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Francisco Veloso Chris Henry Richard Roth Joel P. Clark. December 1999. Students: Carlos Neves Tiago Ratinho. Contents. Objectives and Scope Analytical Approach Major Conclusions Critical Recommendations. Objectives and Scope. Automotive industry:

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Francisco veloso chris henry richard roth joel p clark

Francisco Veloso

Chris Henry

Richard Roth

Joel P. Clark

December 1999

Students: Carlos Neves

Tiago Ratinho


Francisco veloso chris henry richard roth joel p clark

Contents

  • Objectives and Scope

  • Analytical Approach

  • Major Conclusions

  • Critical Recommendations


Francisco veloso chris henry richard roth joel p clark

Objectives and Scope

  • Automotive industry:

    • Massive generator of economic wealth and employment

    • Predictable demand for each country

    • Other sectors dependent, like rubber or steel

    • Highly dependent of government trade, safety and environmental regulations

    • Its impact depends crucially on the specific role

    • Governments look at automotive industry as an important industrial development opportunity


Francisco veloso chris henry richard roth joel p clark

Objectives and Scope

  • Portugal:

    • 1987-1997 the autoparts industry grew seven times

    • together with assembly industry leads the stock of FDI

    • 7% of GDP

  • How can parts and components produced in Portugal remain internationally competitive?

  • What strategies should national firms follow to move up the tier structure?

  • When it is necessary to internationalize production, and under which conditions should it be done?

  • What role should the government play?


Francisco veloso chris henry richard roth joel p clark

Analytical Approach (1)

  • Macroscopic:

    • Provides an understanding of the industry as a whole

    • Discusses the technical trends in the global automotive industry

    • Globalization and changes in the supply chains

  • Intermediate:

    • Macroscopic level, addressing common aspects across the supplier base in Portugal


Francisco veloso chris henry richard roth joel p clark

Analytical Approach (2)


Francisco veloso chris henry richard roth joel p clark

Analytical Approach (3)

  • Micro:

  • Technical cost modeling for:

    • -Stamping and molding processes

    • -Logistic

    • -Logistic strategies


Francisco veloso chris henry richard roth joel p clark

MAJOR THEMES OF THE PORTUGUESE AUTOPARTS INDUSTRY

  • Company size: product development capabilities; manufacturing should achieve minimum efficient scales;

  • Labour Market: labour considerations play a role in the manufacturing cost for higher value added products; engineering and development costs;

  • Geographical considerations: logistics cost penalty arising from its peripheral location; significant automotive manufacturing industry in place in Spain; investments in Brazil;

  • Manufacturing competencies: represents 7% of GDP; 20% of national exports and 20% of all foreign direct investment stock; presence of AutoEuropa and substantial commercial vehicle manufacturing sector; high levels of certification and quality practices;


Francisco veloso chris henry richard roth joel p clark

CRITICAL RECOMENDATIONS (1)

  • Cooperation: cooperation programmes among companies with complementary business objectives; specialization according to specificity of equipment; considerer mergers and acquisitions;

  • Development: higher value added products; companies working together; the area of cars interiors should be looked with particular attention; attracting engineering and research centers from major auto components corporation; research in logistics from Portugal, with the support of government funds;

  • Human Resources: low wages requiresa better-qualified workforce; creation of a technical vocational school for the auto;


Francisco veloso chris henry richard roth joel p clark

CRITICAL RECOMENDATIONS (2)

  • Internationalisation: depending on the types of components being produced and overall company strategy; investing abroad should be seen by the government as a positive evolution of the local industry (Brazil in particular);

  • Manufacturing Management: narrow product range; higher levels of worker education and responsibility; a balanced and adequate use of methods for manufacturing planning and control; careful equipment time management; choice of the appropriate equipment for the product being manufactured;

  • Supply Chain: disseminating the best practices of the supply chain capabilities

  • Overall Strategy: development of the auto parts companies; strong cooperative environment between local industry and public sector.


Francisco veloso chris henry richard roth joel p clark

  • Narrow array of high value products

  • Larger plants

  • Focus on integration of technologies

  • Full product engineering

  • JIT shipping logistics

OVERALL STRATEGY

Single Company

Group of Firms

4

3

Higher Complexity

Product Focused

1

2

Process Focused

  • Moderate array of low value products

  • Larger plants

  • Focus on manufacturing performance

  • JIT or distribution center

  • Full process engineering team

  • Very broad array of low value products

  • Small facilities

  • Lean business structure

  • Direct logistics strategy

  • No engineering

Higher Growth


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