Supply Chain Risk Management in Automotive Small and Medium Enterprises in Malaysia

Norlaile Salleh Hudin,Abu Bakar Abdul Hamid

doi:10.4028/www.scientific.net/amm.773-774.799

Abstract

The current automotive supply chain is facing more risks than ever due to the heavy dependencies of local automotive component manufacturers with foreign and established global producers. In response, this paper is designed to explore the supply chain risk management (SCRM) practice of automotive industry in Malaysia. In-depth case studies were conducted at two automotive components manufacturers based on three constructs of SCRM framework including the SCRM process, tools used in SCRM and techniques to minimize risk. The case studies revealed that the automotive companies implemented failure mode and effect analysis (FMEA), 5 why analysis, impact-aspect study, and recovery planning to manage their supply chain risks. In addition, brainstorming techniques, experience and expert judgment were mainly used as risk identification and assessment techniques. Most of the risks encountered during operations were dealt by reactive strategies such as back-up suppliers and increasing buffer stocks. Overall, the automotive companies are heading towards more formal and sophisticated SCRM especially with the certification of TS16949 although there are still plenty of rooms for improvements in the risk identification and risk assessment techniques since very limited quantitative techniques were evidenced.

Highlights

The automotive supply chains have been proven to be facing risks derived from globalisation, increasing outsoucing activities and product variants [1], and supplier default [2] which threatened the flow of finished product or material supplies
Malaysian automotive industry is chosen for this study because it relies on the same suppliers as other supply chains in different countries exposing it to similar set of risks
The results reveal that automotive companies tend to implement informal supply chain risk management (SCRM) probably due to several barriers such as limited capital

Summary

Introduction

The automotive supply chains have been proven to be facing risks derived from globalisation, increasing outsoucing activities and product variants [1], and supplier default [2] which threatened the flow of finished product or material supplies. Company B is a producer of car air conditioner which was established in 1985 They are a subsidiary of Japanese firm with more than 50 percent of their parts are imported from China while the rest are either purchased from Japan, Korea, Thailand, Indonesia or Malaysia. The purchasing managers confirmed that the most common SCRM practice applied at her department was supplier evaluation based on quality, delivery and cost aspects After supplier evaluation, they monitor the performance of the suppliers as a risk monitoring activity. Due to heavy reliance on suppliers in China who they claimed to have quality issues, Company B implemented FMEA involving only top managers in production, production engineering, R&D and quality department Another practice to minimize the quality risk is called the 5 why analysis which is conducted as per customer requirement. They claimed that their SCRM was based on TS16949 standard

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