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Marketing channels and logistics BY k3700026 1. Executive Summary This report is aimed at exploring the market channel and logistics in the case of SuperAlloy, the world-class provider of forged aluminum alloy wheel rims. Through the analysis of financial performance, the fluctuations of average selling days and inventory turnover are necessary to addressed. After the discussion, this report mentions three key, including the dilemma of collaboration in supply chain, breakthrough of market channels, deploying the system of logistics in China region.
From the perspective of management, SuperAlloy should adapt external integration, estructure the supply chain collaboration, complete the breakthrough of market channels, highlight some KPIs, such as inventory turnover, average selling days, and the average time to generate first trial order for new customer or new design, and deploy the logistics of China regions. 2. The Discussion for Task 1 2. The market opportunity for the forged aluminum alloy wheel rims With the designs of energy-saving technology growing mature in automobile market, the forged aluminum alloy wheel rims have become the important component in future lightweight vehicle. The components of high-strength forged aluminum alloy could e used to reduce vehicle weight and enhance the engine efficiency. Therefore, the forged aluminum alloy wheel rims have played the key part in automotive supply chain (http://www. superalloy. tw/). The case company in this report is SuperAlloy, which has moved into the forged aluminum alloy wheel rims since 1997.
The first three key suppliers of forged aluminum alloy wheel rims are America’s ACOA, Germanys Otto Fuch, and Taiwan’s SuperAlloy. In China, the first provider for article_content_12953. html). The market opportunity for forged aluminum alloy wheel rims results from technological bar inherent in the high-strength forged luminum alloy wheel rims ( http://www. superalloy. tw/). First, it stems from high specifications in automobile system regarding safety. Thereby, the providers of forged aluminum alloy wheel rims are often required to meet the criteria by way of innovation of manufacturing process or material technology.
Second, the process of aforementioned innovation result in longer lead times before mass production. Accordingly, higher margins for the forged aluminum alloy wheel rims often cost the higher-than-normal expense of high-quality services from R&D team and sales team. On the other hands, the management for market channel and logistics plays the critical position in the technology-intensive industry. 2. 2 The financial performances of SuperAlloy As the appendix describes, SuperAlloy is the Taiwan’s biggest closed-mold forge company and ranked as the third position in the global forged aluminum alloy wheel rims industry.
Based on the published financial data on the website of http:// newmopsov. twse. com. tw/, this report reviews the financial performances of SuperAlloy from 2006 to 2011, trying to identifying the issues behind market channel and logistics. Table 1 The financial performances of SuperAlloy Year 2006 2007 2008 2009 2010 2011 sale (NTD OOOS) 2,223,755 3,579,541 2723,396 Margin(%) 30. 39 20. 98 2. 72 20. 95 22. 44 17. 2 Operating margin(%) 17. 13 10. 83 -6. 81 6. 83 5. 42 Debt ratio(%) 59. 36 60. 35 63. 72 24. 23 46. 51 Inventory turnovers 1 . 1 1. 89 2. 05 2. 66 2. 98 2. 14 Average selling days (Days) 278. 62 193. 12 178. 04 137. 21 122. 48 170. 56 Asset turnovers 0. 37 0. 48 0. 46 0. 39 0. 43 0. 49 Cash flow 63. 06 60. 42 12. 01 4. 8 1 . 44 -6. 17 2. 4 3. 45 2. 74 0. 64 -19. 58 3. 8 5. 95 4. 13 Source: http://newmopsov. twse. com. tw NA” means the data can’t be accessed. As shown in table 1, the sales from 2006 to 2008 indicate the strong growth momentum, while the margins and operating margins in the same period indicate that more revenue didn’t mean more profit.
In 2008, the inventory turnover, asset turnover and average selling days indicate the positive progress on management. Therefore, the negative ROA in 2008 could be attributed to the issue of negative margin. It suggests the necessary adjustments regarding cost efficiency. According to the management interview traced on the website of (http://store. gvm. com. tw/ article_content_12953. tml), the improvement of manufacturing process and staff quality has been under the focus of internal management.
Compared with the data shown in the appendix, SuperAlloy began to deliver forged aluminum wheel rims to Jaguar Cars and Tesla Motors in April 2008. In October 2008, SuperAlloy won a Toyota TMS gold award. Hence, the factors resulting in the negative operating margin in 2008 could be related to the effects from financial tsunami and following issues regarding cost efficiency. The fluctuation in the period from 2009 to 2011 reflects another pattern. Even with the lower revenue than 2009, the outcomes in 2010, ncluding inventory turnover, average selling days, margin and operating margin, indicate the best signal since 2006.
However, affected by cripple effects resulted from the European debt crisis, the performance in 2011 delivers the signal of another economic impulse surrounding a higher average selling days as well as a lower inventory turnover. Figure 1 The compassion among sales, margin, operating margin Source: This report Based on the analysis of DuPont formulate, a lower ROA could result from lower asset turnover, indicating poor management, lower operating margin, or a combination of oth factors. The trend displayed in figure 1 suggests the downtrend of ROA an ROE in fgure 2 should be focused on the operating management.
As shown in table 1, there are two points which are necessary be highlighted. First, the lower inventory turnover of 2011 suggests the efficiency of logistics should be improved, reflecting some problems linked with manufacturing system and sale team. Second, the higher average selling days indicate the forecasts for brand customers’ orders should be adjusted to the dynamic of market, indicating the key issues behind market channel and regarding strategies. These issues could involve the identification of problems, the cooperation of cross-group cooperation, internal integration or external integration.
These topics will be discussed in following sections of this report. Figure 2 The compassion among sales, ROES, ROAS in the past Source: This report Based on the previous analysis, there are some issues necessary to be addressed. The lower inventory turnover of 2011 suggests possible challenges confronted SuperAlloy. From the perspective of operation between sale team and manufacturing department, lower inventory turnover mean the misinformation in the process of ommunication between these two departments.
The sale team should take the role to maintain customer relationship and Judge where is the equilibrium among the capability of manufacturing department and customers’ demands and criteria. Once customer’s demand could not fit the capacity or the present category of product. The outsourcing process should be moved on in order to provide the total solutions for the timing and immediacy of orders. Accordingly, in accordance with the lecture of “Marketing Channels & Logistics” by Mike Bourlakis(2012), the efficiency of outsourcing process will be the issue to be discussed.
Before the discussion, it’s important to realize the characteristics in automotive supply chain. For the purpose, this report collects the information from the in-depth interview by e-mails through personal relationship connecting to some senior manager in the regarding forging field. Based on the process cited on the website of http://www. ]yeh. com. tw and personal in-depth interview with the senior manager by e-mails, the manufacturing process of forged aluminum alloy wheel rims could be referred as the following sequence: 1. Order entry, 2. Mold design & making, 3. Material incoming, 4.
Material inspecting, . Making product sample, 6. Quality confirm by customer, 7. Cutting 8. Forging, 9. Edge cutting, 10. Heat treatment, 11. Vibration grinding, 12. Pickling, 13. Drilling surface grinding hole machining 14. Anodized or coating, 15. Finished product inspection, 16. Packing & delivery. Above process highlights the longer lead time for new product innovation depends on the sequence from step 2 to step 6. The average lead time for the trial order of a new customer to a formal mass-producing order usually cost six months to 1 5 months, according to the in-depth interview through emails.
The major threshold for enerating new orders results from the capability of dealing well with customers’ requirement, such as the strength of product, the design of the product as well as the flexibility of rapid responses for customers’ immediate need and ideas. Besides maintaining the customer relationship with existent clients, the main promotion of sale teams in the industry is through the all kinds of exhibitions around the world. design, the following orders of forged aluminum alloy wheel rims will grow at the pace of automotive growth momentum.
Above process for building up customer relationship results in the higher-than-normal threshold for new providers. . 3. 1 The first key challenges : The dilemma of collaboration in supply chain From the perspective of automotive supply chain, the difficulty and complexity inherent in the technique of forging aluminum alloy drive the outsourcing process and following collaborations. Notwithstanding, there will still be the dilemma for the collaboration of supply chain confronting SuperAlloy.
The dilemma derives from the differentials among different companies, heated up by the process of distribution of benefits in customers’ orders and the difference of profitability of different automotive components. Thus, the partnership in supply chain is like the game theory, demonstrated by the prison’s dilemma. From the perspective of protecting intangible assets, the know-hows and techniques embedded in forged aluminum alloy wheel rims mean the capability of moving into a higher margin market. Inevitably, more robust partnership, more comprehensive understanding . t symbolizes the advantage of core competition decays with the collaboration going on. Hence, the concerns of keeping the uniqueness of techniques will drive the dilemma into next stage, since both parties want to keep the competitiveness in the market nd sustain the original customer relationship. Whereas the dynamic of collaboration depends on more bargaining assets which party holds, like technologies, producing capacity, the certification of customer as well as the capability of generating orders. Accordingly, the first key challenge in front of SuperAlloy is to meet the the dilemma of collaboration in supply chain collaboration. . 3. 2 The second key challenges : The breakthrough of market channels Even with the insurance of automotive customer’s certification, the unstable sale growth momentum will be always existent. The ncertainty is reflected on the volatility of average selling days in table 1 . The issue behind the higher average selling days in 2011 should be linked with the global economic concerns. Once the sale team loosens the monitoring for global automotive market, the reliability of customers’ order forecast will be overestimated.
It could lead to the lower inventory turnover and higher average selling days, along with the fluctuating margins driven by unexpected downtrend in the market. Under previous global economy, the market channels of SuperAlloy should react through innovation, integration or diversification of product portfolio. Based on the point of view, the breakthrough of market channel should be addressed . For the time being, the promotion through exhibition is the key channel to contact potential customers. However, the promotion should be involved with R&D team and sale team to back up the following communication with customers.
From the perspective of efficiency and accumulating the key human capital, the management of the market channel should rely on the scheme of the key performance indicators, to utilize the existent human resources. For SuperAlloy, the second key challenge is the breakthrough of market channel. Based on above characteristics of automotive supply chain, SuperAlloy should leverage its customer relationship to build up the solid partnership and flexibility of outsourcing or other external integration. Therefore, the objectives of breakthrough of market channel are to bring into solid collaboration, maintain the promotion. . 3. 3 The third key challenges : Deploying the system of logistics in China region Under previous global economy, the growth momentum of automotive market depends on the stimulus of policy of subsidies, guiding people to transfer from traditional vehicles to energy-saving vehicles. Combined with brand customers’ romotion, the demand of forged aluminum alloy wheel rims could be heated up. Nonetheless, it should be a long way to go. Whenever reviewing the growth momentum around the world, China automotive market shouldn’t be missed.
Notwithstanding, the cooperation with Chinese local partners is not always an easy task, due to the regulations inherent in cultures and Joint venture. The issue of managing the logistics and sustaining the customer relationship shouldn’t be ignored. Once the distance between the different customer’s basements are longer than ever, the efficiency of managing people in the process of logistics become ritical to the global operation. As shown in figure 3 in the appendix, SuperAlloy is running the global operation.
Nonetheless, how to strengthen the efficiency of logistics in China region should be addressed as a crucial decision-making process, including the indicators of measuring performance and assembling the logistics depending on potential customers’ demand. In sum, there will be three key challenges for SuperAlloy to deal with in the future. They are listed as following points: 1. The dilemma of the collaboration in supply chain, 2. The breakthrough of market channels, 3. Deploying the system of logistics in China region. . The Discussion for Task 2 3. The solution for the dilemma of collaboration in supply chain After above discussion, the following parts of this report will be focused on how to generate the solutions for aforementioned three challenges. As far as the first challenge is concerned, the solutions will include supply chain integration. According to the characteristics of forging industry, the swap of equity to build up the long term collaboration should be listed as the first priority. The first reason results from the culture of Taiwan’s supply chain companies, which usually focus on the control of decision-making process.
If the partners are without cross-shareholding, the external integration would be possibly deterred by mutual trusts and interest conflicts inherent in supply chain mentioned as above. On the other hand, the negotiation of the swap of equity will bring in the dynamic of adjustments and evaluation from all kinds of standing points. Thereby, the equilibrium of new collaboration could be achieved by the trade-off of industrial dynamics and the right of control. From the perspective of supply chain integration, first comes who could be authorized to adjust the logistics, then second comes the evaluation of performances.
The two ecessary step are dependent on the equilibrium of equity structure. After the two procedures, the external integration and internal integration could be reorganized under the leadership. Under above discussion, the first solution to the dilemma of collaboration in supply chain is to start the external integration, based on the building up of new leadership and equilibrium of equity structure. For the sake of considering the differentials of company culture and accelerating the speed of market channels Based on the external integration mentioned as above, the following step is to start the breakthrough of market channels.
With the capacity and flexibility inherent in new partnership, the promotion of creating total solutions for customers could strengthen the capability of keeping customers’ orders and drawing the potential customers’ orders. Once the flexibility of selecting qualified orders is enlarged up, the product mix could also be more appropriate than ever to restructure market channels and adjust logistics. Notwithstanding, the success of breakthrough of market channels depends on the building up the key performance indicators (KPI).
Compared with above discussion regarding table 1, inventory turnover and average elling days could be ranked as two primary KPIs. Besides them, the average time to generate first trial order for new customer or new design could be used as the KPI to measure the efficiency of integration between technological team and sale team. Reviewing the process of generating new order, average time to generate first trial order for new customer or new design will include the plan for exhibition, the forecast of market trends and initial survey of customers and potential customers.
Once the outcome is longer than expected, then the necessary interview or adjustment should be carried out. Since average time to generate first trial order for new customer or new design is linked with the cooperation among members in both teams, the interaction among them could be under evaluation and immediate adjustments. 3. 3 The solution for deploying the system of logistics in China region After breakthrough of market channels, the customer relationship could be maintained efficiently.
With the KPIs in previous discussion, the global operations around brand customers could be leveraged up in the deploying the system of logistics in China region. Under the differentials between Chinese enterprise ulture and Taiwan enterprise culture, the better way to deploying the system of logistics in China region is through the collective actions based on the new partnership. On the other hand, the logistics in China regions should be completed through the linkage with local relationship. The Joint venture with local critical family or key company will be reviewed as the must-be routine.
Nonetheless, the past experiences in China region are not always profitable, due to the learning curve for local regulations and exclusive marketing channel. For the sake of utilization of xistent resources, the collective deployment under the external internal integration could shorten the adjustments , quickening the speed to fit customers’ demand in China regions. 4. Conclusions After the discussion in this report, the suggestions for SuperAlloy are listed as following point. The three key challenges are the dilemma of collaboration in supply chain, the breakthrough of market channels, deploying the system of logistics in China region.
According to the analysis of arguments , the solutions for these challenges are stated as following. First, SuperAlloy should start the external supply hain integration, building up the new supply chain collaboration. Following that, SuperAlloy should restructure breakthrough of market channel, combining the management of KPIs in previous sections. Finally, SuperAlloy could utilize existent resources and partnership to deploy the logistics in China region. 1 . http://store. gvm. com. tw/article_content_12953. html 2. http://www. superalloy. tw/main. hp 3. http://newmopsov. twse. com. tw/ 4. http://www. gvm. com. tw/Boardcontent_12953_1 . html 5. http://www. autoinfo. gov. cn/autoinfo_cn/top/ydphb/index_ydphb. htm 6. http:// www. Jyeh. com. tw 7. Mike Bourlakis (2012), Marketing Channels & Logistics,London: Brunel University. 6. Appendix: The company profile of SuperAlloy SuperAlloy , founded in 1994, has moved into the industry of forged wheel rims since 1997. From the perspective of revenue, SuperAlloy has created the sales of NTD 27. 5E in 2011, operating Taiwan’s biggest closed-mold forge.
Nonetheless, from the point of the company history in the industry of forged wheel rims, the initial stage from 1997 to 2000 have almost run out of original accumulated capital until the influx of venture capital from IJMC group, which is ranked the second position of IC foundry http://store. gvm. com. tw/article_content_12953. html). After the experience of initial stage, the management of SuperAlloy have started to focused on the operating efficiency and regarding capital expenditures such as the plants and equipments for forged aluminum alloy wheel rims.
Since then, SuperAlloy has gradually passed the threshold of automotive supply chain. From the points of sale growth, the sale of 2004 was Just above NTD 5 hundred million, whereas SuperAlloy delivered the sale of NTD 22 hundred million in 2006 (http://store. gvm. com. tw/article_content_12953. html). The growth momentum results from the orders from global auto brands, such as 6M, FORD as well as Chrysler. According to the information on the company’s website of http://www. superalloy. tw, the critical milestones of company history from 2000 to 2011 are listed as following: 2011. 1 Won the “TOYOTA QUALITY Platinum Award”. 2011. 07 “AS 7003 NADCAP Materials -resting” certified. 2011. 03 “Germany KBAnuvvehtcle -rest certification” certified: KBA NO. 48288 (Truck wheel 22. 5 x 1 1. 75). 2011. 03 Won the “19th Taiwan Excellence Award” (truck wheel TE0002). 2010. 08 Won “Supplier Excellent Performance Award” from Bureau of Foreign Trade. 2010. 08 Won “Finishing Light Metal Article Equipment and Methods” NO. US007785452B2 U. S. patent. 2010. 06 AS9100 certified, supply Forging to AIDC Aerospace. 2010 The company get Honda, Land Rover, AMG Forged Wheel Program Awarded. 009. 07 The company by raising an additional NT$187 million in cash, with its capital increased to NT$2. 17 billion. 2009. 07 Opel Insignia OPC Forged Wheel Supplier. 2008. 04 The company began supplying forged aluminum wheel rims to Jaguar Cars and Tesla Motors. 2008. 10 In October 2008, SuperAlloys designs won customer recognition and a Toyota TMS gold award. 2007. 6 The company obtained Ford QI . 2007. 10 The company recapitalized undistributed earnings in the amount of NTD140. 5 million, bringing its paid-in capital to NTDI . 7655 billion, with a staff of 2006. 6 Phase 2 of Plant 2 was completed and the factory went into production. 2006. 10 The company expanded its plants and purchased additional equipment by raising NTD900 million in cash through issuing new shares at a premium of NTD700 million, with the companys paid-in capital increased to NTDI . 625 billion and its shares traded on the emerging stock market. 2006. 11 The company began shipping wheel rims to Chrysler. 006. 11 The company hired new employees in the month to the end of 2006 to increase its workforce to 1006, with a new golf head end customer added to its customer base: 2005. 1 The company expanded its plants and purchased additional equipment by raising an additional NTD360 million in cash by issuing new shares . 2005. 01 The company expanded its plants and purchased additional equipment by raising an additional NT$360 million in cash by issuing new shares at a premium of NT$135 million, with paid-in capital increased to NT$I . 425 billion. As of the end of 2005, the company’s employees had increased to 874. 2005. 1 The company added a new golf head end customer 2004. 05 The company began shipping wheel rims to Ford. 2004. 6 the company purchased additional fixed assets and built Plant 2 by raising an additional NTD128 million in cash through issuing new shares at a premium of NTD48 million, with its capital increased to NTDI . 08 billion. 2004. 08 Phase I of Plant 2 was completed, with machines installed and production begun. 2004. 12 Plants were expanded and additional equipment purchased by raising an additional NT$192 million in cash through issuing new shares at a premium of NTD72 million, with paid- in capital increased to NTDI . billion and employees increased to 346. 2003. 5 The company purchased additional fixed assets and built Plant 2 by raising an additional NTD200 million in cash through issuing new shares, with its capital increased to NTD 1 billion and employees increased to 270. 2002. 07 The company purchased additional fixed assets by raising an additional NTDI 72. 3 million in cash through issuing new shares, with its capital increased to NTD 800 million and employees increased to 210. 2001. 09 The company purchased additional fixed assets by raising an additional NT$IOO million in cash through issuing new shares, with the total paid- n capital increased to NTD 627. million and employees increased to 147. 2001. 11 The company began shipping wheel rims to GM. 0 2000. 05 The company purchased additional fixed assets and built Plant 1 by raising an additional NT$300 million through issuing new shares and NT$29. 7 million through earnings recapitalization. The company’s capital was increased to NTD527. 7 million and was renamed SuperAlloy Industrial Co. , Ltd. 2000. 11 Plant 1 was completed and inaugurated , with employees increased to 116. Figure 3 The global operating basements of SuperAlloy Source: http://www. superalloy. tw/main. php