Table of Contents
Introduction
The management of logistics and operations in any organization is essential in enhancing the efficiency of the organizational activities. For instance, it defines the process flows and the supply chain of the company’s products which are significant in promoting the flow of goods from the manufacturing station to the consumers. Therefore, it becomes fundamental to manage these processes to ensure the satisfaction of the consumers in regards to timely delivery and the delivery of the product in excellent condition as ordered. This paper looks at Ferrari’s Case study. It evaluates the existing process flows of the company’s logistics and operations management. Furthermore, it suggests the possible improvements that could be implemented to better the operations management and the logistics of the company.
Company Overview
Established in 1929, Ferrari Company specializes in producing luxury sports cars. Enzo Ferrari officially started it in 1947. The car-designer company is based in Italy. In his entire life, the founder, Enzo Ferrari, concentrated on designing and creating sports cars. There are two stakeholders in the company. The fiat group commands 90% of the total share capital with the remaining 10% being controlled by Piero Ferrari. Additionally, formula Uorno is used in the company. It is an innovative program which outlines the objectives of the organization, thereby driving the employees towards the stated aims by providing an innovative, safe, and economic friendly working environment. Over the past years, the company has been able to increase its annual sales. However, it has faced challenges in its operations such as increased competition, changing consumer patterns, and the diversification of product portfolios. Despite the challenges, the company has been able to grow and strengthen its brand identity by using innovative approaches to develop solutions for these problems.
Literature Review
Eskigun, Uzsoy, Preckel, Krishnan, and Tew (2005: 200) conducted a study on the design of the supply chain in the automotive industry. They found out that the supply chain and process flows were divided into different structures in the industry. The structure comprised of the upstream supplier, OEMs (Original Equipment Manufacturers), and the downstream distributors and dealers. In another case, the structure also encompasses the aftermarket. Eskigun, Uzsoy, Preckel, Krishnan, and Tew’s (2005: 201) study identified that most of the supplier in this industry was tiered from the perspective of the manufacturers. According to the findings of the study, suppliers that directly delivered products to the manufacturers were considered as the 1st tier suppliers. The study indicated that in the supply chain, these suppliers were the closest to the Original Equipment Manufacturers. As a result, they provided larger modules and most of the parts that were used in the final assembly process.
In their study, Lambert, Cooper, and Pagh (1998: 18) found out that the industry structure comprised of the 2nd and the 3rd tier suppliers. The study identified that the 2nd and 3rd tier suppliers were the primary source of raw materials to the 1st tier module supplier. Furthermore, this group of suppliers often provided the 1st tier suppliers with small module components that were essential in the manufacturing process. Lambert, Cooper, and Pagh (1998: 19) found out that the manufacturer could have thousands of 2nd and 3rd tier suppliers but only a handful 1st tier suppliers. Beyond these suppliers, the study also identified that there existed supplier of the war materials and the aftermarket.
According to Martínez Sánchez and Pérez Pérez (2005: 691), the OEMs were the markets of the vehicle products in the supply chain. The study found out that the OEMs completed the final assembly of the modules and then shipped then vehicles to the distributors. In their research, Martínez Sánchez and Pérez Pérez (2005: 700) indicated that the generated service parts and accessories had a different supply. They also identified that some elements in the aftermarket came from OEMs and component suppliers to enhance customization, repair, and maintenance. The findings of the study determined that the aftermarket was involved with the purchases related to the vehicles for customization, repair, and maintenance of their original sales. The aftermarket was segmented into two structures, the heavy-duty aftermarket which comprised of the heavy weight and the medium trucks and the automotive aftermarket which focused primarily on the light vehicles.
A study conducted by Murphy (2004) showed that the consumers in the automotive industry were segmented depending on the company’s market department. Some of the factors that were considered for the segmentation include the demographics of the consumers, types of vehicles, and classes of prices. Murphy (2004) also identified that few channels served the customer segments in this industry. Murphy found out that the majority of the sales was made through dealerships. In these channels, the other sales comprised of the fleet and the direct sales. The direct sales were achieved by using the e-commerce sites that were hosted by the dealers, and the fleet sales were primarily developed for the rental car companies.
Ferrari’s Logistics and Process Flow
Ferrari has a lean supply chain. Its suppliers are structured into functional tiers that are made of the first level and the second tier suppliers. The 1st tier suppliers work closely with a team in product development, while the second tier suppliers are primarily concerned with the making of individual parts. In Ferrari, the supply chain model encouraged communication and cooperation among all the suppliers. Its in-house operations were diversified into a quasi-independent network for the first tier supplier companies (Womack, Jones and Roos 2000). Furthermore, there are substantial cross-holding between the suppliers and Ferrari even though each supplier acted as an independent company.
Moreover, to enhance the efficiency of the operations management, the structure of Ferrari’s supply chain provided for the cross-sharing of personnel. The cross-sharing was achieved by transferring some of the senior managers of the company to suppliers. At times, the company had to send its staff to the suppliers in the bid to compensate the higher workloads in these market segments. The chain also focuses on the ‘market price minus’ system. The system focuses on analysing value effectively reducing the costs. Unlike the ‘supplier cost plus’ approach, the market price system used by Ferrari looks at the declining model of the prices over time resulting from the learning curve (Womack, Jones and Roos 2000). After Ferrari’s supply network, the company has also concentrated on building a sales network, which consists of the distributors, dealers, and the buyers. Initially, the distributors owned equity shares in companies that are now owned by Ferrari. The dealers and the buyers also form another vital market segment.
Advantages of the Tools to the Operation of Ferrari
Operations Performance 5 Objectives
The operations tool stated above provided various advantages to Ferrari in its operations. It promotes the analysis of various organizational objectives such as flexibility, cost, customization, speed, quality, and dependability that are essential in providing direction to the company (Stevenson and Hojati 2007). Ideally, the objectives enhance the assessment of the quality of the inputs, outputs, and the concerned processes. The evaluation enables the Company, Ferrari, to make continual improvements wherever necessary in the bid to maximize profits due to improved quality of the products. The tool enables the evaluation of the speed with which the products reach the consumers thereby generating cash flow.
The assessment would allow Ferrari to eliminate ‘bottlenecks’ that slow the production process, therefore, improving the speed of generating cash flow since the products are delivered to the market on time. The approach is essential in analysing the cost that is involved in the production process, thereby promoting its management (Johnston and Clark 2008). Management of costs would ensure that all the financial resources are utilized properly to avoid wastages. Additionally, the evaluation helps in focusing on the flexibility of the company’s product to meet the customer’s varied demands. It is closely associated with dependability which helps in improving the reputation of the organization (Rogers 1998: 101). Both customization and reliability focus on promoting quality essentially promoting cash flow and profitability in the group.
SWOT Analysis
The SWOT analysis also confers various advantages to Ferrari. The analysis helps the company to identify the strengths and that increases its focus on these elements to maximize its profits. For instance, Ferrari has a solid presence in the world of racing because the alloys used in manufacturing the cars are light leading to better handling and acceleration (Johnston and Clark 2008). The company can focus on this strength to explore new markets and that increases its customer base. On the other hand, the SWOT analysis is essential in identifying and evaluating Ferrari’s weaknesses. Some of the company’s weaknesses comprise the presence of limited distribution network for the Ferrari cars across the world. These countries also face a shortage of experienced service professional. The evaluation would prove advantageous in that it would help the company to develop measures that would remedy and eliminate these workers (Bowersox, Closs and Cooper 2002).
The SWOT analysis tool is essential in identifying opportunities which provide the potentials for growth of the company. For example, some of the possibilities for Ferrari include the differentiation of the company’s product portfolios and augmenting its service and the distribution networks. Differentiation of the product portfolio would enable the accommodation of variants fundamental to the success of Ferrari. Other potential opportunities for Ferrari would also comprise diversification into the hybrid and the future car segment and increase the pride of owning the car models from the Ferrari Company. Finally, the SWOT analysis evaluation is significant in that it helps the organization to identify threats and institute necessary precautions. For example, some countries might have custom policies that might frustrate Ferrari’s business operation by making the purchasing procedure lengthy. Also, some of Ferrari’s competitors such as Bugatti and Lamborghini might use frugal engineering and product innovation practices that might threaten Ferrari’s market share.
Based on the evaluations of Ferrari’s operations, it is suggested that the company focuses on the factors that would help to improve its services and increase productivity.
Disadvantages of using the tools
Despite the various advantages that accrue from this business tools, they also have multiple limitations. For instance, the evaluations do not prioritize issues in their valuations with respect to their significance to the organization’s operations. At times, the analysis might concentrate on a pool of issue that might not be relevant to the operations of the business effectively wasting valuable resources and time that could have been incorporated in the production process (Bowersox, Closs and Cooper 2002). Furthermore, the tools might not provide solutions or alternative decisions to some issues that might face the organization. For instance, there are some issues that might not be catered for in their analysis. Therefore, the tools cannot be able to provide solutions to these situations since most of their decisions are based on result analysis. Consequently, the valuations might also offer too many ideas that would make it difficult to select the type of ideas that should be implemented to ensure profitability and growth of the enterprise.
Suggested Improvements in Better Business Logistics and Operations Management
Better management of the logistics and operations are crucial in ensuring the survival of business enterprises. Some of the suggestions for the improvement of the operations management and business logistics of Ferrari Company include;
The adoption of a model for business operation and planning that is driven by demand. The model should be based on the insights of real-time market and demand shaping. The model will incorporate contingency planning tools that would ensure that the company has a complete view of the business risks such as suppliers going out of business, thereby developing effective response measures to these dangers (Beamon 2000: 277). The company should also build adaptive supply chains with integrated executions and rapid planning models. The supply chain would enable the organization to adapt to the changing market environment since the company would be able to understand the factors shaping the demand and risks in this market segment.
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Ferrari should optimize product management and the product designs for sustainability and supply thereby accelerating successful innovation. Moreover, it should align its supply chain with the goals of the business by integrating corporate business planning with operations and sales planning (Beamon 2000: 280). The integration would enable the company to seal the existing gaps and disconnects in strategy and activities in the enterprise. Also, it would allow for integration of the forecasting systems with financial, strategic budgeting with the operations, thereby permitting the making of smart trade-off decisions that would ensure the growth of the business.
Ferrari should incorporate sustainability into its supply chain operations. The strategy would enable the company to achieve various competitive advantages such as production efficiency. It would be achieved by incorporating critical components into the supply chain process of the organization (Ballou 2007). Ferrari’s professionals should put much emphasis on the ways of achieving positive results through strategies like real-time visibility and analyses of the fundamental resources in the production process. It would enable the production of fewer wastes at the same time optimizing the profits for the company. The company, Ferrari should strive to keep the operations of the business running by ensuring continuous improvement of the systems management through audit, measurements, and knowledge management (Ballou 2007). Additionally, it should ensure that the logistics and the operations management are reliable and predictable. Providing reliability and predictability of the business’s supply would enable the company to supply its products to the right locations at the right time.
However, there are limitations which hinder the implementation of these strategies. For instance, they might be employee reluctance towards changes since some of them may feel that restructuring the system might render them jobless. Also, the restructuring might require professional expertise that might be expensive to train or acquire.
Conclusion
Ferrari is a vibrant brand in the car industry that has gradually grown over the years. Due to the existing market conditions, it became essential for the brand to develop efficient logistics and operational management strategies that would give it an edge over the other players in the market. The car industry is a diverse industry that is prone to change from time to time due to innovations, technological changes, and the changes in demands and preferences of the consumer. Therefore, any company such as Ferrari needs to use various business tools such as the SWOT to analyse the factors in the market essentially providing alternative solutions that would ensure competitiveness in the market. Consequently, the analysis would help the company to set its priorities effectively putting focus to move towards a particular desired direction that would ensure client satisfaction thereby generating more revenues for the company. In the Ferrari’s case study, the incorporation of the business tools in logistics management helped to improve the productivity of the company and hence its profitability and growth.
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