The Supply Chain Management

The Supply Chain Management:The Study on The Global Tyre Industry and Michelin全球轮胎企业和米其林公司的供应链管
理
摘要】在现代的商业社会中，一个最重要的研究课题就是企业的国际化和全球
化发展问题。

正如我们所知，在大多数情况下，高效的供应链管理是一个企业立足于世界商业舞台的重要因素之一。

本文以全球轮胎行业以及其领先企业--米其林公司为例，讨论了有效的供应链管理对企业发展的重要性，并探讨了企业在其供应链建设中的可行性操作问题。

【关键词】供应链管理；米其林；SWOT分析
【Executive Summary】At the modern time, one of the most important researched topics is that of internationalization and globalization of the firm in the world. As we know, for the most part, efficient supply chain management in the company is one of the vital factors to get success in the world-class markets. To testify that the successful business requires an efficient supply chain management, this paper presents the development of the global tyre industry and research on one of the leading company, Michelin, to analyze the general circumstances in this industry and Michelin, especially evaluating the supply chain management. And according to some existing approaches and practices in other organizations, this paper would give a few relevant recommendations on its further operations to Michelin.
【KEYWORDS】Supply chain management； Michelin； SWOT Analysis
一、Introduction
Established in 1863, Michelin as a family-owned company, operates in over hundreds countries worldwide with various products and services and has been becoming one of the largest companies in the tyre industry now. The tyre industry appeared at the end of the nineteenth century in both Europe and the U.S. and now has being an essential industry in most Asian, European and American regions. Generally, the tyre market segments with two main dimensions: Original Equipment Manufacturer (OE) V.S. Replacement Tyre (RT) and Cars V.S. Trucks. The major cars and trucks operators control this market and have been looking for management outsourcing in both OE and RT market.
The nature of the competition at the post-industrial time ask a new business model focused on competition that has shift from between organizations within a supply chain to between supply chains themselves. The purpose of this paper is to examine the general circumstances and the performance of the tyre industry and one leading company, Michelin, especially evaluating the supply chain management in 2004. The first part of this paper gives a brief explanation about the tyre industry and Michelin. Then followed a SWOT analysis, the paper reviews the strengths and weaknesses of Michelin through its operations and exams the advantages and disadvantages of the general circumstance. In addition, referred to the existing approaches and practices, especially focusing on its supply chain practices, this paper provides some suggestions for Michelin’s further business management.
二、SWOT Analysis of the Michelin Company
The supply companies have to create and manage an efficient supply chain devoted to the durative global competition. A SWOT analysis is used to exam the
advantages and disadvantages in both inside and outside of Michelin in detail.
（一）Strengths:
Leading Position in the Market and Increasing Operation Margin
As a leader in the global tyre industry, Michelin accounted for 19.6% of the global tyre market shares reached 13.75 billion US dollars in 2002. Michelin stood the top place in the European agricultural tire market and expanded to the developing countries. This top position provides Michelin with a strong bargaining power and good reputation in the competition. The leading position is really helpful to Michelin in improving the core competencies and increasing the competitive advantages of the efficient business, because Michelin earned more opportunities to reaching the new information, technology and financing via cooperation than others.
Investment in R&D and Wide Range of Products
Michelin has a creative nature which leads itself to the top seat in the tyre market. Modern business requires the company has a quickly response to meet the customers’ needs with low cost. The nature of innovation and investment in R&D make Michel success to possess large share in the market. Also since focusing on R&D, such as the innovation of radial tyre, Michelin manufactures and sells a broad range of products and provides large numbers of supplements, like maps, travel guides and digital products and mobile assistance products and services. The wide range of the products and services sustains a convincing power to Michelin to operate in global market. To maintain this advantage, Michel should keep its eyes on the R&D at a suitable level.
Co-operation Culture
Opportunities exist for Michelin based on the circumstance of acquisition, strategic sourcing and joint venture. The acquisition programmes of Michelin in 1989 turned the company into the World’s largest tyre manufacturer ad thief tyr e supplier to GM’. In managing the Asia strategies, Michelin worked closed with the local firms, such as merged the four joint ventures in China, and made a joint venture with Apollo Tyres in India. Also the strong connections with independence retailers, mass merchandiser and large haulers, including Wal-Mart and UPS, provide Michelin an effective channels in its supply chain to delivery its products.
Diversified Operation Locations
Michelin expanded its business in over 170 counties with more than one thousand different products nearly across the whole world via an effective distribution network. As the diversified the operating locations, Michelin diversified revenue base decreases the operational risks and enhance the growth of the profits in operations based on the industrial network theory.
（二） Weakness:
Lagging Behind in Part of Markets
In spite of locating in global market, Michelin focuses on high-cost European regions and North American, whilst its competitors like Bridgestone have taken up with low-cost market like Asia. The revenue in Michelin heavily depends on the European and North American, so much as account for 87% of the net sales in 2004. Additionally, despite Michelin invested largely in R&D, the range of its products is still really all-sided. Continental made better efforts to develop integrated suites of products around tyre and barking systems than Michelin. Since the limited growth in specifically markets and products, such heavy dependence may cost enormously in Michelin.
Lack of implement process for Innovation
Most companies heavily invested in R&D, on average 3.3% of their total sales. However, based on the different characteristics of various properties the pace and returns of the invention were low. In spite of larger spending on R&D than all the other competitors, Michelin had been slow in implementing those innovations at some stages. The competitors, such as Clermont-Ferrand and Continental, had always caught up Michelin or taken some market shares from Michelin indeed.
Therefore Michelin should exam its implement system carefully to renew or replace it. Also using the Toro’s case for reference, Michelin could credit strategic sourcing programs, which covered from development to production and delivery and reconciles the conflicting goals of individual departments, for part of its improved profitability with the issues of products lifecycles.
Lack of Human Resources Management
Workforce is a key capital in Michelin since the tyre industry is a labour-intensive industry. It is really hard to imagine that before Edouard managed the company, Michelin did not have a sound incentive pay scheme and employee training courses. Comparing with its competitors, the net income of the employee in Michelin is lower. Michelin preferred to recruitment local engineers who might not have enough expert knowledge and abilities in performance. Also the normal way to reduce the cost in Michelin is to cut off the positions to employees. However, it always causes the conflicts between Michelin and the employees and may hurt the whole management of the company. For instance, Michelin was indicted by unemployees from the company with costly compensation. The lack human resources management in Michelin indicates low employee productivity which has adverse impact on the financial position such as decreasing the revenue of the company.
Corporate Culture and Legal Issues
As a family owned company, the leader, especially the old chairman, Francois, in Michelin had a highly centralized and secretive control. The leader found it is really hard to believe someone out of the company. The informal and secretive structure had always obstructed outside partners and investors. Depending on this corporate culture, Michelin only focused on the long-term relationships with other participant under trust. In fact, the long-term relationship always started from short term cooperation. Smart companies need to have both short term and long term strategies. Despite Edouard advocated acquisition and integration including ‘Tactical Operational Units (TOU)’ strategy, Michelin still keeps its core competencies as a secret, which against the outsourcing approach from Marshall et al.
Moreover the family-based company has always less watchfulness of policies. If there are appropriate counselor-at-law in the organization or from the third party, the chastisement by the Commission would not be happened in Michelin for the unfair trading which breaking the EU competition Law. Thus, bearing the issues of trust and policies is important to Michelin as well.
（三）Opportunities:
The development of the Global Tyre Market
After a painful time, the tyre industry returned to gain profits since 1990s and the most large-size companies, like Michelin, Bridgestone and Goodyear, have increased their operating margins year after year. The total average growth rate in the global tyre industry is 5.63% in each year since 1995. With the market expansion, the demand
of the tyres would increased by prompting the road transportation and developing the traffic infrastructures in developing countries, like China and India. The promising foreground of the market would provide good opportunities to Michelin to cater the increasing demand in the global tyre industry.
Expansion of the International Distribution and Relationship with DealMichelin must manage a global supply chain with strategic network relationships.
（一） Creating Appropriate Supply Chain Management
To reach the top place in the strong global competition, Michelin has to understand how efficient the supply chain should be. Using the Fisher’s Matrix, Michelin have to perfectly match its functional products to the market demand by an efficient and/or hybrid supply chain strategy. Consulted a hybrid supply chain in Lenovo, Michelin should look for the new innovative technology needs and create a responsive supply chain besides holding the basis of efficient functional supply chain, to cater to different needs and demands with a short term.
Referred to the successful exercise in Cisco, Michelin could cater to the demand for standard and high-volume networking products by commissioning contract manufactures in Asian countries by a low cost. For the wide variety of mid-value items, Michelin could use dealers in low-cost countries to produce core products whilst need to customize and specialize the specific products in high-cost counties. One thing need to be noticed here. Since the requirement of the Triple-A theory, involving Agility, Adaptability and Alignment, Michelin should prepared crisis management team and use different networks which are able to adapt well as backups in case of emergency. Additionally, with the cost-efficient point view, the supply chain could associate with postponement and speculation strategies. Considering what Toro did, it is important to Michelin to simplify and cut the costs of inventory management, that such as developing a system to combine the new producing products with the parts were already being used in existing products.
（二） Managing Relationships in Supply Chain
The strategic sourcing and outsourcing part of process in both core and non-core competencies would be useful to Michelin. Strategically managed relationship with suppliers and buyers could help Michelin integrating information of changes, materials and even the personnel and eliminating of waste to elevate ‘inter-firm competition to inter-supply chain competition.
Michelin need focus on the market and social changes and respond both quickly and cost-efficiently with its tailored networks. Michelin can create new suppliers and cooperate with many intermediaries and partners to maintain the advantages and add additional values in its supply chain. Meanwhile, Michelin also needs to identify a few key collaborators to establish more close relations for the long term operations.
To manage the relationship with supplier efficiently, Mini-Maestro Model is useful. Relied on Lenovo’s experience, Michelin could identify different suppliers at various levels. When it is working close with Tier 1 suppliers, Michelin should develop a communicational channel to provide information, feedback and suggestions on best practices and to strengthen the commitment contractually with third parties in order to support collaboration. Meanwhile Michelin could be committed to lead with Tier 2 suppliers and start to ensure them committing to the performance at some stages. Similarly, to maintain an appropriate barging power with strong competitive advantages, Michelin should different its products and services, as well as create new
supplements to more potential customers with long-term contract and good relationships. Trust is an essential element in collaboration. Also Michelin have to maintain a visible and transparent process to communicate and share information effectively and efficiently.
Instead of cutting off the working position in costing savings, Michelin could use the way Japanese electronics giant NEC Corp. had. Michelin could set up a team of employees to promoting increased in-house production of parts and equipment which it now outsources to other firms. The aim of the team is to achieve cost savings from reduced material procurement expenses and from lower costs for outsourcing production.
（三） Setting up Good Reputation
Since the global business is imbued with the issues of the environment, besides focusing on the cost reduction, Michelin has to launch several sound programmes around their performance. For example, to consider the issues of the green environment, Michelin could set up a sensible procurement strategy covered environment-friendly purchasing rules in their supply chain use primary goals in Bank of American for reference. In addition to cheering on the best protection on the green forest simply, the explicit policy is helpful to maintain a good reputation of the company in the global market.
Referred to a great success by collaboration in Lenovo, Michelin may join some international non-profit organizations and reward consumers in area such as encouraging recycling end-of-life products, and incenting renewable energy. It will benefit to Michelin working with different partners as well. Also based on the case of Lenovo’s sponsorships with AT&T and the Formula One, collaboration in the term of sponsoring and endowing some specific event could improve the reputation in the global market and extend the new marketing with specific partners.
四、Conclusion
The development of the globalization and the leading position afford sufficient competitive advantages and strong competition powers to Michelin. Meanwhile facing the international rivals, the intrinsical nature of the tyre industry and Michelin itself would cause a few challenges in turning to success.
To maintain the leading position in the tyre industry, Michelin should be committed to being a responsible and active corporate citizen and seeks to integrate the core values into its entire business, covering customer satisfaction, high quality operation, innovation, social investment trustworthiness and environmental affairs. Creating efficient supply chain management team, setting up explicit implementation policies and systems and dealing with good collaboration relationships with both internal and external participants are as same important as enhancing qualities of products and services and improving the initial business efficiencies by Michelin itself.
Meanwhile Michelin should understand the importance of the managers’ competencies to create and control the supply chain. Setting up and implementing appropriate strategies on the basis of well determining the nature of its products requires the managers have to understand their products and process, as well as to the relationship and networks via trust in the whole operation. Michelin also need regard the relationships with suppliers, buyers, employees and the third parties.
【Reference】
[1]Bitran, G. R., Gurumurthi, S. and Sam, S. L. (2007). ‘The Need for Third-Party Coordination in
Supply Chain Governance’, MIT Sloan Management Review. Spring, pp. 20-37.
[2]Cool, K., Syedain, A. and Perarnaud, J., (2006). ‘The Glob al Tyre Industry and Michelin in 2004’, Insead, Case Study for use at UCD Michael Smurfit School of Business, 2008. 4935 (305-123-1).
[3]Flynn, B. B., Zhao, X. D., Huo, B. F. and Yeung, J.H.Y., (2008). ‘We’ve Got the Power! How Customer Power Affec ts Supply Chain Relationships’, Business Horizons. Vol. 51, pp. 169-174.
[4]Marshall, D., McIvor, R. and Lamming, R. (2007). ‘Influences and Outcomes of Outsourcing: Insights from the Telecommunications Industry’, Journal of Purchasing & Supply Man agement. Vol. 13, pp.245-260.
作者简介：樊俊花（1977- ），女，河北沧州人，北华航天工业学院经济管理系，研究方向：物流管理。

陈志敏（1979- ），男，河北临城人，临城中学总务处，研究方向：计算机科学。

本文系2013年廊坊市哲学社会科学研究课题项目《首都新机场建设对廊坊影响研究》
（项目编号：2013021）的阶段性研究成果。

课题负责人：樊俊花，其他成员：刘瑛莹、尚娟、陶睿。

（北华航天工业学院重点学科项目资助）。