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Navistar Supply Management Essay

Executive Summary

Navistar was a worldwide leader in the manufacturing medium and heavy trucks for 17 consecutive years in the North America market. Navistar’s premium conventional trucks were produced at the Chatham assembly plant, which had almost 14 years experience in producing Navistar’s premium line since 1983. Navistar had forecasted increased industry demand for heavy and medium trucks in 1998. Especially, the Chatham assembly plant’s customers had strict requirements to the truck’s quality and delivery date. As the assembly supervisor in Chatham, Andy Ramsz encountered the interior trim quality and delivery problem for the truck. Andy had begun to gather data on the interior trim supply problem and he got the crucial reasons for these problems occurred. These reasons absolutely affected the Navistar’s internal supply process, increased the extra cost as well as reduced the efficiency of the supply management. According to the reasons identified for the trim supply problem, my decision is to set up the improved procedure focused on problems identified and take plans to enhance efficiency and productiveness of trim supply chain so as to relieve the difficulty of shortage problem and meet customers’ requirement accurately.

Issue Identification

Navistar provides premium trucks that ranged in design from no frill models to highly customized units. Customers are able to select from customized units which represented 50-80 percent of production volumes. These customized units contained various options that formed kits that included anywhere from 18-26 individual trim pieces.

Andy Ramsz, the Assembly Supervisor at Navistar’s Chatham facility has been experiencing an issue with interior trim shortages for Navistar’s premium conventional trucks. The shortage of parts and non compliance with delivery schedules did not allow plant assemblers to complete the interior of a truck. The delay in completing the truck affected the bottom line as the interruption in waiting for replacement parts caused additional time and money.

Environmental Issue

Navistar considered quality and on-time delivery as a priority that came before costs; therefore, various improvement initiatives to quality programs were supported by top management as well as initiatives to improve processes and on-time delivery. Andy is an Assembly Supervisor but had very broad job responsibilities. Andy’s time was taken up in areas such as supplier quality evaluations, internal process documentation, process improvement, and much more. His focus was very widespread and his day was drawn away from scheduled and unscheduled meetings; this position required long hours and weekend work. In addition to the quality issues, truck interior trim shortages was another challenge which resulted in reordering of trim parts leading to additional material handling, and post- assembly installation. These delayed parts required overtime that increased cost and delayed delivery of the finished truck to the customer. Issues came from both Navistar and their supplier Trimco.

Navistar had design changes such as different sizes, repositioning of mechanisms and other various designer and material changes; however, these changes to the truck interiors were not communicated to Trimco before production runs were completed. As a result, parts were shipped with different specifications than those needed for proper fit during assembly. Due to the lack of coordination and communication, this caused hurdles to Navistar and Trimco’s just in time system where lead and delivery times were compressed. As a key supplier for Navistar, Trimco provided 420,000 parts annually to Navistar. Unfortunately, of these parts, approximately 3,100 were defective, missing or inappropriate for use.

These 3100 parts were another financial burden and jeopardized customer service. Due to the lack of centralisation and limited computer systems capability, Trimco had difficulty monitoring outgoing parts for shipments sent to Navistar; inappropriate component of trim parts or insufficient quantities of the correct parts were supplied. Andy estimated that costs associated with the interior trim shortages were over $200,000 per year. The company was not being run efficiently and quality control was hindering the performance for Navistar.

Furthermore, Trimco was QS9000 certified, but the quality control procedures varied throughout as the company lacked consistency. To make matters worse, Trimco also had high employee turnover which meant that employees were not all properly trained and failed to understand the knowledge and specifications of customer requirements.

Alternatives Alternative 1

Research and Source another reputable supplier to manufacture 30% of the customized trim parts – To improve financial situation and alleviate the shortage issue, Navistar can source out a portion of their customized parts to another supplier while maintaining the other 70% to Trimco. The new supplier will adhere to the specifications of Navistar’s customization requirements by going through training programs.

Pros:
Meet on-time delivery and reduce the number of shortages
Creates more inventory and safety stock
Could be less risky for Navistar as they don’t have all their eggs in one basket Another supplier puts pressure on Trimco as they could possibly lose more business, so they would hopefully improve their shortage issue

Cons:
High cost to source, train and implement quality processes with new supplier Separating parts can confuse Accounts Payable and payment, additional paperwork Purchasing power can decrease if inventory is split between multiple vendors No guarantee that delivery and quality will immediately fit to conformity

Alternative 2

Navistar will work with Trimco to develop cross-organizational teams and partnerships to re-examine programs for product quality, training, processes and logistics. Exchanging information with Trimco and having open and effective communication to work on areas of concern externally and internally will help improve operations and business for the plant, Navistar and Trimco.

Pros:
Working with one another by sharing my resources will help both companies
ind solutions and work more efficiently By collaborating ideas and using cross-organizational teams, companies can increase efficiencies and reduce costs Creates a strong and long relationship Potential to improve lead times

Cons:
High cost implementing and initiating programs
Takes a long time to make changes
Potential for lots of changes leading to possibility of turnover if employees do not like changes If not properly executed, could be confusing to employees

Alternative 3

Decrease the customer’s design options. Decreasing design options and providing standard packages will reduce the numerous trim parts for production; this can possibly increase the appropriate shortage and delivery issue. Navistar provided customized units to satisfy different customers’ requirements; customers should change the design before the production runs, which often resulted in the failure of communication to the supplier for the change, and inappropriate trim provided, or delivery delay.

Pros:
Standardize the “kits” form for the interior trim to increase the appropriate delivery and installation procedure. More efficient to organize production and procure trim parts. Convenient for supplier to produce trim parts and arrange the stock and inventory.

Cons:
Navistar may lose the market shares without the specific feature and attracting styling.

Recommendation
Alternative 2 – Navistar will work with Trimco to develop cross-organizational teams and partnerships to re-examine programs for product quality, training, processes and logistics.

Working together with Trimco and reviewing internal processes will help Navistar rectify the trim shortage issue. Even though both companies have quality management systems and programs, a revised quality program should be cooperatively put together to increase efficiency. A Quality Representative from each organization should be placed in the other company to check on conformity, quality and completion of kits. With the help of Trimco, Navistar can create a workbook for inspection procedures for incoming kits and Trimco will have a procedure to follow for kits going outbound. The inspection will have a review checklist that examines the kits as they come in/out; if there are missing parts, they should be documented immediately. Incoming shipments with part shortages that are taken from another kit will be required to be documented and ordered. Trimco will also upgrade their computer system and enhance the centralization to monitor outgoing parts.

Trimco had difficulty responding to Navistar’s design changes. Navistar will need to implement a new process to allow increase in lead time for new design changes and communicate changes to the Trimco’s design and manufacturing department. Once Navistar receives confirmation from Trimco they can expect to receive the correct trims with the correct design changes.

There has been high turnover at Trimco and training employees has not been up to par. Trimco will need to work with Navistar to create a program for product quality and control than develop a manual for process and development. It will be beneficial for Navistar to help Trimco with a program and manual as this will help hold their employees to compliance standards. The manual will be a reference and include quality planning activities and controls that document the manufacture of Navistar products.

Navistar has internal challenges that can be changed to help with the quality and logistics. Andy was given too many responsibilities and his focus was widespread, some of his responsibilities should be the responsibility of managers. Creating some time for Andy will allow him to focus on his core responsibilities and look to programs on continuous improvement. Allowing Andy to have free time will help as he should figure out that providing a forecast to Trimco will more preparation for parts.

The plant at Chatham should try and lean out duplicate processes and perhaps change the order in which the trim assembly took place. The trim was placed into the cab than the cab placed onto the chassis. The cab isn’t dependent on whether the trim assembly is in place; therefore, if trims were added further down the line it would provide more lead time for orders.

Implementation Plan

Navistar will need to assess internal process and to work with Trimco’s manufacturing department to improve their quality control and process. 1-4 Months: Navistar and Trimco will need to select a Quality Representative and train them on the requirements and specifications for the customized products. Quality representatives and the Manager of Manufacturing at Trimco will help develop a training process and combine that knowledge into Training Manuals to help train current and future Trimco employees. Navistar will provide forecasting tools and reports and review with Trimco to determine mutual understanding of the documents. Trimco will upgrade their computer systems so that monitoring of outgoing parts will be more accurate.

5-6 Months – Quality and consistency will be rigorously inspected and tested to ensure that they meet the quality standards. Navistar will set up KPI to the supplier to determine quality and performance and will be audited. Trimco will have the forecast so they should have safety stock based on the Navistar’s forecast

Monitor and Control

Navistar will need to examine the success of the implementation process; the training of staff, and shortages of trim parts will be assessed. The staff should be tested during the first month to see that they are comfortable and understand all the requirements for Navistar. Also, monitoring the Tricmo to see if they are using the forecast to meet production levels should be assessed monthly. Navistar will need to set KPIs and notified when quotas aren’t being met as this could be an indication of inefficiency. Areas in operations such as production level, turnaround time, disruptions, and
flexibility for change would be taken as key performance measurements.

Audit KPI Monthly

Notes – Issues
*Shortage of trim parts to Navistar
Notes – Environmental
Interior cut back Quality and Delivery Problem
* Missing or Inappropriate trim parts. This resulted in:
* Reordering of parts
* Additional Material Handling
* Post aggregation Installation that needed overtime ($42 per hour) * Eventually decease to a delay in delivery * Typical truck contains 18-26 individualist trims costing $630-$770 * Andy estimated that trim part shortages cost the company $200,000 annually *Slowing down the line due to reordering of parts, extra time and money in material handling, post assembly installation and HR management

Trimco Industries
* Supplied over 450 parts in 5 different colours and 3 different trim levels * Trimco sent about 420,000 units a course of which about 3100 were defective (0. Some processes within their facility were passing automated while some were manual * Used Quality visit Techniques Statistical Process Control (SPC), Manual Inspection and heel over Production. * Due to lack of centralisation and limited computer governance capability * Difficulty in Monitoring Outgoing Parts * Sent shipments with contradictory parts or incorrect quantities * High Attrition rate leading to employees with poor level of training, hence some employees were insensible of customer requirements * The company had difficulty responding to certain design changes. * At times these design changes were not sent by Navistar forward production runs and hence parts Notes – Alternatives 1 – Source another vendor 30% of trim parts

Pros:
Meet on-time delivery and reduce the number of shortages
Creates more inventory and safety stock
Could be less risky for Navistar as they don’t have all their eggs in one basket Another supplier puts pressure on Trimco as they could possibly lose more business, so they would hopefully improve their shortage issue

Cons:
High cost to source, train and implement quality processes with new supplier Separating parts can confuse Accounts Payable and payment, additional paperwork Purchasing power can decrease if inventory is split between multiple vendors No guarantee that delivery and quality will immediately fit to conformity

2 – Collaborate with Trimco for improvement
Pros:
Working with one another by sharing my resources will help both companies find solutions and work more efficiently By collaborating ideas and using cross-organizational teams, companies can increase efficiencies and reduce costs Creates a strong and long relationship Cons:

High cost implementing and initiating programs
Takes a long time to make changes
Potential for lots of changes leading to possibility of turnover if employees do not like changes If not properly executed, could be confusing to employees

3 – decrease customization option
Pros:
Standardize the “kits” form for the interior trim to increase the appropriate delivery and installation procedure. More efficient to organize production and procure trim parts. Convenient for supplier to produce trim parts and arrange the stock and inventory.

Cons:
Navistar may lose the market shares without the specific feature and attracting styling.

Notes – Recommendation
*Monitor supplier performance
*How to get the QA dept’s aligned between the companies?

1. Navistar – supply chain division restructuring on a strategic level b. Andy’s responsibilities to be shared between new subdivisions/departments taking away some of his current functions (e.g. internal documentation and material management) c. Logistics audit/review to be implemented by external company to set new procedures particularly for parts flow

2. Chatham plant – reorganization of assembly
a. To review assembly process and redesign production steps for smooth and consistent move of the truck to decrease customization level and shorten production lead time b. Interior trim process flow – reduce/eliminate NVA steps through c. Increase communication efficiency with Trimco to send proper and in time data for last minute changes/redesign

3. Trimco – tighter collaboration to help them produce quality a. Involve Trimco in logistics audit c. Eliminate double processes taking place both in Chatham plant and Trimco warehouse (e.g. trim kit assembly)

Notes – Implementation
Navistar implementation:
Action Item | Type | Term | Responsible | Duration | Status | Prepare the forecast for the trim part by month | Tactical | Short | Dealer & marketing department & procurement department | 3 month | Not started | Take the liability for the safety stock with supplier | Tactical | Short Long | Procurement department | 3 months – 6 months | Not started | Set up KPI to the supplier for the performance audit | Tactical | Short & Long | Procurement Department & production Department | 1 month | Not started |

Trimco implementation:
Action Item | Type | Term | Responsible | Duration | Status | Upgrade
computer system and enhance the centralization | Tactical & Strategic | Long and short | IT department | 6 months or more | Not started | Arrange the appropriate training to the employee | Tactical | Long and Short | Top management & HR department & production department | 3 month | Not started | Have the safety stock based on the Navistar’s forecast | Tactical | Short & Middle | Production department | 3 months | Not started | Set up the quality traceability regulation for the quality control | Tactical | short | Production department & QC department | 1 month | Not started |

Notes – Monitor and Control
Element | Evaluation |
# | Description | Measure | Success | Failure |
1. | Recommend best- selling configuration | Got the selling data | Accurate and detailed | Inaccurate and non-detailed | 2. | Forecast form and accuracy | accuracy | Accuracy >=80% | Accuracy =85% | Accuracy =85% | Accuracy


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