I. Case Background Samyeong Cable Company manufactures cable parts such as control cables, speedometer cables, ignition cables and filter elements mostly for motor vehicles. It sells its products domestically and internationally. Its major customer is Hyundai Motor Company but it also sells to other large motor companies like Kia and Daewoo and Rockwell International for door regulator cables. In four-year’s time, the company’s revenue grew by 153% from 8. 7B Korean Won in 1991 to 22B Korean Won in 1995. 68% of the revenue in 1995 comes from its domestic operations while only 32% from international customers.
Because Hyundai plays a very important role to SCC’s growth, they have to be responsive to the former’s development action plans, namely: CR 30, “2 by 2” and “100pm”. II. Point of View The case is analyzed based on the point of view of Samyeong Cable Company’s management during the middle part of the 1990’s. III. Problem Statement Samyeong’s current customers can be split into its domestic and overseas market. In 1995, 3/4ths of its revenues were from its domestic sales while 1/4th were from overseas. Its major customer in Korea, Hyundai, has recently overhauled its supply chain management into capability-based single sourcing.
Taking this and its global potential into consideration, how can Samyeong secure an immediate improvement in operations in order to continue a profitable relationship with Hyundai while taking a long-term perspective of becoming competitive globally as an automotive cable solutions and automotive parts provider? IV. Assumptions 1. Reason for class B rating – Samyeong’s rating in Hyundai’s Supplier Rating Report is average (18-20%) in Production Management and Quality Management and lower than average (15-18%) in Technological Development criteria. 2.
There will be no major changes in the political and economic environment of South Korea that can affect the operations of Samyeong. V. Analysis a. Industry Analysis Products: control cables, speedometer cables, ignition cables, hood latch cables, etc. Plant operations are highly affected by labor disputes. Analysis of Hyundai’s direct competitors (we need info on this) *According to sir’s suggestion, we can tap other potential customers so long as they do not directly compete with Hyundai. For example, Chrysler serves a more upper class market than Hyundai does. Actual and projected vehicle sales in Asia
Source: standard and poor’s dri-global automotive group *Show also trend from 1995 onwards Labor disputes in South Korea Source: Ministry of Labor, S. Korea B. SWOT Analysis C. Global Market Potential Motor Vehicle Production by Manufacturer in 1998 (in thousands, Top 15) Motor Vehicle Production by Country in 1997 (Top 15) World Motor Vehicle Production (in thousands) and Compounded Annual Growth Rate by Country: * Countries in BLUE on the table are also countries that are included in top motor vehicle production by manufacturer (98) and top motor vehicle production by country (97). Countries in bold on the table are countries that are not included in top motor vehicle production by manufacturer (98) but are included in top motor vehicle production by country (97). Recommendation: The remaining countries in blue and bold are the ones feasible for either placement of a future manufacturing plant or a distribution channel. Since all the countries in the table above have exhibited substantial positive growth from 1991-1997, these are countries that present some potential for Samyeong’s global market. SHORTEN!!!
Manufacturing overseas – China and India, both known for their low labor costs, had a compounded annual growth rate (CAGR) from 91-97 of 13. 18% and 11. 11% respectively. Since these are countries that have substantial growth potential, their low labor costs may allow Samyeong to put up a manufacturing plant in these locations. They can do this through joint-ventures to capitalize on knowledge and connections of local companies. Possible benefits include both a balancing of risks from local labor disputes as well as an opportunity to reach out to potential markets.
Further, China has a close proximity to the largest suppliers of both PVC and copper. While India doesn’t have this advantage, copper and PVC has a strong worldwide distribution nonetheless. Distribution channels – Germany, USA, and France all present huge market potential. These countries have the largest car manufacturing companies in the world (in terms of cars produced) as well as a significant potential increased demand for cars (given by an increasing trend in car production through their CAGR). Reaching out to car manufacturing companies here presents an opportunity for Samyeong to increase its exports.
Assumptions: * Main raw materials of auto cables – copper and PVC * Major copper producing companies in 2005 are roughly the same major world producers of copper in 1997. * Labor productivity in potential countries should not be an issue since Samyeong has already instituted several programs to address this in their Korean plants with the help of Hyundai. Their experience allows them to be able to duplicate these programs or at least address this possible issue. Copper output in 2005 Copper output in 2005 shown as a percentage of the top producer (Chile – 5,320,500 tonnes) Green – 100 Yellow – 10
Red – 1 Largest PVC producing companies (combined plant and subsidiary totals) * CSFs * Labor – low labor disputes, labor cost, skill (haven’t gotten data for this yet) * Proximity to raw materials * Proximity to market D. Hyundai’s Supplier Development Programs 1. CR 30:“30 percent cost reduction” *For this part, remove procedures and focus on effects as well as addressing failure points in reco. 2. 2 by 2:“double productivity in two years” 3. 100 ppm: “100 parts per million” CR30 campaign Pros: * Better monitoring of parts, components, and manufacturing activities that led to reducing costs. Innovations through redesigning of products and re-engineering of processes were facilitated. Cons: * Other sources of cost such as labor cost and overhead cost were disregarded. Only materials cost was given consideration. * Overall operation was not thoroughly evaluated. Samyeong’s suppliers are not well developed for Samyeong’s not ready yet to help them in reducing their cost. 2 by 2 campaign: Pros: * Major action programs were conducted that improved productivity of Samyeong and Hyundai. * Improvement in top-down organization led to empowerment and and motivation of employees. Improvement in production layout from I-shaped to U-shaped weed out unnecessary lead time and work in process. * Samyeong’s CEO was able to implement Attach 100 that facilitate small group activities similar to quality control circles of Japan to assert employee work ethics and consciousness. Cons: 100ppm campaign Pros: * Necessary changes were enforced in Samyeong that helped it become more competitive in terms of quality, particularly in its plant in Chonan. * Benefitted both Hyundai and Samyeong to reflect higher standard for quality through an auditing system that helped in evaluation and correction of production lines. The high quality of products translate to lower after-sales service and high profitability for both companies. *Some rewording might be needed here. Cons: Effect VI. Recommendations A. Continue a profitable relationship with Hyundai—a competitive advantage may depend on a close long-term strategic relationship with few suppliers. In the case of Samyeong, they should develop a strategy in order to have a close relationship with Hyundai. 1. Check definition so we’re sure we’re using the right term Develop a plan or strategy in order to improve on quality, cost and productivity that will make Samyeong Class A. Share market research- jointly develop specific products and options- Advantages: Samyeong will incur lower cost since they will have to share the cost of R&D. They can put more focus on increasing the quality of the products—make use of value engineering wherein value of the product is achieved by improving its functionality. However, because Hyundai utilizes capability-based sourcing, there is a chance that it might not approved of such a joint venture. Therefore, Samyeong must improve its operations first—innovative strategy: improve quality, functionality and reliability through value engineering. . Explore a joint-venture with Hyundai in manufacturing of ignition cables. 3. Address failure points of Hyundai’s programs – reduce wastes, improve quality, etc. B. Become competitive globally as an automotive cable solutions and automotive parts provider: 1. Invest in technology and research and development to continue innovation. 2. Find technology hubs and assign them in strategic locations around ASIA and possibly in other countries as well. Introduce the products to these new locations. *I don’t remember what we talked about regarding this. . Globally tap into other customers who are not direct competitors of Hyundai – List possible companies here. Wait for analysis of Hyundai’s competitors. a. Set up sales and storage facilities in its largest potential markets such as the US and Germany (southwestern part of Germany to gain proximity to French market) – Benefits: proximity to new markets, proximity to raw materials, large potential growth of demand in these areas, dampening effects of fluctuation in demand with surplus inventory in facilities instead of outbound logistics. b.
Set up manufacturing plants: i. China and India – low labor costs, proximity to new markets, proximity to raw materials, and large potential growth of demand. ii. US – proximity to raw materials, proximity to new markets, large potential growth of demand, and highly skilled workers. C. Improve own supply chain – help suppliers improve. Hyundai’s POV: 1. Align suppliers with supply chain strategy *Revise to Samyeong’s POV Suppliers should all be aligned to the company’s end-to-end supply chain goals for quality, efficiency, and innovation. Integrated suppliers, which re one group the company has, should be involved early in the design process and co-develop products. They should be much more selective in how it works with second- and third-tier suppliers, however. Joint-value improvement projects are initiated through brainstorming, normally at the plant level. For example, when working on lowering total cost of ownership, the team, including its suppliers, looks at how working capital, logistics, labor, and shifts impact productivity and costs. Integrated suppliers are fully embedded in this process as part of the collective team. 2. Manage the innovation funnel across functions ?
Engaging manufacturing and R&D early in supplier discussions is critical to getting stakeholder buy-in. There’s no point in strategically sourcing anything without it. To achieve this alignment, an innovation project manager must be designated as the representative for all supply chain functions. She should manage every phase of innovation, partnering with suppliers and manufacturing to design manufacturable products. This approach should help keep sales and marketing on track in terms of the time line and ability to execute. It should also ensure Right First Time for both products and the supply chain, allowing speed to market as well.