OUTSOURCING

ES4C9 SUPPLY CHAIN MANAGEMENT

Raj Mamtora

CONTENTS 1. INTRODUCTION

2. COMPANY OVERVIEW

3. COMPANY OUTSOURCING

- WHAT AND WHERE

4. THE RISKS

5. IMPROVEMENTS

6. OUTSOURCING IN 5 YEARS

INTRODUCTION

Define: Outsourcing

“Outsourcing is when a business function, particular task, role or process is contracted out to a third party over a considerable period of time.”

Design Parts Assembly Distribution Dealer End User

Supplier Pie

SCM: OUTSOURCING

TYPICAL AUTOMOTIVE SUPPLY CHAIN

SUPPLY CHAIN MANAGEMENT

1

Two primary reasons to outsource:• To lower the purchase price• To improve quality

COMPANY OVERVIEW

“MOTION EMOTION”

The group also manufactures automotive parts such as: Seats Doors Front-ends

The group primarily operates in Europe. It is headquartered in Paris, France and has 198,220 employees.

PSA Peugeot Citroen (Peugeot) is engaged in the design, development, manufacturing and sales of

passenger cars, light commercial vehicles, scooters, and motorcycles.

INTRODUCTION

SCM: OUTSOURCING

Acoustic packages Cockpits Exhaust systems

2

PEUGEOT

SO WHAT DO THEY OUTSOURCE?

SCM: OUTSOURCING

Engine Category:- Inlet and outlet valves- Fuel injection systems- Air filters, oil filters and spark plugs- Car cylinder head blank, inlet pipes- Automatic gear case, aluminium alloy die- castings

- Gear case and bearings

Chassis and drive train parts category:- Shock absorbers- Alloy wheel- Clutch disks, facing, pads, brake hoses- ABS systems (antilock brake systems)- Aluminium

Body Parts Category:- Wiper blades- Auto lighting and bulbs- Rear mirrors

Other Products:- Electrical/electronic parts – non-durable and sporty accessories

- Auto care chemicals such as wax and rust-proofing solutions

- Tyres

As well as the company outsourcing majority of the components for the production of a vehicle as shown on the left, typical business processes are also outsourced such as:

Human resources –

Customer care call centres –

Detailed product development –

Information Technology Services –

3

PEUGEOTSCM: OUTSOURCING

OUTSOURCING LOCATIONS

Key:Manufacturing PlantsComponents and Casting PlantsAssembly Sites 4

PEUGEOTSCM: OUTSOURCING

RISKS INVOLVED?

• Care with taking outsourcing to emerging markets - Culture• An obvious risk relating to a problem that many of us face –

Increased fuel price!• Communication• Foreign exchange currency.

5

PEUGEOTSCM: OUTSOURCING

IMPROVEMENTS?

• Further rationalise the supply base

- Currently 200-250 Automotive orientated ESP’s

• Carry out appropriate research with emerging markets

• Cost driven outsourcing must be well defined

- set of rules and processes based on KPI

• Take carbon footprint into account.

6

OUTSOURCINGSCM: OUTSOURCING

THE NEXT 5 YEARS

• Will fuel prices really become an issue?

- Local outsourcing becoming dominant - Less developed countries are coming up in the world

• Global outsourcing has hit a plateau

• Outsourcing will be location based - Places like Japan are still recovering from the Earthquake - Will the $157 billion budget for rebuilding allow for Japan to recover within 5 years?

2007 2008 2009 20100

50000

100000

150000

200000

250000

300000

350000

Total Revenuein $Million

Peugeot Toyota

7

OUTSOURCING

THANK YOU FOR LISTENINGANY QUESTIONS

RAJ MAMTORA