Renesas Electronics and the Automotive Microcontroller Supply Chain Harvard Case Solution & Analysis

Problem Statement

The issue that has been faced by the company and the automotive industry is quite different, however, it is associated with each other. The companies A and B will have to identify new methods to enhance their supply chain and to overcome the dependency on one facility. The case determines two options that these companies can implement, but the overall scenario determines something different.

Alternatives

This section will analyze different options available for the companies that they can utilize to increase the efficiency of their supply chain and to overcome the dependency on one production facility or supplier in the future. This section will conduct a thorough analysis of every option in order to determine the best suitable option that the companies can implement in the current state. The options that the companies can utilize will be evaluated on the basis and advantages and disadvantages offered by each alternative and on the basis of the decision criteria in the final recommendation will be made. The suggested alternative options are listed below.

  1. Distribute the production or diversify the production facilities in different geographical regions.
  2. Implement Just-in-Time inventory management.
  3. Hold on to more inventories.
  4. Apply the concept of original equipment manufacturing.

Option 1: Diversify Production to Different Geographical Locations

The first suggested option for the company is to identify different geographical regions that have the strength to manufacture micro controllers and diversify production in those regions. This will allow the company to increase its production and overcome the dependency over one facility. According to this strategic option, the company will have to identify the different locations besides Japan in Asia or in any region that offer low cost benefit and provide the leverage of economies of scale. Thus, the company will have to identify this strategy in order to facilitate the automotive industry and to hold its critical position in the global supply chain.

The advantages that this move will offer are many and are of significant nature as the company will be helping in solving not just the issues faced by them, but also be facilitating the automotive industry in creating a robust supply chain. First of all, the dependencies over one capacity will be over and the threat of shutting down production at the automotive manufacturers end will be reduced or vanished. The companies will have different options to look after and any such incident will not hurt their operations in the future.

Secondly, the companies can create their production flow smoothly without any disruption and can carry out supply chain activities without any hindrance. On the other hand, the companies will have to search for not other means to solve such issues in the future and the role of micro controllers will need no substitution. Therefore, the company will be able to sustain its importance in the industry and will be able to play its role in the automotive industry as well without any distortion.

However, there are certain disadvantages that this option has to offer which are important to cater for the company. Establishing production facilities or searching for new geographical regions will be a costly affair and required strong financial strength in order to proceed with this strategy. Besides that, the inventory management will be another task and catering the demand will be challenging as excess production will generate extra inventory which will reduce the profit margin.

However, the company is currently the sole source of the engine micro controllers which is one of its competitive advantages that has to sustain. Therefore, this strategy can play a vital role to sustain this advantage of the company and also to provide more leverage to the automotive manufacturers. The correct implementation of the strategy will lead to fruitful results and can generate efficient supply chain.

Option 2: Hold on to More Inventory

The second suggested option for the automakers is to focus on keeping or holding more inventories in order to mitigate the risks of failure in such situations. This strategy aims at delivering or managing high levels of inventory every time and to create some ease in the dependency over the Naka facility. However, the companies already are dependent on the Naka facility as it is the sole source of engine micro controllers, but this issue needs to be overcome in the case of any act of God that may disrupt production. In regard to this situation, this strategy can present a possible solution which may help the company overcome the dependency and manage the demand easily. There are certain benefits that the company can obtain from this strategy, but also there are some drawbacks as well................

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