level which is beneficial for improvement in
organisational performance. Moreover, it also provides joint forecasting and
order planning the management of Magna can reduce number of risk within
supply chain which is advantageous for better production of auto-mobile
parts and its distribution. In this support, it can be said that the time and
quantity of physical flow within supply chain management of Magna can also
be synchronized among all parties (Watson, Lewis and Cacioppi, 2012).
CPFR will provide great opportunity to work in collective manner with
its OEM customers and make them understand about customer needs for
effective production of auto mobile parts in order to accomplish needs. OEM
customers of Magna demands delivery of original equipment or parts in
desired time so in order to have effective distribution it is essential for
management to focus on CPFR. In the support of this, it can be said that the
collaborative planning, forecasting and replenishment are key factors of
CPFR process which improves the supplier/manufacturer relationship in order
to meet the objectives (Russell and Taylor, 2008).
With an assistance of CPFR process the management of Magna can
build strong relations with its OEM customers and manage work in
collaborative manner. It will also allow Magna's OEM customers to share
significant information with each other and have effective planning in order
to meet the objectives. In other aspect, it can be said that the CPFR is a
integrated supply chain method which have direct positive impact on the
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efficiency of work and collaborative actions among trading partners in order
to meet the ultimate needs of end customers (Gadde and Hakansson, 2001).
Furthermore, with an improved focus on CPFR process the
management of Magna can have advancement in responsiveness to
customer demand. It provides decrease in out of stock and shorter cycle
situations which is beneficial for better reliability and responsive supply
chain. It will also provide high quality of auto mobile parts to OEM customers
and increase the satisfaction level of end customers (Gravetter and Forzano,
2006). CPFR is also advantageous for proper allocation of product in the
desired time. Effective allocation/distribution and accessibility of auto-mobile
parts to OEM customers will also provide effectiveness to final production of
goods. For example, the UK car manufacturer firm is using services of Magna
then with an assistance of CPFR Magna can manage its supply chain and
deliver auto-mobile parts to UK car manufacturer in better way. It will also
boost the production process of UK car manufacturing firm which is beneficial
for both Magna as well as its OEM customers (Martella, Nelson and
Marchand-Martella, 2010).
Other than this, the CPFR process also provides great accuracy to the
forecasting. In this, Magna can have sharing of single forecasting with its
supply chain which boosts the potential and benefits to the efforts of trading
partners. In the support of this, it can be said that it allows Magna to
understand the different views of trading partners and market which is
beneficial for effective combination of diverse knowledge in order to attain
better forecast accuracy (Tse, Chung and Lim, 2011). Moreover, the
coordination between planning and forecasting also reduces the loss in order
to amend the sales. Magna can put right product at right time in the right
place which is also beneficial for sales and advanced production of end good.
Moreover, the CPFR also provides decrease in the safety stock which is
also beneficial better improvement in its inventory system. In other aspect, it
can also be stated that the improvement in inventory system is also
beneficial for cost reduction (Rotchanakitumnuai, 2013). Accurate
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forecasting will provide effective aligning of the production schedule which is
beneficial for low cost production and accomplish needs of OEM customers.
Low cost production will also provide various benefits to OEM customers such
as low cost acquisition of auto-mobile parts in order to have effective
production of final goods. In other aspect, it can be said that the CPFR is
beneficial for improvement in supply chain management and provides
various improvement in product capability which impacts positively on
relationship with diverse traders or OEM customers (Quesada and et.al.
2010).
2. ROLE OF TIER ONE SUPPLIER IN SAFEGUARDING THE
QUALITY OF FINAL PRODUCTS.
In order to have better sustainability and improvement in sales it is
necessary for management to focus on effective development of supply
chain. In this respect, the Magna can focus on tier one supplier. It is a
manufacturer which provides products directly to the OEM customers. In this,
management will not have any kind of middle man in dealing process with
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other manufacturers (Mason, Oshri and Leek, 2012). In other aspect, it is also
considered as a credibility and commitment which is needed by international
auto-mobile manufacturer. It also creates a better trust among all partners in
context of design, development and validate factor.
Illustration 2: Tier one supplier statics
Moreover, the management of Magna can use one tier supplier
approach for advancement in quality of goods and proper quality
management. In typical supply chain the business organisations needs
number of middle man for better delivery of goods which some time also
impacts the quality of auto-mobile parts. But with an assistance of one tier
Supplier Company can directly deal with various auto-mobile manufacturing
firms (Holmen, Pedersen and Jansen, 2007). Increased number of middle
man also requires high level of sub-assemblies which impact direct to the
quality of parts. In this respect, with assistance of one tier the management
can redevelop its supply chain structure and boost the quality standards. It
also provides an opportunity to have direct interaction with OEM customers
which provides effective understanding of their needs. With an improved
level of needs identification the Magna can easily produce quality of goods
as per needs of OEM customers (Barros and et.al., 2013).
In the support of this, it can be stated that with an assistance of one
tier supplier the management of Magna can easily have safeguarding of the
final product. It also provides effective capability to the company in context
of technology. It also allows management of Magna to have skilled human
resources in order to establish effective process for managing suppliers.
Moreover, the auto-mobile firm suppliers are now accountable to design and
manufacture various parts such as interior, lighting system, braking, etc. So
it is necessary for Magna to have direct understanding of customer need by
using one tier supplier approach. Tier one suppliers have created enormous
value for consumers. It facilitates the management of Magna to increase the
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standards which can improve vehicle safety and provide better delivery
system to improve performance. Number of innovation actions can also be
taken into account to improve the performance at low cost. However, the
success of delivery system is dependent upon quality of final product. With
an assistance of one tier supplier the management of Magna can bring
innovation in design which is also beneficial for improvement in quality. It
also plays key role in meeting the satisfaction level of customers by
developing innovative technology which can develop impressive products.
Other than this, it also focuses on ISO/TS16949 which is one most
significant quality standard for auto-mobile industry. In the support of this, it
can be said that it sets some quality standards within organisation and
allows having certified manufacturing in order to maintain the quality of
product. With an assistance of one tier supplier the management of Magna
can also develop new value creation model. In this model the management
can analyse the previous quality conflicts and redesign the optimizations
system as well as standardization. This kind of activity is significantly
considered as a key role of tire one supplier (Lowson, 2004). It provides a
oriented system which allows functions which provide secure optimization
without affecting the quality of products. Improvement in quality of product
is also provides better opportunities for OEM and improve management in
optimized manner.
Moreover, with an improved focus on one tier supplier theory the
management of Magna can have better knowledge regarding client
operations. With improved information regarding client operations the
management can design quality standards in order to meet the needs of
organisation. In this the auto-mobile organisations can organise the functions
in logical manner. In the support of this, it can also be stated that it also
provides an responsibility for effective functioning in order to meet the
quality standards (Barnes, 2008). It has also been spotted that with an
assistance of one tier supplier the automotive suppliers can also have focus
on manufacturing of diverse models in better way. Such as lighting system,
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fuel delivery, braking system. Other than this, the one tier supplier also has
effective observation of all modules in order to meet the standards of ISO.
Quality of production can also be improved at low cost by improved
focus on one tier supplier. It will allow the management of Magna to have
direct partnership with OEM traders. It will also develop the better relation
among all traders and improve collaboration in order to ensure about the
quality of spare parts. The waste can be reduced and increase the quality of
production at very low cost. It will also have positive impact on the other
members of supply chain management (Flynn, Morita and Machuca, 2010).
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3. EVALUATION OF THE STAIRCASE MODEL OF IKEA FOR
SUSTAINABILITY AND APPLICATION IN MAGNA GROUP
3.1 Evaluation of the staircase model of IKEA
The IKEA's stair case model has found very effective for handling
relationship with different suppliers. In this regard, the management of IKEA
has developed an specialized department for managing relationship with the
suppliers as per the norms sustainability. This department has the direct
responsibility to support and monitor the suppliers. Furthermore, this
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Illustration 2: Tier 1 Supplier

department has determined various strategies for ensuring the compliance
with the requirements of business entity (Minis, 2011). In addition to that the
administration of IKEA has also formed a global compliance and monitoring
group for facilitation of active support and follow up developments on a
global basis which plays important role for managing different business
operations with different suppliers.
The IKEA's case model is considered as most effective model through
organization is able to select appropriate suppliers of wood by ensuring the
protection of environment and forestry. This approach enhances goodwill of
firm. The Stair Case model of IKEA contains flour level that plays important
role in selection of supplier while managing supply chain management. Start up level: In this section, IKEA has determined the basic
requirements that wood product suppliers have to fulfil before initiating
business with IKEA (Current Issues in Operations and Supply
Management, 2009). In this context, IKEA has determined different
standards for suppliers such as suppliers must be known about the
origin of the wood and region within a country the wood originates and
High value tropical tree species must be certified as per the Forest
Stewardship Council (FSC) etc. These standards help IKEA in promotion
of ethical business practices with suppliers. Level 2 – Minimum Requirements: According to this section, IKEA
selects only those suppliers and wood which is produced with reference
to national and regional forest legislation. This approach plays
important role in protection forest and avoid trading of such wood
which is originate from protected areas (Meijboom and Vos, 2008). It
ensures the safety of plantations in the tropical and subtropical
regions. Therefore, it can be stated that this approach has found very
effective in selection of best raw material. Level 3 – 4 Wood to Ease Transition: Wood is the standard developed
for suppliers by IKEA in 2005 to ease the transition from Level 2 to
Level 4. The 4Wood standard emphasizes the use of wood-tracking
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procedures through which management of IKEA is able to select an
appropriate procurement through production. It reduces wastage of
resources (Fernandes, Sampaio and do Sameiro Carvalho, 2014).
 Level 4 – Forests certified or responsibly managed: The section of Stair
case model assists IKEA in determination of forest management and
chain of custody standards that must be produced in a balanced co-
operation between social, environmental, and economic stakeholders.
Presently, FSC is the only Level 4 certification recognized by IKEA that
provides significant assistance in handling of business operations as
per the sustainability. In order to have better sustainability the IKEA
ensure that the supplier have various certifications so that quality of
resources can be improved. Company also make sure that all suppliers
are considering quality of resources as a key responsibility. It also
provides goods as per standards of forest management and enhances
the production process in balanced form.
3.2 Application of Stair case model in Magna group
The Stair case model can be applied in Magna group of companies. It is
one of the leading suppliers of automotive parts and products. Therefore, the
management has to collect row material from different suppliers. The Stair
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Illustration 3: STAIRCASE MODEL

case model of IKEA assists management of Magna in selection of appropriate
suppliers under the criteria of sustainability. This is because Magna is
committed to maintaining organization's entrepreneurial heritage by
assessing active support of decision making at an operational level (Tiwari
and Jain, 2013). Those decisions are always guided by coordinated strategies
and processes through company manage relationship with different
suppliers. Company acquires wide range of raw material such metal, plastic
etc. from different suppliers. As per the different levels of Stair case model,
the management of Magna group is able to develop basic criteria during
selection of suppliers.
This approach helps managers in selection of best suppliers who are
facilitating wide range of raw material to Magna by ensuring safety of
environment along with ethical business practices. Therefore, Magna group
of companies has determined different standards which are considered by
company during selection of suppliers (Gupta and Boyd, 2008). It includes
certification to the latest ISO/TS requirements, evaluating of successful
financial and operational reviews on an on-going basis, supplier's
commitment to Commodity Cost Models and evaluation of ability of suppliers
for managing culture of ongoing innovation and continuous improvement etc.
In addition to supplier's commitment toward safety of environment has
played important role for establishment of relationship between Magna group
of companies and suppliers as per the sustainability aspects (Karlsson and
Voss, 2009).
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4. THE APPLICATION WRAP APPROACH THROGH AUTO
PARTS SUPPLIERS AND CAR MANUFACTURERS CAN
WORK TOGETHER TO INCREASE THE RECYCLABILITY
CARS
WRAP’s is one the leading organization of UK. The primary mission of
company is to accelerate the move to a sustainable, resource-efficient
economy by considering the approach of re-inventing related to design,
produce and sell products; re-thinking related to use and consumer products
and re-defining related to re-use and recycling (Petersen, Aase and Heiser,
2011). The major elements of WRAP's approach are explained below:
 Re-inventing
 Re-thinking
 Re-defining
This approach has found significant success in retail sector of UK while
dealing with clothing and food products. This approach has found very
effective for reduction of wastage and increasing recyclability of end
products.
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The approach can influence auto parts suppliers and car manufacturers
in order to work together to increase the recyclability cars after the end of
car life. In this regard, Re-inventing element of WRAP approach helps auto
parts suppliers like Magna Group and other care manufacturers in selection
of an appropriate car design along with the quality of parts and design of
parts through which company can reduce wastage of raw material (Watson,
Lewis and Cacioppi, 2012). In addition to that selection of raw material has
led significant impact for maintaining the recyclability of auto parts after the
end of car's life. Furthermore, it has been analysed that WRAP approach also
influences companies to design an appropriate car production system that
minimizes the wastage of material, reduces the wastage of energy and
increase production system. In this section, the management of Magna group
of companies along with strategic partners or car manufacturing companies
are able to develop an appropriate supply chain management system that
would lower the carrying cost and reduce carbon emission by reducing
transportation requirement (Russell and Taylor, 2008). In this process,
delivering industry-leading voluntary agreements have played important role
for handling various business operations.
In addition to that the element of re-think associated with WRAPs'
approach assists car manufacturing company and auto parts suppliers for
establishment such kinds of joint work agreement associated with designing
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Illustration 4: WRAP approach

and development of parts in such manner that would reduce the
consumption of valuable raw material. In this process, both companies
require to select appropriate raw material that can be procured without
affecting the environment and could be recycled easily. This system provides
opportunities to both companies for managing the business under the norms
of sustainability. In addition to that this element provides significant benefits
in selection of design of different products along with manufacturing
procedures. Furthermore, it has been analysed that a detail evaluation
quality and design of auto parts helps with the help of car manufacturing
company would support in selection such as raw material that would reuse
after the end of car's life (Gadde and Hakansson, 2001).
The last section of this approach is re-defining which is applied by auto-
mobile company and auto-parts suppliers with the help of joint operations. In
this process, both companies also provide an opportunity to consumers to
recycle their cars. For example: In retail sector, WRAP makes efforts for
developing of an online glass collection directory to help businesses find
companies who offer glass recycling collections locally. This approach has
found very effective for managing different operations of WRAPs while
working with the wine industry to develop and produce lighter weight wine
bottles (Gravetter and Forzano, 2006). It plays important role for reduce
glass packaging waste. As per this example, the management of Magna
Group and car manufacturing companies are able to identify such contractor
that would support them in recycling of wastage. This approach helps
manager in designing and development of such parts as per the view of
recycling contract that would increase the recyclability of cars after the end
of life.
In the support of above statement, it can be said that recyclability
concept is also beneficial for management of Magna and it can also assist
business to recycle its wastage and unused cars. Recyclability is a concept or
process in which waste materials can be convert into reusable resources in
order to save environmental conditions. It will also provide better brand
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image in the market and lead business to impressive success. In other
aspect, it can be stated that recyclability is key component which can be
used by management of Magna to reduce the wastage in production process.
There are number of ISO standards that are needed to be followed in order to
have effective implementation of recyclability concept. In the strictest sense,
recycling of a material would produce a fresh supply of the same material
which is also beneficial for advancement in quality production as well as
decrease in cost of operations.
Illustration 5: Traceability Process
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5. SHARING OF INFORMATION USING TECHNOLOGY IN
SUPPLY CHAINS AND SOLVING QUALITY RELATED
PROBLEMS
The Magna International is selling various parts such as Magna
Powertrain, Magna Exteriors, Magna Seating, Magna Closures, Magna Mirrors,
Magna Electronics and Cosma International etc. to different car companies
such as General Motors, Ford etc. Therefore, supply chain management has
led significant impact on cost of final product. In this regard, Magna has
found several complaints regarding quality of power train from different
clients (Martella, Nelson and Marchand-Martella, 2010). These qualities
related issues are occurred due to different causes such as improper
information sharing, lack of traceability and improper raw material. In order
to resolve this issue, the management should have to consider different
approaches such as increased traceability and sharing of information. First of
all, traceability is defined as the capability (and implementation) of an
organization for keeping track of a given set or type of information or the
ability to chronologically interrelate uniquely identifiable element. In the
context of logistics, traceability refers to the capability of business entity for
tracing goods as well as product distribution chain with reference to batch
number or series number basis. Traceability is considered as most important
element of the automotive industry (Tse, Chung and Lim, 2011). By applying
this approach, suppliers of auto parts and manufacturing company of cars
are able to determine the duration and time period in which a car and part of
car was manufactured. Therefore, the management of Magna International is
able to identify particular batch from which car manufacturing company has
faced quality related issues.
In this process, sharing of information with the help of high end
technologies such as bar bodes, just time information system etc. are playing
important role in order to improve efficiency of supply chain management.
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By using latest communication mediums, car manufactures are able to share
small issues that would be occurred or that have been addressed from
consumers associated with quality of auto parts or design with suppliers
(Rotchanakitumnuai, 2013). This high speed communication provides an
opportunity to both to implement changes in design of cars along with auto
parts. This approach enhances quality of parts that would lead positive
impact on quality of final product. On the other hand, high-tech tools such as
bar codes help managers of both suppliers and manufactures in tracking of
each batch (Quesada and et.al, 2010). On the basis of this information,
company can made recall and could change such parts that have influenced
quality and efficiency related issues in particular batch. By identifying a
particular production batch, both companies are able to carry out detail
investigation on causes and reasons of defects in parts. By developing a
mutual understanding through an appropriate information sharing system,
companies can enhance efficiency of supply chain and increase quality of
final product (Mason, Oshri and Leek, 2012).
In addition to that approach of value chain stream management has
found very effective in supply chain management. This is because it assists
auto-part manufacturing company in order to carry out is a lean-
management in which management makes efforts to assess current state
and designing a future state for the series of events through which
management can manage flow of product or service from its beginning
through to the customer. It provides significant support information mapping
through which company is able to identify appropriate technologies and tools
through which management is able to enhance efficiency of supply chain
management (Rotchanakitumnuai, 2013). It supports Megna for managing
different manufacturing operation along with its supportive activities such as
logistics, supply chain, software development, product development etc.
It has also been spotted that company is facing some issues regarding
CSR activities. It impacts the brand image of Magna in negative manner. In
the support of this, it can be said that the management of Magna can focus
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on technological up-gradation which can improve the transportation medium.
For example, the business firm can focus on development of eco-friendly car
spare parts which can reduce the carbon and other negative aspects.
Company can develop car technology which can reduce environmental
issues. It will present Magna as organisation which focuses on CSR activities.
It will have positive impact on the organisation brand image.
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CONCLUSION
As per the above assessment, it can be concluded that supply chain
management is identified as a most crucial aspect of every industry. This
report has addressed that tire one supplier’s plays important role for
managing quality of cars in auto-mobile sectors. It has found that WRAP's
approach helps auto-parts suppliers and care manufacturing companies for
consideration of sustainability element. The approach of information sharing
has played important role for reducing quality related issues. It has also been
spotted that the Magna can also focus on ensuring that they have effective
supply chain management and original equipment is delivered to its partners
or customers. CPFR is also advantageous for proper allocation of product in
the desired time. Accurate forecasting is beneficial for effective aligning of
the production schedule which is advantageous for low cost production and
accomplish needs of OEM customers. It has also been spotted that one tier
supplier is considered as a credibility and commitment which is needed by
international auto-mobile manufacturer. It can also be concluded that one
tier supplier creates a better trust among all partners in context of design,
development and validate factor. With an improved focus on one tier supplier
theory the management of Magna can have better knowledge regarding
client operations.
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