Organisations finding it harder and harder to survive

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Perusahaan Otomobil Kedua Sdn Bhd (PERODUA), established in 1993, is a joint venture company between Malaysian and Japanese partners. The business world has changed very much today compared in the past. Organizations find it harder and harder to survive and face a lot of barriers of entering industry as well as competing against one another. Supply chain management is one of the factors of consideration in any sort of organization to meet their goals. In this assignment, Perodua Berhad's management of supply will be discussed and recommendations will be given.

The Supply Challenge

Short life cycle characteristics inside the customer good products are growing very fast, which creates a lot of challenges in the supply chain. The very first supply chain challenge here understands what the customers want in their buying decision and also sourcing from where, how much they are willing to spend, and the time that want to buy. Following this challenge, the next problem lies in the company itself. The company needs to figure out their demand plan and also how to get the product into the market at the right time with the right channel of choice and this is considered to be the major problem related to distribution. The third challenge is cost, where almost all companies face in their supply challenge. Being cost efficient and effective is very important to ensure the company can have enough cash flow to sustain themselves.

Perodua has invested up to RM97 million in the previous 13 years on facilities alone and more than RM1.5 billion on model development. This underlines Perodua's strong commitment to the localisation policy and in-house development capabilities, as well as the government's aspiration to see local companies enhance their R&D expertise.

The Make-Buy Challenge

As a manager in a company, he/she has to distinguish and design his/her company's fulfillment supply chain and its technology supply chain. The manager should use a combined understanding of business cycle dynamics, value chain structural dynamics and corporate strategy dynamics to design a robust supply chain strategy (Lysons & Gillingham, 2003).

In detail, a manager has to know if a company does too much outsource may lose its competitive advantage among the market. Company has to build a sourcing strategy tree to understand the position of each supplier, and then integrate make-buy decisions with supplier relations. When making make-buy decision, company should not focus merely on the cost, quality and time implications of the decision.

In PERODUA, they have achieved 75 LMCP (Local material component points) in the manufacturing of the Kancil i.e. an optimal level for localisation given economies of scale requirements.

Sourcing Strategies And Supply Chain Configurations

Sourcing Strategies

One of the most important things in the organization is to find out their sourcing strategies. It can be completed by the means of a Business Requirement Definition provided their objectives and goals are to make amendments in their service and reduce cost.

Many parties will catch an eye on the result of it. Majority of them consists of stakeholders and they will be satisfied until they know what the organization needs to source including from where, how, the cost and also satisfying their own needs.

The organization needs to understand the best sourcing strategy to adopt in order to gain a better market share and being competitive in their industry.

Supply Chain Configurations

Supply chain configuration is one of important problems among the high-level supply chain management, which either completely or partially incorporates some of the specific supply chain management problems. Problems that are relevant to supply chain configuration are as follows:

a) Network design. It is the core sub problem of the supply chain configuration problem (Mangan, Lalwani & Butcher, 2008)

b) Sales and distribution. Individual ordering and marketing activities can not identifying supply chain configuration problems.

c) Logistics design. Choosing the right inventory and distribution approach.

Planning and predicting communicates with configuration decision making. This is obtained through the algorithm and also demands data provided and usually an exact amount cannot be found in the results. As a matter of fact, both predicting and planning is a problem even the problem on supply chain configurations does not arise.

PERODUA's changed their focus to developing their capabilities in automotive technologies ranging from basic testing, design and styling engineering to manufacturing engineering skills. The activities include styling / modelling, concept car development and the ability to undertake major facelifts. The main activities of the R&D are localisation of car parts and components, styling and modeling of future models and facelifts of current product range.

Strategic Supplier Selection

This selection of supplier is a process which needs to understand certain factors which are utilized in decisions related to operations in the company. As we understand in the current business world, many theories like the total quality management and just in time have been emphasized together with the supply chain management philosophies. This has made the business world needing to understand and also adopt correct supplier relationships among one another to increase their sales revenue.

We understand that PERODUA needs to make a decision on which supplier to choose from just before making the purchase of the product or services chose. It is also the most important steps for both suppliers and customers and factors like relationship with the performance of supplier will be taken into consideration just before the purchase decision is made.

There are many steps which PERODUA will have consider such as the capability, competency, quality and also customer service level of the potential choice of organization before making the purchase of their product or service. Customers are always right and suppliers have to understand this golden theory to capture them in the correct manner.

Supplier Development

Organizations have the responsibility to reduce their cost in the process of competing with other competitors in the similar industry (Mangan, Lalwani & Butcher, 2008). Many organizations adopt the old way of eliminating wastage within the organization. However, in the modern era, they have changed to adopt outsourcing as well. Big organizations with their own subcontractors will have the benefit of being able to accept more deals and buy goods in a lower price if in bulks.

Supplier development is a theory with an objective of improving the results of subcontractors in terms of their capabilities needed (Christopher, 2005). It can also help them in minimizing their costs as well as creating higher awareness.

Their strategic partnership with Daihatsu Motor Co. Ltd (DMC) allows them to tap into the technologically advanced facilities and manpower expertise of DMC to support their local engineers during their research and development stage.

Aligning Supply With Corporate Strategy

Every goal of an organization is to make money. The only difference that organization applies is their methods to achieve their goals. Most companies will have their own mission and vision statement. In their statement, it will list out their methods of differentiation, what sort of strategy to apply and also their steps to implement based on a period of time.

In the alignment of supply with corporate strategy, there are many factors of consideration that the company may chose from looking at their target customer as well. However, there will be strengths and weaknesses in every move made. The only thing the organization can do is to minimize their mistakes and carefully make their approach as well as solving possible problems that arise.

In the near future, Perodua's R&D plans to increase its in-house production in developing its own 'full upper-body' and 'floor development.' To date, the R&D has already developed 8 models in-house, beginning with simple cosmetic changes and gradually increasing the capabilities to skin change and structural modifications.

Performance Management

Performance management can be known as a proper process whereby the organization is related to groups, teams, employees and also stakeholders having an objective of achieving the goals of their organization (Harrison & van Hoek, 2008).

In successful organizations, good performance management lies within their people and practiced well enough to ensure success. Rewards are given in their results of accomplishing missions. It is a motivator to upgrade the performance management and also behavior of workers.

At PERODUA, we believe in constantly motivating and developing our work force. As we continue to grow, one of the strategies to remain focused on achieving our corporate goals is by having competent and qualified employees. We have carefully tailored our training programmes to suit the organization and employee needs.


With the above analysis, it can be seen that Supply Chain Management has a very significant position on company's development. Paragraph 2 and 3 has explained the challenges on supply and make-buy. Therefore making the right decision is also important at this moment. The other paragraphs have given the clear explanation about how to deal with the problems which are relating to the supply chain management. As we can see that dealing with supply chain management probably is very important for a company's development.

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