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Ducati Company was using lean production during their changing of supply chain management. Lean production include wide variety of management practices such as just in time which is mention in the case study, quality management, works teams, cellular manufacturing, supplier management and integrated systems. The main practice of lean production is to create a streamlined, high quality management that will produce finish product without wasting and satisfy customer needs (Shah and Ward, 2003, pg.129-149). Ducati Company can save cost and time by using lean. Based on the case study, measures of quality have increased 70 percent.
The Toyota Production System (TPS) [as in Herron and Hicks's study (as cited in S. Spear and K. H. Bowen, 1999, p.97-106)] was developed in Japan by Ohno and Shingo and forms the basis of lean manufacturing. Other companies such as Toyota also using lean production. Toyota Company focused on minimizes waste in all of its operation. Toyota could not afford the high capital-intensive mass production that used in USA (Herron and Hicks's, 2008, pg.524-531). Besides, Toyota Company used Kaizen, cellular manufacturing, synchronous manufacturing, poka-yoke, standardize working and work place organization to reduce the waste in production [as in Herron and Hicks's study (as cited in J. Bicheno, 2000)].
Based on case study, Ducati revamped its supply chain in operation turnaround. By using the turnaround, it was significantly reduce the inventory lead times, better performance, and more space and minimize waste on resource and increase productivity and quality of goods.[as in Herron and Hicks's study ( as cited in S. J. Pavnaskar, J. K. Gershenson and A. B. Jambekar, 2003, pg.3075-3090)].
In 1996, the Society of Motor Manufacturers and Traders (SMMT) Herron and Hicks's study (as cited in SMMC, 2006) was supported by Honda, Nissan, Toyota, General Motors and Volkswagen ( Herron and Hicks's, 2008, pg.524-531). They are also using supply chain management. This means that this company had learned from Ducati how important of supply chain management.
Investments in supplier development teams was establish by japans car manufacturers, as in Herron and Hicks's study (as cited in M. Sako, 2004, pg.281-308)]. Supplier had been train in how to manufacturing in best practices and been promoted the dissemination of lean manufacturing in supply chain (Herron and Hicks's, 2008, pg. 524-531). Nissan transferred lean expertise to its UK plant in Sunderland from Japan with three nominal levels of abstraction which are Kaizen, skill control, 5S/5C and standard operations, autonomous maintenance, just-in-time and systematic problem solving and total quality management (TQM) and benchmarking. This transfer had taken 20 years with training for employees and high level of support in UK. Nissan and the IF provided NEPA with the master engineers who provided expertise in lean manufacturing (Herron and Hicks's, 2008, pg. 524-531).
Total quality management was a multi-dimension concept that focuses on quality, techniques and instruments for controlling quality (Anderson et al., 1994; Dean and Bowen, 1994; Flynn et al., 1995; Garvin, 1984 and Garvin, 1987; Saraph et al., 1989; among others).During 1970s, Total Quality Management was around for a long period, and it was practices and industrial adaptation in the US. Japanese automobile also focus on their product and reliability. Toyota Company, by using the "Toyota-system", focuses on lean production, just in time and quality control through their product. (Lee, H.L and Whang, S, 2005, pg. 289-300). Ducati also use total quality management to control its own motorcycle quality.
Elements in the TOM, the well-known quality pioneers (Deming, 1986 and Juran, 1986) pointed out that how important top management leadership, which can be considered as the most influential TQM element, affects other elements of the organization (Anderson et al., 1995 and Flynn et al., 1995; cf. Kaynak, 2003). Top management was an important element because it was the leader that makes decision by using which techniques to run the production. By using the quality elements can lead the company to produce high quality product by using low cost. Changing organization strategy in order to implement TQM practices is that top management is very important (Hamlin et al., 1997 and Ho et al., 1999; cf. Kaynak, 2003).
Besides that, employee involvement and empowering is essential elements in making continuous improvement. It is because this can lead employee to work harder and involving in the change process, and they won't resist to change [ as in Jung, J. Y and Wang, Y. J. (as cited in Flynn et al, 1995 and Handfield et al., 1998; cf. Kaynak, 2003)].
Next is long term based relationship with supplier. For instance, supplier partnerships are key elements for TQM [as in Jung, J. Y and Wang, Y. J. (as cited in Kaynak, 2003 and Trent and Monczka, 1999)]. Other company had learned that by using the relationship with supplier and customer is the elements key for success in TQM, it is because that have a good relationship we can understand what the customer needs and wants and supplier can satisfy their need and wants.
Six Sigma implementation aims at improving customer satisfaction, by mean of improved processes capability (as in Brun, 2010). Six sigma are tools to improving customers' satisfaction of the company product. Based on the case study, Ducati production volume has increased more than threefold, from 12000 motorcycles a year to more than 40000 a year when they revamped their supply chain management.
2. To achieve result such as those at Ducati, how important is the free flow of information among members of a company's supply chain? Explain.
Based on the case study, Ducati had to involve its supply chain partner in the "operational turnaround" because 92 percent of the cost of a typical motorcycle was come from the company's supply chain. Ducati need to transfer the culture and the technique for creating a lean and efficient supply chain to their supplier. As Ducati consider their suppliers to be an extensions of Ducati which connected them via the web to accelerate the flow of information. Information free flow involves sharing information across company boundaries with supply chain member and it is needed since organization is unable to generate all their required resource internally.
Therefore interact with other organization that controls their critical resources allow them to compete effectively in their environment [as in Samaddar, Nargundkar and Daley study (as cited in Yuchtman and Seashore, 1967, pg.891-903)]. According to (Towill, 1996; Towill and Mason-Jones, 1997; Mason-Jones and Towill, 1999a; Towill et al., 2000, 2002) decision makers need a depend 'big picture' of the process so they can manage the supply chain as one single company, to minimum uncertainty updated feed forward and feedback information flow coupled with optimal decision making. When information is shared in between supply chain networks, it can result a more efficient flow of goods and services (Anand and Mendelson, 1997), reduced inventory level, and lower costs (Yu, Yan and Cheng, 2001, pg.114-119), which benefits the overall network. Since Ducati is linking their suppliers that are as close as a few block away as well as many that are scattered around Europe and as far as Japan, they can exchange information such as production planning, part price list, invoices and quality report.
Limitation of information in the supply chain will lead to unnecessary inventory investment, poor customer services, wrong capacity allocation, reduce revenue and missed production (Lee, Padmanabhan, and Whang, 1997, pg. 93-102). According to (P.Fiala, 2004, pg.419-423) information exchange is a very important issue for coordinating actions. If member of the supply chain have free flow information it can reduced their lead time of information such as orders, demand and capacity forecast, point-of-sale data for the whole supply chain. (Lee, So and Tang, 2000, pg.626-643) Find the benefits of sales information sharing and identified the drivers that have significant impacts. Manufacture obtains larger inventory or cost reduction when the demand is highly associated if the lead time is long. Eventually customer will receive a higher quality, cost-effective product in a shorter amount of time.
In addition, Ducati's new supply chain management processes that support information-sharing activities aim to support data sharing and communication between supply chain partners which allow the company reduced the bullwhip effect. Plan along the supply chain and coordinating information can control Bullwhip effect and improve their supply chain performance (Lee, Padmanabhan, and Whang, 1997, pg. 93-102).
Besides, information sharing enhances the agility of firms while improved the stability and performance of the whole supply chain. According [as in Hsu, Chiu, Chen and Liu study (as cited in Li et al., 2006, pg.18-21)], the importance of sensible information and quantified the impact of upstream disorder on supply chain. When received information from other member of the supply chain, everything remain the same except other than receive an order from the previous supply chain member but also receives end users demand for the current period ( Dejonckheere, Disney, Lambrecht and Towill,2004, pg.727-750).
Refer to [as in Samaddar, Nargundkar and Daley study (as cited in Yuchtman, Sahin and Robinson, 2002, pg.505-536)] information can flow along the supply chain in sequence, within orders posed by each supply chain members or it may be share by them. Free flow information can be achieved by using information and communication technologies based tools which allow supply chain members to get information at the real time with accurate information on the point of sale demand to allow them to forecast replenishment needs inventory need and eliminate under or overestimated orders and inventories (Pendroso and Nakano, 2009, pg. 376-384).
Information sharing allows better planning and coordination of the supply chain [as in Welker, Vaart, and Donk study (as cited in Koh and Saad, 2006, pg.545-554)]. Moreover, information sharing is an important aspect on assimilation and collaborative inter-organizational relationship (Huang, Lau and Mak, 2003, pg.1483-1571). Ordering process is a function related to the information sharing and it is important to process in the supply chain [as in Welker, Vaart, and Donk study (as cited in Bertrand et al., 1990; Gustin et al., 1995; Parente, 1998; Scho¨ nsleben, 2004; Stadtler and Kilger, 2002)].Supply chain management can make better decision on the ordering process, production plan and capacity allocation therefore the supply chain dynamics can be optimized (Huang, Lau and Mak, 2003, pg.1483-1571).
Furthermore, information free flow is important because partnership always formed so that individual can share unique information (Hsu, Chiu, Chen and Liu, 2009, pg.101-121). There should be levels of information sharing for mutual benefits and cooperation (Christiansen, Rohde and Hald, 2003, pg.23-30). For example, companies share data with suppliers to reduce cost and bargaining also increase efficiency.
3. What barriers exist to the free flow of information among the members of a company's supply chain, and what can managers do to overcome those barriers?
There are a few barriers exist to the free flow of information among the members of a company's supply chain. First of all, workers are required to move parts long distances for no reason because the company's flow of materials through the factory was inefficient (Scarborough, N. M., Wilson, D.L., & Zimmerer, T.W., 2009, pg.630). Besides that, Ducati are forced to trim its roster of vendors to 175 because some suppliers simply refused to participate (Scarborough, N. M., Wilson, D.L., & Zimmerer, T.W., 2009, pg.630)
Generally, vertically linked organisations from raw material sources to end users includes in supply chain (ANU H. BASK1* & JARI JUGA2, 2001, pg.138). Supply Chain Management is known as a wider concept covering all business processes between these organisations (Bowersox et al., 1999; Cooper et al., 1997a; Lambert et al., 1998). Good supply chain management will define who will stay and who will leave the market (Martins & Laugeni, 2002). There is a downstream flow of material from the factory via the factory warehouse, the distributor and the retailer to the customer (Bernhard J. Angerhofer, Marios C. Angelides, pg.343). Orders flow upstream and there is a delay associated with each echelon in the chain, representing, for instance, the production lead-time or delays for administrative tasks such as order processing (Bernhard J. Angerhofer, Marios C. Angelides, and pg.343). "Forrester Supply Chain" or Forrester Model is a simple four-level supply chain which is consisting of factory, a warehouse, a distributor and a retailer (Bernhard J. Angerhofer, Marios C. Angelides, pg.343).
Forester effect or bullwhip effect is a common problem to those who deal with supply chain management. According to (Lee, Padmanabhan, & Whang, 1997, pg. 93-102), this effect occurs when there is a lack of coordination among the elements of the supply chain at the moment when there is a variation in the quantity demanded by the final client, with the reactions of suppliers tending to be amplified at each passage upstream through the chain. All of them react increasing or diminishing the orders differently from what is really necessary, seeking to protect themselves. The lack of coordination felt mainly by the Forester effect is caused by two reasons which are the different stages of the supply chain has conflicting objectives, and the information sent among the different stages suffers delays and distortions according to Chopra & Meindl (2001).
Managers can overcome those barriers by implementing shorter delivery times, more reliable delivery promises, fewer schedule disruptions, lower stock levels, fewer quality problems and stable prices which are offered by Integrated Supply Chain Management (Christopher, 1998).
Besides that, System Dynamics is a computer-aided approach for analysing and solving complex problems with a focus on policy analysis and design. Previously System Dynamics is known as Industrial Dynamics. Industrial Dynamics defined as the study of the information feedback characteristics of industrial activity to show how organizational structure, time delays in decision and actions interact to influence the success of the enterprise and amplification in policies (Forrester 1961). Industrial Dynamics treat the interactions between the flows of information, money, orders, materials, personnel, and capital equipment in a company, an industry, or a national economy. The application of System Dynamics Modelling to Supply Chain Management has its roots in Industrial Dynamics (Forrester 1958, 1961). The "Forrester Model" is a model of a production-distribution system. This model is described in terms of six interacting flow systems which are the flows of information, materials, orders, money, manpower, and capital equipment.
RFID (Radio Frequency Identification) is an emerging technology intended to complement or replace traditional barcode technology to identify, track, and trace items automatically (Zaheeruddin Asif, Munir Mandviwalla, 2005, pg.393). The drive toward adopting RFID is being further enhanced by mandates from large retailers such as Wal-Mart and Target, and the US Department of Defense, who require all suppliers to implement this technology within the next few years ( Zaheeruddin Asif, Munir Mandviwalla, 2005, pg.394). RFID is claimed to add intelligence to and to minimize human intervention in the item identification process by using electronic tags. The tags are significantly different from printed barcodes in their capacity to hold data, the range at which the tags can be read, and the absence of line-of-sight constraints (Zaheeruddin Asif, Munir Mandviwalla, 2005, pg.393). RFID can be used to reduce labour costs, reduce out-of-stock supply chain cost, reduction in theft, improved tracking through warehousing and distribution centres and reduced inventory holding and carrying costs (Zaheeruddin Asif, Munir Mandviwalla, 2005, pg.393). A key goal of supply chain management is greater speed and cost effectiveness (Lee, 2004, pg. 102-112) Marketing tends to focus on pricing, customers, and product. An RFID-enabled integrated supply chain will likely lead to greater speed and perhaps, over time, lower costs. However, speed and cost are the relatively easy and obvious goals of RFID enabling a supply chain. Lee et al. (1997, pg. 93-102) propose information sharing, channel alignment and operational efficiency as strategies to counteract the "bullwhip effect".
Sterman (1989, pg.345) presents a generic model of a stock management system which forms the basic structure in an environment for a decision-making experiment. This generic stock management structure is applicable to Ducati such as raw material ordering, production control, or at a macroeconomic level, the control of the stock of money. The physical stock and low structure of the system, and the decision rules used to control the system are parts of the model.
Ducati's managers could use the "Beer Game" (Sterman 1984, pg.345) to conduct an experiment on managing a simulated industrial production and distribution system. The Beer Game presents a multi-echelon production distribution system, containing multiple actors, non-linearities, feedbacks and time delays throughout the supply line.
Ducati's managers can include top management commitment; cross-functional teams with feedback between management and staff, and the use of new information systems to overcome the barriers to the free flow of information (Bernhard J. Angerhofer, Marios C. Angelides, pg.344).Time compression strategies based on simulation allow to predict supply chain performance improvements ( Towill, 1996b, pg. 15-27.) Ducati's managers can over the barriers by using re-engineering strategies which are reduction in all lead-times such as material, information and cash-flows, elimination of time delays in decision points and provision of marked information to all upstream decision makers.
Collaborative management envisages the reduction of negative consequences of the bullwhip effect or the lack of coordination in supply chains. It can be said that the main objective of collaborative management is to obtain, by means of shared planning, a greater precision in sales forecasts and replenishment for all in the chain. As a result, it is possible to decrease the inventory along the supply chain and obtain better service levels that in turn tend to result in sales increases and cost reductions (Skjoett-Larsen, Thernoe, & Andresen, 2003, pg.531-549).
According to Retzlaff-Roberts & Nichols (1997, pg.69-78), simulation offers an effective analytical tool for organizations that need to measure the performance of a cycle time in the environment of supply chains.
For Pedgen, Shannon,& Sadowski (1995), simulation is the process of projecting a computer model of a real system and conducting experiments with this model with the purpose of understanding its behaviour and/or evaluating strategies for its operation. In this way, simulation models of supply chains may be used to study several processes that may comprise factories, distribution centres, and transport systems, among others (Miller & Pegden, 2000, pg. 63-66.).
Supply chain simulation is used in decision taking in the case of implementing a new supply chain, or for performing modifications to existing chains. These changes may be classified in two categories which are structural and operational. Structural decisions affect the supply chain in long terms; however, operational decisions affect the supply chain in short terms. Simulation may be used as a tool to assist decision taking in both cases (Pundoor, 2001).
According to Maria (1997, pg.7-13), Pedgen, Shannon, & Sadowski (1995), Banks, et al., (2002, pg.1652-1658), and Chang & Makatsoris (2001, pg. 24-30), simulation assists the understanding of the entire process and characteristics of the supply chain by means of graphics and charts. Simulation has the capacity to capture data for analysis. Users may model unexpected events in certain areas and understand the impact of these events to the supply. The risk inherent to changes in planning can be diminished drastically by simulation. Several alternatives may be tested by users before making the change to planning. Stimulation can be used to investigate the impact of changes due to a greater demand for components of the supply chain. Relations between suppliers and other components of the supply chains can be used to rationalize the number and size of order lots, using as a basis the total of costs, quality, flexibility and responsibilities. Opportunities can also be used to diminish the varieties of product components and standardize them throughout the supply chains.