Part I- Sourcing & Procurement ................................................................................................3
1.1 Definition of Mercedes-Benz's current sourcing processError! Bookmark not
1.2 Analysis of the internal situation of the commodity........................................................6
1.3. Analyze the external situation, supply market, and main suppliers................................7
1.4 SWOT analysis ................................................................................................................8
1.5 Different sourcing levers by suitable criteria regarding commodity .............................10
1.6 Sourcing strategy for commodities in Mercedes-Benz..................................................10
1.7 Digitalization concepts/methods could be applied in your sourcing strategy................12
Part II- Logistics and Production Management .......................................................................17
2.1 Advantages and Disadvantages of logistic outsourcing- ...............................................17
2.2 Forecasting of sales- ......................................................................................................20
Part III- Integrated Supply Chain Design ................................................................................25
3.1 Recommendation for Improvements- ............................................................................25
3.2 Appropriate Supply Chain Set-up-.................................................................................27
The upcoming parts of this report will cover three major sections of supply chain
management. The concept of sourcing and procurement that has been Mercedes-Benz has
been discussed elaborately. Along with this, the report discussed the commodities that
Mercedes-Benz aims to use by 2025. The internal situation of the commodity, as analyzed by
Porter's 5 forces, and the external situation, supply market, and main suppliers of the
commodities have been discussed elaborately. The report's main focus is Mercedes-sourcing
Benz's strategy is to emphasize sustainability and maintain a high level of luxury while
reducing carbon emissions.
The report also highlights the importance of maintaining customer satisfaction and
prioritizing employee engagement. The key points mentioned in the report include the trend
towards localizing suppliers and warehouses, the use of single-source purchasing, the
emphasis on sustainability, the commitment to carbon neutrality and electrification, and the
importance of customer and employee engagement. The report also mentions the use of
digitalization concepts and methods in sourcing strategy and the implementation plan to
become an electric-only vehicle producer by 2030.
Along with this, The report provides information on different sourcing levers and commodity
sourcing strategies, along with necessary actions and an implementation plan for Mercedes-
Benz. The report discusses the concept of logistic outsourcing and its advantages and
disadvantages. It highlights the case of ALPHAPLUS, a global manufacturer of explosion
protection solutions, facing delivery performance issues at its business unit in Germany. The
report explains that logistic outsourcing can help solve distribution issues by taking the help
of a third party for supply chain functions, and it is a cost-saving measure for organizations.
Outsourcing provides access to outside experts, improves services, allows companies to focus
on their core competencies, and provides access to new technology. It also reduces raw
material usage and creates new alliances with other companies while sharing risk, asset
management, and knowledge. The report highlights three theories - transaction cost
economies, resources-based theory, and network theory - to decide on outsourcing logistics.
It mentions that outsourcing also has some disadvantages, such as brand loss, misuse of IT,
and strategic misalignment. Finally, the report explains the procedural steps involved in
logistic outsourcing, which includes preparation, vendor selection, transition, management of
the relationship, and considerations.
Part I- Sourcing & Procurement
1.1 Mercedes-current Benz's sourcing strategy has been established.
Mercedes-Benz, sources their auto vehicle materials from regions of North America,
Europe, and Asia
● Mercedes's sourcing process is found to be complex and uncertain due to their heavy
and changing requirements
● The organization has over 60000 direct and non-production material suppliers (Devlin
& Yang, 2022)
Being one of the biggest automobile organizations, Mercedes-Benz sources its requires
supplies from all around the world and has around 60,000 direct and non-production material
suppliers. The sourcing process is rather complex due to its wide requirement of different
automatic parts and components. The organization sources most of its raw material supplies
from regions of Asia, North America, and Europe.
Definition of the required commodities
● Mercedes-Benz has aimed to bring C02 and fossil-free steel into use for developing
their automobile series in 2025 (Wang et al., 2021).
● As a result, in order to meet its objectives, the organization must source Green steel
suppliers by 2025.
Mercedes-Benz is one of the world's largest automobile corporations. On 27, 20921, the
organization announced the use of green steel in its cars by 2025 and has invested in the
Swedish start-up H2 Green Steel (H2GS) to develop a complete carbon-free steal into its
series of automobile production. Due to this, Mercedes has acknowledged a requirement for
sourcing these commodities from a fossil-free steel organization within the year 2025.
Strategic procurement process for the commodities and specific activities for sourcing
The strategic sourcing process of the commodity will include.
○ Formulating (Olofsson, 2019)
Analyzing the Green Steel requirement and overall quantity requirement Planning of the
actions and tactics which will include eight steps, This includes, Developing a profile of the
category, Analyzing the supply market, Developing a strategic sourcing procedure,
Developing a contact, and effectively communicating and negotiating with the selected
supplier, Implementing and integrating the strategic sourcing process, Benchmarking and
developing of KPI, Developing a supply risk management plan. Then it Formulates the
overall plan and lastly Implements the sourcing procedure. These are the strategic sourcing
methods that Mercedes-Benz will follow to obtain the commodities that the organization
requires to meet its goals. The strategic sourcing process activities will require to follow
seven steps which include category defining of the required commodity, analysis of the
supply market, developing a sourcing strategy, negotiating and developing a contract with the
selected supplier, implementing and integrating, parts of strategic sourcing and benchmarking
1.2 Analysis of the internal situation of the commodity
Porter's 5 forces High/low
The threat of new entrance (new automobile
Bargaining power of customer (Mercedes-Benz) Low
Alternatives in the market (other supplying
Supplier bargaining power (the 2nd tier
Competitors in the sector (a competitor of
Mercedes that is purchasing the same raw
material) (Vogl & Åhman, 2019)
Within the internal market, it has been found that the threat of new entrants in the local
market is low, due to strong and high entry barriers and the requirements of the huge
investment in the market. Hence, new organizations intending to enter the market will not
only have to invest a large sum of money to enter the market but will also be required to
make connections and investments in suppliers. The bargaining power of Mercedes to their
supplier is found to be moderate as there are limited suppliers in the market who are eligible
to supply green steel to the organization, causing the bargaining power of Mercedes to be
low. In December 2021, Heine + Binswanger, GMH Group, and Sandvik Cormorant formed
the very first Green Steel Partnership in Germany. This causes the country to have only a
limited supply of green steel currently. Hence, there are only a few supplying companies with
no significant substitute found for green steel. The bargaining power of suppliers is high
because there are only a limited number of organizations that can provide Mercedes with
green steel supply in the local market, due to this there are low to no options for switching to
another supplier. The competitive threat in this sector is found huge because numerous well-
known automobile companies in the country have similar approaches to supplying green steel
to achieve sustainability, causing huge competition in terms of getting supplied for the
required commodities. Hence, through this, the organization might find difficulties in
sourcing the required commodities from its local market.
1.3. Analyze the external situation, supply market, and main suppliers.
● Governmental policies have been
developed to protect the environment.
● This encouraged the emergence of the
green steel market
● The supply market of green steel has
a sustainable growth of $83.4
million according to 2021.
● This influenced 131.8% growth
● The European region is the largest
supply market of green steel while
● The development of CCUS
technology across the world has
northern America is the second largest
supply market of green steel (Vogl,
Åhman & Nilsson, 2021)
influenced the development of green
The global policies enforced towards sustainability have encouraged the development of
green steel that can be used in both automobiles as well as construction. The global green
steel market is found to have a value of around $83.4 million during 2021 which is predicted
to have a 131.8% growth from $386,119 million within the next ten years. The European and
North American region has the highest development and use of CCUS technologies causing
Europe to become the largest market of green steel, while northern America is the second
largest green steel growing market. This makes northern America and European regions the
main source of sourcing green steel for Mercedes's sustainable approaches.
1.4 SWOT analysis
● The OEMs are using control towers, digital tools as well as asset tracking so that the
performance of the supply chains could be developed (Andreeva & Petikhin, 2022).
● The Daimler supplier Sustainability standards do work as a guide for the performance
of the supply chains of Mercedes.
The strengths of the supply chains of Mercedes. If these strengths could be used effectively
from the side of the Mercedes company, then their production processes can be maintained
without any restrictions. With every consecutive development in the market as well as with
every innovation the supply chain also develops dynamically. The supply chains are shifted
to closed loops so that the materials can be recycled or reused for the long term.
● The covid-19 has resulted in supply chain disruptions which resulted in the weakening
of the supply chain's production capacities.
● As a result of the covid-19, the suppliers and the OEMs of the automotive supply
chains are looking for alternative sourcing.
Better technologies are required to be applied to supply chain management so that the
production processes can be maintained equally in the long run. Better management of the
hotspots can help the supply chains to maintain their performance. The shortages of raw
materials are increasing day by day. Like the normal times of these shortages, the supply
chains are unable to rectify these increasing loopholes in the automotive sectors.
● The requests to develop risk hotspots can help the existing supply chains to develop
(Li & Wang, 2021).
● Corrections could be made in the places where violations are found in the supply
Better opportunities can be created with the application of artificial intelligence systems.
Automobiles can create good supply chains by applying AI systems to overlook their
operations. The processes of examining as well as creating audits do help the supply
chains to improve their performance.
● If the risk hotspots are not identified at the right time, then they can act as a threat to
these supply chains.
● If supply chains cannot provide transparency among themselves, this could pose a
challenge to these supply chains.
These threats must not be overlooked by the OEMs of Mercedes because these could
hugely harm the production processes of companies like Mercedes. Thus, these supply
chains can be rectified with the help of better-optimized ways of controlling their
1.5 Different sourcing levers by suitable criteria regarding commodity
● The Zycus technologies could help these supply chains to improve their visibility,
● To evaluate the different matters of supply chains market intelligence can be
evaluated through alternative supply sources.
Agile sourcing or alternative sourcing could also help the supply chains to maintain their
operations effectively. The trend of localizing the suppliers is growing rapidly in the post
covid world. This will help companies like Mercedes to avoid travel restrictions so that the
production procedures of their products do not suffer overall.
1.6 Sourcing strategy for commodities in Mercedes-Benz
● The strategy of Mercedes-Benz emphasized keeping luxury and sustainability
maintained hand-on-hand (Li & Wang, 2021).
● Mercedes Benz uses single-source purchasing for a better implication of sourcing
Mercedes Benz is shifting its sourcing strategy to a more localized system of suppliers and
warehouses, especially after the pandemic. The company is working on value chain
propositions so that the reduction in global delivery footprint could have been implemented
adequately. A commodity sourcing strategy is referred to as a purchasing strategy for
providing quality supplies and services within the lowest commodity prices.
The strategic goals of Mercedes-Benz
● The strategic goal of Mercedes-Benz is to maintain profitable and resilient growth.
● Mercedes-Benz is aiming for 100% carbon dioxide neutrality by 2039 (Li & Wang,
● The company has set a target of providing fully electrical versions of all its existing
models by 2025 (Li & Wang, 2021).
Mercedes-business Benz's approach is centered around sustainability and working on
adopting a production approach that would maintain environmental sovereignty and would
not harm the climate as well. The primary goal of the company is to stick to the basics of
building the world's most desirable cars so that the needs and requirements of people can be
fulfilled along with taking firm steps in reducing carbon emissions. The core competence of
the company is based on the desirability, therefore, Mercedes-Benz is committed to standing
out in performance to match the expectations of people. The company is targeting the
achievement of increasing 5% sales every year by the end of 2026. The strategic goal of
Mercedes-Benz is to promise a high and stable return on investment.
Necessary Actions to be taken into consideration.
● Mercedes-Benz has shown commitment to ensuring consumer safety is a given
priority (Andreeva & Petikhin, 2022).
● Mercedes-Benz knows how to be consistent with performance and follow certainty in
actions for the desired outcome.
Mercedes-Benz is regarded as one of the few existing car companies that have emerged as
one of the trusted brands around the globe. The company plans and is known for having a
clear strategy to maintain consumer satisfaction. Therefore, it is suggested that the company
maintain its workforce the way it has been operating. Emphasizing employee engagement
and constantly working on understanding customer preferences and choices by analyzing
consumer feedback would be important for the company to implement things better and
experience the desired results. From taking initiatives in countless pioneering technical
achievements to producing one of the safest cars on the planet for decades long, Mercedes-
Benz has shown an intense level of trust, credibility, and compatibility through their
Implementation plan for Mercedes-Benz
● The plan for Mercedes Benz to become an electric-only vehicle producer by 2030
could only be possible with proper intent and a positive approach (Andreeva &
The implementation plan must be concise and on-point to get better market exposure. The
plan and organizing strategy for Mercedes-Benz has always been vocal about prioritizing
customers before anything, therefore, promoting clear imagery and maintaining a good brand
reputation would help the car company in the continuation of its market dominance in the car
and automobile industry. Efficient marketing and investment in the research and development
programs would help Mercedes-Benz to better analyze market trends and take on action
1.7 Digitalization concepts/methods could be applied in your sourcing strategy
Mercedes Benz is a German automobile manufacturing company with an $84.47 Billion net
worth and is the multinational division of Daimler AG. Mercedes-Benz, together with AUDI
and BMW, is one of the "German Big Three" best-selling luxury automakers. (Mercedes-
Benz, 2023). The progenitor of the automobile makers Gottlieb Daimler, Carl Benz, Wilhelm
Maybach, and Emil Jellineck at the end of the 19th century auspicated the company with
luxury automobile buses, coaches, and trucks with its incorporated slogan “Best or Nothing”.
Daimler Benz AG combined its logo badge with the Laurel wreath embedded in the
Mercedes Benz Halo that defines the high-priced history of racing monochromatic design that
demonstrates ambition and powerful industrial innovation. The company is increasing its
global presence worldwide. Mercedes cars are manufactured in over 17 countries and on 5
Figure 1: Mercedes Benz
Source: (Mercedes-Benz, 2023)
Background of Case Study on Mercedes Benz
This is a brief case study of Mercedes Benz forerunning through Digitalization in cost saving,
supply chain management, and focusing on core competencies. The German automobile
sector has been jolted by two attention-seeking forces: digitalization and decarbonization,
both of which have an impact on the core of the companies. Digitalization of the organization
through technical advancement in sourcing and attainment, Supply Chain Design, logistics,
and production management. This is an evidence-based framework for using blockchain
applications and their fortuitous factors to redefine applications in the sourcing strategies of
Mercedes Benz (Wafaa, Bart, and Host., 2022). The study informs the manufacturing
process, synopsis of its supply network, industry standard, regulation, and market demand.
Mercedes automobiles were developed in Sindelfingen Germany Automotive Plant models
like Vehicles in the Mercedes-Benz M, GL, and R classes. Production facilities in
Tuscaloosa, Alabama with 6 production locations are cornerstones in the vehicle production
process. Material parts and suppliers mainly belong to North America. Marcedes's digitally
owned assets are enough to achieve sales upliftment. Marcedes real-time optimization test
that increases the conversion rate by customers test drive bookings from different channels.
An efficient supply chain is determined by the company's profitability and prosperity,
beginning with raw materials and ending with finished products.. Every stage defines the
work culture with peculiarities that illustrate the company's performance.
Sourcing and Attainment
Digitalization is the phenomenon that can convert analog signals into digital ones that go
through various technological advancements. Acquisition with YASA Ltd in the in-house
development of ultra-high radial and axial motors to achieve distinguished performance in a
single range kWh/100 km (Cleary et al 2021). Introducing EVs by using AI, Integrated
Combustion Engines that burn fuel within themselves for energy production- implementing
these sustainable initiatives in R&D, supply chain, mobility services, manufacturing, and
operations. Channelizing through their website to figure out all the touchpoints of their
customers in diverse situations to improve the business relationship with its customer directly
or indirectly. Original Equipment Manufacturer company is the value-added seller of
Mercedes that helps to produce engines. The PoS system is used in retail services in
transactions of car sales and purchases conducted throughout the year. Marcedes
implemented Hybrid battery electric vehicles in every segment and established 8 new battery
cell factories with 200 GWh in the US and Europe.
Figure 2. Mercedes Benz Business Strategy 2021
Source: (Bowman, By and Bowman, 2023)
Integrated Supply Chain Design
Marcedes is now targeting its pilot project “AMBITION2039” in the cobalt supply chain,
STARTUP AUTOBAHN using blockchain technology to establish Green and Carbon
neutrality (Bowman, By and Bowman, 2023). Blockchain technology helps in the transparent
documentation of contracts in digital data recording of its suppliers. Marcedes is going to
introduce M- class featured technology with independent suspension and a 4-wheel disc
brake that is planted on 966 acres with a 1 million square foot plant in Birmingham that will
give good competition in the automotive industry. Five-speed automated transmission
powered by a 2.3 liter, V-6 engine with 4 cylinders. MBUSI has 65 parts and component
suppliers that channel materials to the plant. After its full production 50% of the vehicles will
go to the US, 35% to Europe, and 15% to Japan and other markets (Subham and Manish,
Logistics & Production Management
For the procurement, production, and sale Marcedes applies Electric Vehicles with 1.75- 36
tons carrying capacity to the distribution point and Drones (Abderahman et al ., 2021) for the
movement of raw materials and semi-finished products. Third-party logistic operators and
Cloud computing help in the transparent and precise delivery of records. The company
estimated its largest costs, especially by cargo transportation, purchase of oil and lubricants,
and proper organization of their service in a timely and comprehensive manner. Managing
supply chain spending on their prominence.1.75- 36 tones carrying capacity to the
distribution point (Tovarianskyi, Renkas, and Rudenko, 2021). A well-integrated logistic
system profoundly helps in the flow of goods, manages fuel costs, and helps to meet
deadlines. Government support through a transparent database helps to facilitate trade and
Figure 3. Supply Chain Management System
Source: (Tovarianskyi, Renkas and Rudenko, 2021)
Technological innovation in digitalization or supply chain history is getting more complex
and undetermined but on the contrary, making the supply chain smarter. It is a
transformational map toward Industry 4.0, digitalization, and supply chain management
innovation, as well as artificial intelligence and data science, are critical differentiators in
fulfilling ever-changing customer needs. Strategic goals toward potential investment,
acquisition, and integration scenarios, creating avenues and synchronized details in decision
making becoming prevalent. Tackling the disruptive supply chain due to pandemics or war
needs smart logistic operative efficiency. Lastly, organizations that practice risk management
are in a better position in the market in times of chaos.
Part II- Logistics and Production Management
2.1 Advantages and Disadvantages of logistic outsourcing-
ALPHAPLUS is one of the global manufacturers of explosion protection solutions.
Currently, they are challenged with a situation at their business unit of BU Lightning in
Germany. There are two of them One of the primary lighting manufacturing units is in India,
which services the Asian market, while the other is in Germany. The delivery performance of
the German unit is only 50% which is incredibly low. A major part of the equipment's made
up in India and then shipped to Germany for assembling and installation. Due to the German
units underperform The company is struggling to generate high-margin sales and profits. The
company currently is using its truck for distribution. Logistic outsourcing is a new concept
that may solve the distribution issue of the company in the case of Lighting.
Outsourcing logistics is the process where a company can take help from a third party for
distribution or supply chain functions (Fadile, et.al., 2018). Outsourcing is the new business
trend that can help businesses in revising their internal process and changing their priorities
by putting limited resources on less important segments of the organization. Logistic
outsourcing is used to make decisions regarding "Make or Buy". Most organizations are
preferring the outsourcing business for the following reasons-
Cost Saving- If a company uses its channel for every operation, it may be possible that the
company has to arrange all resources from the base level every time. This includes percent
cost generation. Outsourcing will give relief from making arrangements for resources and
managing all the operations at a minimum cost. Thus, it saves some sort of cost for the
company (Drew’s editorial team,2022).
Gain the advantage of outside experts- In regular practice, the company can't take expert
advice from the market. But outsourcing will facilitate updating knowledge of the company
with good outside experts.
Improvisation in services- Outsourcing helps in changing the priority of the company and
starts considering the important issues. When operations are handled by a third party, the
company has the opportunity to improve its operations and focus on other areas.
Focus on core competencies- The company can concentrate on its core competencies and
utilize their skill and resources appropriately. Once the operations are distributed or allocated
to another firm, then saved resources and skills can be improvised and utilized appropriately.
Access to new Technology- supply chain operations also involve the use of technology.
Outsourcing offers a new opportunity to make contracts with those suppliers who are using
the latest technology for managing the functions. Thus with minimum investments, the
company can access new technology (Drew’s editorial team,2022).
Outsourcing is advantageous for four primary reasons:
Cost Reduction- If outsourcing is adopted by the company then this will reduce the use of
raw materials and other resources within the organization. The company will be free from
making arrangements for the material. A company can use market opportunities through
procurement. Companies can enter into ventures with a large number of suppliers who are
involved in providing quality services. It gives birth to new alliances with other companies.
Risk Sharing- Outsourcing will save the cost as well as share the risk of distribution and
service delivery on time. It is up to the third party to manage all supply chain functions on
behalf of the company. The company will only be interested in improving its profit margin
after the sale so there will be fewer currency risks and suppliers will have to absorb volume
Asset Management- No need to make any type of capital investment in business assets. All
the functions related to supply chain operations have to be performed by the contracted party.
One more benefit the company will get is flexibility in changing to a third party. Because all
the business transactions are conducted on a contract basis (Gadde, and Hulthén, n.a.).
Availability of Know-How- It is difficult for a company to bring new technology to its
supply chain, with the outsourcing company's contract will become closer to innovative
know-how and get advantage gained by unique production.
There are multiple logistic drivers, that push firms to adopt outsourcing options for their
businesses. These drivers include economies of scale, elements that affect the competitive
advantage of a firm badly, improvising customer service, reduce customer lead time, and high
quality of services. The decision about logistic outsourcing can be taken by using three
Transaction cost Economies- as per this, a firm is used to decide "make or buy" to reduce its
transaction and production costs. As per this theory, the firm decides to outsource when it
sees any chance of cost saving in terms of production and transactions.
Resources-Based Theory- Firm may choose to outsource when it wants to improvise its
performance by using the latest know-how and quality resources. All tangible and intangible
resources are used for making the firm competitively advantageous in the market.
Network Theory- This theory believes that firms need to develop relationships with other
parties in the same industry. It can only utilize resources acquired and used by third parties
while constructing a network.. Network building is good for sustainable business.
Till now, advantages, benefits, and theories are discussed. These all explain that outsourcing
is important and necessary for the organization in the current business environment. But there
are some disadvantages also:
Loss of branding- If logistic functions are transferred to a third party, then this will transfer
the branding from the company to a third party. If a company is not sure about the benefits of
outsourcing, then it will become a challenge for the company to hand over the logistic
function. Any kind of service failure may affect the image of the company before customers.
Misuse of IT- Date and information related to logistics are flowing between systems there
may be a chance of misutilization of customer information for personal benefit by a third
party, and this may affect the business of the company.
Strategic misalignment- Under outsourcing, both parties are enjoying a strategic
relationship as well as sharing Key Performance Drivers. Both parties must consider this a
business venture, not an expense, and try to make a profit from the transaction.
In general, the outsourcing process includes preparation, vendor selection, transition,
management of relationships, and considerations. The procedural steps of logistic outsourcing
include 4 levels. These levels include –
Level1 – Transportation and warehousing service management
Level 2- After storing the goods their packaging and labeling are also important for further
Level 3- It includes Inventory management and transportation management are elements of
planning and control services.
Level 4- it is the last level meant for distribution network management service.
These outsourcing services can be customized as per the requirements of the client, if
possible within the specified budget or fee. In the case of ALPHA PLUS company is facing
problems in final assembly and transfer/ delivery functions so activities in all 4 levels are
important for the company to be adopted/ accepted by the outsourced firm.
2.2 Forecasting of sales-
ALPHAPLUS is currently operating for manufacturing explosion protection solutions for
other industries such as Oil Chemicals, Sea transport and Shipbuilding, Pharmaceuticals,
Machine Building, and Food & Beverage Industries. To serve different industries,
ALPHAPLUS is operating through different Global Business Units (GBU). As per the
discussion with the manufacturing head, it has been identified that they are currently pushing
for high internal value creation so that they can utilize the full capacity of resources.
The process of lighting manufacturing is very difficult because it is completed at two
different places and thereafter the final unit has been received for sale. The major part of
lighting lamps are manufactured in India and thereafter, it has imported to Germany for final
assembly and customization. If a company requires it, then it can adopt the "LEAN
MANUFACTURING APPROACH". To learn its production and save resource wastage.
Lean manufacturing is working upon five principles – agreeing on values, mapping the value
stream, generating flow, employing a pull system, and achieving perfection. The lean
manufacturing approach is working upon three major elements as Availability, Performance,
and Quality. If ALPHAPLUS wants to adopt a lean manufacturing approach then it has to
follow the following process-
Waste Elimination- The manufacturing head should collect data and determine the
amount of wastage that occurs during the manufacturing of lighting lamps at two
different places. The elimination of waste strategy also saves costs for the company
and makes the environment clean and healthy.
Consideration of valuable Human resources-Employees or workers involved in the
manufacturing process also takes care of by management. Managers should determine
the utilization rate of workers and their existing potential.
Continuously seeking perfection- Lean manufacturing process always tries to
remove complexity in the current manufacturing process. Smooth processes will also
lead to perfection in product quality, design, and manufacturing (Tripathi and Gupta,
Mapping of value streams- To put control over the manufacturing process,
mapping of value streams / valuable areas are needed. The manager must take care of
the utilization of raw materials, labor, and transportation at its maximum capacity
with the lowest possible cost.
Reducing errors- Organizing and monitoring the lean manufacturing process
decreases errors/chances of errors or resource and money waste during the
Determining loss of values- Lead time, color, price points, material properties, and
amount of material used are some of the important elements that create value for any
product. Lean manufacturing helps in identifying any issue, or error in these values so
that quality can be improvised.
Automatically determine mistakes- Lean manufacturing facilitates the review and
monitoring of each product carefully so that mistakes can be identified at an earlier
stage and on the spot.
ALPHAPLUS can use lean manufacturing tools along with its manufacturing strategy to
achieve the objective of lean production. Tools include- Control Charts, Kanban Boards,
Multiprocessing Handling, Rank Order Clustering, Single Point Scheduling, etc. Lean
manufacturing will help the company to reduce production time and improve the customer
delivery system too.
Part III- Integrated Supply Chain design
3.1 Recommendation for Improvements-
For auditing, the functions of the organization, and theoretical concepts of Supply chain
management have been used. Theoretical concepts include – resources-based views,
Stakeholder theory, institutional theory, transaction cost theory, and resource dependence
theory are all examples of theories. Using all these concepts, meetings with different
departmental heads have been conducted (MOSIMTEC, 2021).
Meeting with the development engineer has provided detailed information about lighting
products and their features like the type of protection, Zone, scope, Minimum ambient
temperature, Rated Operational Voltage, etc. Engineers ensure that they can develop new
items with these elements as per the customization demand of consumers.
The head of sales provides that lighting lamps have customers under multiple categories such
as customers with centralized buying departments, customers with decentralized buying,
Long term and Medium and small-size customers, etc. Further details shared by the sales
manager show that currently, APHAPLUS has 8000 customers of lighting and overall 20000
customers in the global market. To improve sales, the company has dismissed dealings with
some of the dealers and started making direct sales to customers, to enjoy a good relationship
and high-profit margin.
A discussion with the Chief Procurement Officer disclosed that ALPHAPLUS is targeting
vertical integration, which indicates that they want every facility available within the
organization and do not.
The logistics manager reveals the performance of individual units involved in the
manufacturing and consumer delivery process. In the case of lighting, the Indian factory has a
delivery performance of 90 percent while the German factory has only a 50% of delivery
performance. The company does not consider the cost of air freight every time during the
transportation of products from India to Germany.
The manufacturing head provides that a major part of the lighting has been manufactured in
India and thereafter it has transferred to Germany for final assembly and installation.
Installation is also complex and the company is not able to be flexible as per customer
The above discussion provided that ALPHAPLUS is currently facing lots of issues related to
sales, procurement, logistics, and manufacturing. The following recommendations should be
considered to improvise the performance issue and smooth the process of logistics and
Diversity in the consumer group must be reduced so that companies can recognize the
current demand and requirements of customers and develop their products without any
confusion and mistakes.
The company should consider dealership agreements for those areas where the
diversity of consumers is wide because dealers will help it with market expansion and
an increase in its customer base. Along with direct selling, the company should
continue to work on sales through a dealership agreement (George & Pillai, 2019).
The Chief Procurement Officer is an experienced professional so the management of
APLHAPLUS should consider the viewpoint and think about outsourcing logistics. As
management is aware of existing potential and strong areas of performance.
The company must try the Industrial Electronics segment along with the customer
electronics segment, as the company may get a good profit margin.
CPO has done market research and she already knows about major cost control
elements within the organization.
The company must take important steps toward logistic cost control and performance
The process of assembly and installation is also very complex, the cost of import and
transportation from one unit to another unit should be considered. Cost savings will
lead to lean manufacturing. Instead of competing products in two units the company
must try to complete the manufacturing and finalizing of goods in a single unit. So that
every unit in India and Germany can determine their area of improvement and
improvise customer delivery performance.
The above suggestions are related to the operational efficiency of firms. Under structural
suggestion, this may include that ALPHAPLUS should drop the idea of vertical integration
till then when it is able completely in reducing errors and satisfying customers completely.
Appointing General Manager for each Business Unit is not satisfactory, ALPHAPLUS should
appoint more staff as controlling and monitor the process at every business unit to promote
lean manufacturing. In short, ALPHAPLUS requires strong teamwork to achieve its mission.
3.2 Appropriate Supply Chain Set-up-
In the words of Sukati (2018), Supply chain strategies area set of strategies that integrates
and coordinates materials, information, and financial sources across the business in order for
merchandise/product to be created, supplied, and distributed in the appropriate numbers.
SCM process also facilitates the organization to reach the right time and right place with the
right quantities. The basic objective of the supply chain is to become cost-efficient, satisfy
customers’ requirements, and achieve a competitive advantage in Industry. All these
objectives can be achieved if ALPHAPLUS considers Supply Chain strategies separately and
then adopts one of them for future perspectives.
Sukati (2018) says that there are two generic supply chain strategies available in
management- Agile and Lean. The lean manufacturing approach focuses on improvising the
internal performance of the company and improvising current value. While the Agile
approach concentrates on market research, knowledge, and virtual corporation to exploit
available marketplace opportunities.
Lean Supply Chain Strategy-Lean manufacturing approach is soulful for manufacturing
concerns like ALPHAPLUS. This approach concentrates on cost reduction, waste removal,
and value building. In this strategy, organizations need to work on their inventory levels,
capacities, delivery plans, and fluctuations. Customers will get affordable products with
quality content under a lean approach (MOSIMTEC, 2021). The lean approach is achieving
the lowest production cost and economies of scale. It was all accomplished through careful
planning, monitoring, and management. The process under the lean approach is never
changing so sometimes organizations avoid it for the Supply chain management.
Agile Supply Chain Strategy- Current business external environment is continuously
changing. It brings complexities and challenges all the time along with good market
opportunities. Agility strategy rapidly aligns the network and operation of the company with
the turbulent requirements of customers. Agile supply chain strategy considers the external
environment situations, available business networks, consider business opportunities. Agility
directs the organization towards accepting market challenges and opportunities and
enhancing the performance of the organization as per the appropriate winning strategy. In
short Agile supply chain strategy is information-driven and market sensitive with integrated
processes and network-based.
Figure- Supply chain strategies as per product life cycle.
The above figure shows that it is important to consider different elements before choosing an
optimal supply chain strategy. Some of those factors include the Product category (Planet
, customer category, market uncertainty, functional product, innovative product, product life
cycle, etc. Another factor that ALPHAPLUS should consider is the Order qualifier or Order
winner(George & Pillai,2019). A supply chain strategy product based is not suitable for
ALPHAPLUS because it involves manufacturing innovative, and hybrid products.
As per this categorization, ALPHAPLUS is lying under Market winners because it prefers
quality, lead time, and service level the most. For ALPHA lean manufacturing approach is
suitable as it is a manufacturing concern and provided details by the company never
discussed competitive advantage or market competition. At its current state, the company
wants to improvise its internal issues and these can be resolved through a lean manufacturing
The concludes that Mercedes-Benz, being one of the largest automobile organizations,
sources its supplies from regions of North America, Europe, and Asia, and has a complex
sourcing process due to the changing requirements. The organization’s aim to bring CO2 and
fossil-free steel into use for developing their automobile series in 2025 has increased the need
to source green steel suppliers by 2025. The strategic sourcing process will involve
analyzing, planning, formulating, and implementing specific activities for sourcing, including
risk management plans. The internal market analysis shows the high bargaining power of
suppliers and competitors, while the external situation analysis shows a growing sustainable
supply market for green steel with technological advancements. The report suggests that
market intelligence can be evaluated through alternative supply sources, and agile or
alternative sourcing can be helpful. Mercedes-Benz's sourcing strategy emphasizes keeping
luxury and sustainability maintained hand-on-hand, using single-source purchasing, and
shifting towards a more localized system of suppliers and warehouses. The company's
strategic goals center on sustainability and maintaining profitable and resilient growth. The
report suggests that necessary actions should be taken into consideration to ensure consumer
safety, consistency in performance, and employee engagement. The report also recommends
that Mercedes-Benz adopt digitalization concepts/methods in its sourcing strategy. Efficient
marketing and investment in research and development programs would help the company
better analyze market trends and take action accordingly. Outsourcing logistics is a new trend
in the business environment that can help companies in revising their internal processes and
changing their priorities by putting limited resources on less important segments of the
organization. There are numerous advantages of outsourcing logistics, including cost savings,
access to outside experts, improvisation in services, focus on core competencies, and access
to new technology. However, there are also some disadvantages, including loss of branding,
misuse of IT, and strategic misalignment. Companies can make their decision on outsourcing
logistics by using three theories, Transaction Cost Economies, Resources-Based Theory, and
Network Theory. The decision-making process includes preparation, vendor selection,
transition, management of the relationship, and considerations. Therefore, companies need to
evaluate the pros and cons of outsourcing logistics and make the best decision that will
enable them to improve their business operations, generate sales, and profit of good margin.
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