The reasons for Micro Compact Car AG (MCC) should assemble the cars themselves rather than rely on the suppliers on site:

A-Level: Business Studies

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(2). Maintain relevance skill or knowledge of assembles the cars
Over rely on the suppliers for assemble their cars may lead MCC don’t have any capability/skill to assemble the cars themselves. To protect themselves and keep more secret for production process, MCC should keep some relevance skill; knowledge of assemble their cars. Because it exist the risk of disclose too much production skill to suppliers on the site.


(3). Further controls the important element of assemble the cars
In addition to control the quality, MCC can control more important element of assemble the smart cars by themselves. This element may include flexibility; assemble-line stoppage time; production reclamation; qualification of teams etc……

For example, MCC can have more flexibility to control the assemble time of any module. MCC can decide when to assemble module A and when to assemble module B or assemble both at the same time. Also, MCC have more responsive for receive the urgent order in anytime. It is because the sale amount of smart car effect their profit directly.


(4). To achieve strategic fit
Although the cost of assemble the cars by supplier may be cheaper than MCC themselves due to comparative advantage, MCC should still assemble the cars themselves. It is because smart car is the new product of MCC that need to put more attention to understand the demand or opinion of customer toward their cars.

In this case, MCC should deal with their smart car in a responsive supply chain than an efficient supply chain. See Table 2.4 in appendices. Although an efficient supply chain help MCC to save cost (e.g. little advertising fee to promote smart car.), a large scale of customer may be loss since smart car is a new product that the brand name is not popular and stable enough to avoid customer go away.

Figure 2.5 state that the more uncertain demand product is more suitable to match with a responsive‘s supply chain.

(Source: Peter Meindl & Sunil Chopra (2007), Supply Chain Management: Strategy, Planning & Operations, 3 rd ed. USA, Pearson Education, Inc., pp40-53)


2. The problems for the performance of the Supply Chain based on cooperation rather than direct ownership or control:


(1). Lose control on suppliers
When supplier more involve in the processes of production of smart car, their bargaining power will become more than before. In contrast, MCC‘s bargaining power will become lower when supplier’s bargaining power increase. Whenever negotiating the price with suppliers, MCC always forced to over pay to suppliers. Also, MCC may feel difficult to control their supplier’s performance because they does not fully know the whole production process when they over rely on their supplier production.


(2). Lose control on efficiency
Besides, MCC can’t control the timeline schedule of the production of the relevance components/parts of smart car when these production procedures are distributed to the suppliers. Although suppliers only work according to the order of MCC, MCC can’t ensure their supplier can finished /assemble their part on time. So, there may cause the situation of lose sale of some customers when there have an urgent order from customers.


(3). Communication with suppliers
There may always have some argument between MCC and their supplier if they can’t handle their relationship in an appropriate way. This problem always happen while cooperation with other in the beginning. (ex. Antagonistic stage-lose/lose situation). When the relationship improved, it goes to Adversarial stage (ex. win/lose situation). After that, it goes to Cooperative stage (ex. win/win situation). The ideal stage is collaborative stage (ex. win/win situation). To achieve this stage, it evokes another problem of how to select suitable supplier for MCC.
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