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CHAPTER 2 THE GLOBAL AND SOUTH AFRICAN AUTOMOTIVE INDUSTRY
INTRODUCTION
The previous chapter dealt with the background on and introduction to the study. In this chapter the role and trends in the automotive industry, world-wide and in South Africa, are described. This will provide the background on this study in the automotive industry and also serve as further justification for the study. The next section provides an overview of the global automotive industry
MAIN PARTIES IN THE AUTOMOTIVE INDUSTRY
As indicated in section 1.2, the automotive industry consists mainly of original equipment manufacturers, original equipment suppliers, automotive component manufacturers and the automotive retail and aftermarket. Figure 2.1 indicates the main parties or types of businesses in the automotive industry or automotive supply chains.As indicated in figure 2.1, automotive component manufacturers supply automotive spares to original equipment manufacturers (vehicle manufacturers), original equipment suppliers and the automotive retail and aftermarket. Candler (1998:6) notes that OEMs do not wish to deal with a large number of suppliers because this results in increased expenditure in administration, increased design costs and quality problems. Hence, instead of dealing with a large number of suppliers, suppliers are organised into tiers, where first-tier suppliers are left to design many of the assemblies themselves and second-tier suppliers to assist in designing and producing the components. According to Humphrey and Memedovic (2003:21), the global automotive industry is composed of a number of different parts, as outlined in table 2.1. The requirements for these different sections are quite clear.
OVERVIEW OF THE GLOBAL AUTOMOTIVE INDUSTRY
Introduction
Since the Industrial Revolution, the automotive industry has consistently been one of the most global of all industries. This industry has manufactured goods for global distribution and use and is led by a small number of businesses with global recognition (Humphrey & Memodovic 2003:2; Sutherland, Gunther, Allen, Bauer, Bras, Gutowski, Murphy, Piwonka, Sheng, Thurston & Wolff 2004:107). Morris et al (2004:129) acknowledge that in the last two decades, the automotive industry has experienced major changes, which have come about through the pressure of globalisation, the introduction of lean production practices and the development of modularisation. These changes have thus affected the relationships between original equipment manufacturers (OEMs) and their suppliers, most particularly those in the first tier, known as automotive component manufacturers (ACMs) – the main focus of this study The global automotive industry is currently led by the main manufacturers (OEMs), that is, Toyota, General Motors, Volkswagen, Ford, Honda, PSA, Nissan, BMW and Chrysler, which function in an international competitive market. The globalisation of the automotive industry has gathered momentum since 1995 owing to the building of facilities in foreign countries and the formation of mergers between multinational automotive assemblers (Bera 2004:1). The level of concentration in the industry between 2006 and 2007 is shown in table 2.2.In order to clarify the world ranking in table 2.2, it should be noted that the listed unit production excludes the manufacture of light commercial vehicles (LCVs), heavy commercial vehicles (HCVs) and heavy buses. For example, in 2006, total production (including cars, LCVs, HCVs and heavy buses) for General Motors was 8 926 160 and 8 036 019 for Toyota. In 2007, total production for General Motors was 9 349 818 and 8 534 690 for Toyota. Therefore the number one world ranking manufacturer for total vehicles in 2006 and 2007 was General Motors even though Toyota produced more passenger cars. According to Barnes and Morris (2008:32), the automotive industry is one of the largest and most advanced scale industries in terms of output levels and direct and indirect employment. Dannenberg and Kleinhans (2004:1) comment that 8.8 million people are employed in the global automotive industry. The industry contributes 15% of the word’s gross domestic product and is made up of both automotive assemblers and automotive component manufacturers. Maxton and Wormald (2004:3) agree with Barnes and Morris that the industry is one of the most vital economic sectors and the world’s largest single manufacturing activity. Dannenberg and Kleinhans (2004:1) comment further that globally, the value creation characterised by automotive progress and production (excluding sales,replacement components and service) is expected to grow in the region of 2.6% annually for the next 12 years, that is, from EUR645 billion in 2004 to EUR903 billion in 2015.
DECLARATION
ACKNOWLEDGEMENTS
SUMMARY
TABLE OF CONTENTS
LIST OF FIGURES
LIST OF TABLES
APPENDICES
LIST OF COMMONLY USED ACRONYMS
KEYWORDS
CHAPTER 1: INTRODUCTION
1.1 BACKGROUND
1.2 CATEGORIES OF BUSINESSES
1.3 SUPPLY CHAIN MANAGEMENT
1.3.1 The concept of supply chain and supply chain management
1.3.2 Dimensions of the supply chain management philosophy
1.3.3 The impact of Japanese best practices in supply chain management
1.3.3.1 Total quality management (TQM)
1.3.3.2 Continuous improvement (CI)
1.3.3.3 Just-in-time (JIT)
1.3.3.4 Lean production
1.3.4 Systems integration
1.4 SCOPE OF THE STUDY
1.5 RATIONALE FOR THE STUDY
1.6 PROBLEM STATEMENT AND OBJECTIVES OF THE STUDY
1.7 RESEARCH SYNOPSIS
1.8 EXPECTED CONTRIBUTION TO THE BODY OF KNOWLEDGE
1.9 LIMITATIONS OF THE RESEARCH STUDY
1.10 AN OVERVIEW OF THESES ON RELATED RESEARCH
1.11 OUTLINE OF THE STUDY
CHAPTER 2: THE GLOBAL AND SOUTH AFRICAN AUTOMOTIVE INDUSTRY
2.1 INTRODUCTION
2.2 MAIN PARTIES IN THE AUTOMOTIVE INDUSTRY
2.3 OVERVIEW OF THE GLOBAL AUTOMOTIVE INDUSTRY
2.3.1 Introduction
2.3.2 Changes in the global automotive industry
2.3.2.1 North American automotive market
2.3.2.2 European automotive market
2.3.2.3 Asian automotive industry
2.3.2.4 Japan’s automotive industry
2.3.2.5 South Korea’s automotive industry
2.3.2.6 China’s automotive industry
2.3.2.7 India’s automotive industry
2.3.2.8 The Australian automotive industry
2.3.3 Conclusion
2.4 THE SOUTH AFRICAN AUTOMOTIVE INDUSTRY
2.4.1 History of the motor industry in South Africa
2.4.2 Employment levels
2.4.3 The size and role of the South African motor industry
2.4.4 Broad-based black economic empowerment
2.5 CONCLUSION
CHAPTER 3: SUPPLY CHAINS, SUPPLY CHAIN MANAGEMENT AND RELATED CONCEPTS
3.1 INTRODUCTION
3.2 SUPPLY CHAIN MANAGEMENT
3.2.1 An overview of supply chain management
3.2.2 Supply Chain/value chain
3.2.3 Porter’s value chain
3.2.3.1 Porter’s value chain Model
3.3 HISTORICAL DEVELOPMENT OF SUPPLY CHAIN
MANAGEMENT
3.4 OBJECTIVES OF SUPPLY CHAIN MANAGEMENT
3.5 DIMENSIONS OF SUPPLY CHAIN MANAGEMENT
3.6 BUILDING RELATIONSHIPS
3.6.1 Development and management of supply chain relationships
3.6.2 Types of buyer-supplier relationships
3.6.2.1 Transactional relationships
3.6.2.2 Collaborative relationships
3.6.2.3 Alliance relationships
3.7 SUPPLY CHAIN INTEGRATION
3.7.1 Information sharing
3.7.2 Levels of integration
3.7.2.1 Cross-functional integration
3.7.2.2 Cross-organisational integration
3.7.2.3 Supply chain community integration
3.8 SUPPLY CHAIN DESIGN
3.9 SUPPLY CHAINS FLOWS
3.9.1 Materials flow (logistics activities)
3.9.2 Information flow
3.9.3 Funds flow
3.9.4 “Cradle to Grave” flow
3.10 FUTURE TRENDS IN SUPPLY CHAIN MANAGEMENT
3.10.1 The knowledge revolution
3.10.2 Continuous improvement requirements
3.10.3 Lean thinking
3.10.4 Cycle time and response time
3.10.5 A values-based infrastructure
3.10.6 The greening of supply chain management
3.10.7 Virtual supply chain management
3.11 SUPPLY CHAIN ISSUES IN THE SOUTH AFRICAN MOTOR INDUSTRY
3.11.1 Public transport
3.11.1.1 Inefficiencies at ports
3.11.1.2 High port costs
3.12 CONCLUSION
CHAPTER 4: SUPPLY CHAIN MANAGEMENT PRACTICES AND TOOLS
4.1 INTRODUCTION
4.2 INFORMATION TECHNOLOGY
4.2.1 Electronic data interchange (EDI)
4.2.2 Enterprise resource planning (ERP) systems
4.2.3 Supply chain analytics (SCA) systems
4.2.4 Emerging information technologies and their impact on SCM
4.3 SUPPLY CHAIN FOUNDATIONS
4.3.1 System slack
4.3.2 Quality management and TQM
4.3.3 Lean and Just in Time
4.3.4 Pull versus Push
4.3.5 Line Balancing
4.3.6 Vendor-managed inventory
4.4 FUNCTIONS INCLUDED IN SUPPLY CHAIN MANAGEMENT
4.4.1 Demand management
4.4.2 Inventory management
4.4.3 Facility site selection and design
4.4.4 Materials handling
4.4.5 Packaging
4.4.6 Warehouse management
4.4.7 Procurement
4.4.8 Logistics communication
4.4.9 Transport
4.4.10 Reverse logistics
4.4.11 Customer service
4.5 VALUE STREAM MAPPING (VSM)
4.6 TOTAL COST OF OWNERSHIP (TCO)
4.7 EARLY SUPPLIER INVOLVEMENT (ESI)
4.8 CONCLUSION
CHAPTER 5 : RESEARCH DESIGN AND METHODOLOGY
5.1 INTRODUCTION
5.2 THE MEANING OF RESEARCH DESIGN
5.2.1 The meaning of research
5.2.2 The meaning of design
5.3 PROBLEM STATEMENT AND OBJECTIVES OF THE STUDY
5.3.1 Primary objectives
5.3.2 Secondary objectives
5.4 HYPOTHESES
5.5 VALIDITY AND RELIABILITY CONSIDERATIONS
5.5.1 Validity
5.5.2 Reliability
5.6 THE METHODOLOGICAL APPROACH ADOPTED FOR THIS RESEARCH PROJECT
5.7 QUANTITATIVE VERSUS QUALITATIVE RESEARCH
5.7.1 Qualitative research
5.7.2 Quantitative research
5.8 FIRST PHASE OF THE EMPIRICAL RESEARCH
5.8.1 Preparing for data collection
5.8.2 Data collection
5.8.3 Analysing data
5.8.3.1 Categorisation
5.8.3.2 Unitising data
5.8.3.3 Writing up the findings
5.9 SECOND PHASE OF THE EMPIRICAL RESEARCH
5.10 RESEARCH PURPOSE
5.11 RESEARCH STRATEGIES
5.12 CONCLUSION
CHAPTER 6: PROBLEMS EXPERIENCED BY ACMS FROM THEIR CUSTOMERS’ PERSPECTIVE
6.1 INTRODUCTION
6.2 INTERVIEWS WITH FORD MOTOR COMPANY SOUTHERN
AFRICA AND TOYOTA MOTOR COMPANY SOUTH AFRICA
6.3 ANALYSIS OF DATA: SECTION 1 COMPANY PROFILE OF BOTH OEMs
6.4 ANALYSIS OF DATA: SECTION 2 GENERAL
6.5 ANALYSIS OF DATA: SECTION 3
6.6 EXTERNAL FACTOR
6.7 PROBLEMS IDENTIFIED
6.8 CONCLUSION
CHAPTER 7: SUPPLY CHAIN PROBLEMS FACING ACMS IN SOUTH AFRICA: EMPIRICAL RESEARCH
7.1 INTRODUCTION
7.2 RESPONSE RATE
7.3 DATA PROCESSING
7.4 RESEARCH RESULTS
7.5 RANKING OF SUPPLY CHAIN PROBLEMS CURRENTLY
EXPERIENCE
7.6 HYPOTHESES TESTING
7.7 CONCLUSION
CHAPTER 8: SUMMARY, RECOMMENDATIONS, CAVEATS AND SUGGESTIONS FOR FUTURE RESEARCH
8.1 INTRODUCTION
8.2 DISCUSSION OF AND RECOMMENATIONS REGARDING THE MAIN FINDINGS AS RANKED IN THE STATISTICAL ANALYSES
8.3 THE MOST SIGNIFICANT CORRELATIONS
8.4 LIMITATIONS OF THE STUDY AND THE WAY FORWARD FOR FUTURE RESEARCH
8.5 CONTRIBUTION OF THE RESEARCH STUDY
8.6 CONCLUSION
BILIOGRAPHY
