Hyundai motor corporation ( HMC ) is engaged in the design, development and fabrication of cars. The company chiefly operates across parts such as North America, East Asia, and Europe but is strong in South Korea where, as market leader, it is responsible for about 50 % of the state ‘s car production. HMC, given its association with the Hyundai group has immense support from the Korean authorities. As at 1998, Hyundai group contributed 20 % of South Korea GDP ( dong and genitourinary..up )
HMC ‘s Korean operations ( and its major rivals ) are regularly hit by general brotherhood work stoppages by the Korean labor Unions. Until late 1998 ; HMC had been successful in managing its traditionally riotous worker ‘s brotherhoods with about double-digit wage hikings and other benefits ; therefore maintaining major work stoppages at bay. However this was to stop as the Asiatic fiscal crisis in 1998 affected the car industry and forced the company and so other car companies in South Korea to prosecute drastic restructuring.
Restructuring at HMC was indispensable ; harmonizing to company functionaries, Hyundai ‘s six assembly workss with a annual production capacity of 1.65million vehicles, operated at merely 40 per centum of their capacity. Staffing demands had to cut down ; some occupations were to be lost. HMC worker ‘s brotherhood did non accept the alteration with gratitude.
The Hyundai workers brotherhood have been described as one of the most powerful and hawkish brotherhoods in Korea. It boasts of 39,000 members across three fabrication sites in South Korea and has non failed undergoing a work stoppage any twelvemonth since 1990 ( anon 2004 ) . The efforts by Hyundai direction to reconstitute operations had met stiff opposition from the brotherhoods and labor differences have been on the addition since 1997 culminating in the major break event in June 20, 2003.
This study is a survey into the break of HMC planetary supply concatenation following a 47 twenty-four hours work stoppage of production workers in its South Korean workss. The primary consequence of this break is the foundation of all major planetary operations ( salvage for India ) . Entire fiscal impact due to this break was estimated at $ 1.2 billion gross loss chiefly from America, Europe and South Korea.
The paper first reappraisals of the planetary operations of Hyundai with a focal point on the European operations. It will so show a theoretical model for the analyzing the instance mentioned. A treatment on HMC Europe recovery will follow and so, expandible resiliency enterprises will be outlined and decisions, recommendations and countries for future research will be presented.
HYUNDAI MOTOR CORPORATION GLOBAL OPERATIONS
2.1 Car Industry:
The car industry in Korea suffered serious hits during the Southeast Asiatic economic crisis from 1998. Hyundai was most hit in this crises ; seeing its domestic gross revenues diminution by 55 % and exports clang by 74 % .By early 2000 ‘s, the south Korean economic system started resiling back to entertain lifting inflow of imported autos, the coup d’etat of Daewoo by the globally strong General Motors and increasing competition from Renault-Samsung and Ssangyong motors. Although Hyundai was market leader within Korea, it began to confront within Korea, the same degrees of competition it experienced globally.
2.2 South Korean Operationss
HMC operates three principal car production bases in Korea: the Ulsan mill, the Asan mill and the Jeonju mill.
The Ulsan mill is HMC ‘s chief production works ( and the universe ‘s largest car works ) and comprises five independent workss capable of bring forthing 5,600 vehicles daily. The works besides manufactures and exports critical constituents and subassemblies to abroad wholly knocked down ( CKD ) assembly workss.
The Asan and Jeonju workss produce rider vehicles and mid-large sized coachs chiefly for export.
Export operations from these workss are jointly co-ordinated at Hyundai group ‘s Ulsan port co-located with the Ulsan works. HMC employs the services of its logistics subordinate ( Glovis ) for the co-ordination and executing of logistics activity from this port to finish ports across the Earth.
2.3 European Operationss
HMC European operations are linked with production and/or assembly in low labor cost economic systems chiefly in Eastern Europe. As at 2003, operations in Europe consisted of two assembly workss located in Izmir, Turkey and Rostov, Russia severally. The workss are located nearby ports due to the immense imports of sub-assemblies.
The Turkish works was deemed to go the gateway to the western-European market following the application of Turkey into the EU to take advantage of trade advantages. This has non materialised. Until 2005 nevertheless, the Turkish works was the chief provider to Western Europe dwelling the UK, France, Spain etc. The Russian works supplies Eastern-European markets including Luxemburg, Uzbekistan etc.
In 2005, HMC built a new fabrication ( non assembly ) works in Czech Republic capitalise on low labor costs and EU trade advantages. The fabrication works enhances the purchase of HMC ‘s R & A ; D capablenesss in order to innovatively accommodate its merchandises to its markets. Flexibility in design and invention is regarded as beginning of competitory advantage for HMC.
Other operations worthy of reference are its American, Asiatic and In-between East/African operations. The market entry schemes in the states seem to reflect the nature of market development or growing rates ; in developed markets ( North America, Japan ) Hyundai owns production and/or R & A ; D installations in order to efficaciously vie on tendencies such as invention while it operates joint ventures or licensed assembly workss for less developed markets e.g. Egypt, Sudan etc. Manufacturing operations in Emerging economic systems like India and China have capacities transcending current domestic demand.
The tabular arraies below provide a sum-up of Hyundai Motor Co. ‘s planetary operations.
Table 1.1: HMC Global operations as at June 2003. HMC works in Alabama, US operational in 2005 and therefore non captured here
2.4 Disruption Event
On 20th June 2003, the Hyundai production labor brotherhood undertook a major work stoppage impacting all three production installations in South Korea. The work stoppage lasted 47 yearss.
The state ‘s largest car manufacturer saw its July, 2003 gross revenues retract by every bit much 40.6 % year-on-year ( y-o-y ) with combined gross revenues of 97,940 autos, which breaks down into 40,208 units in domestic gross revenues and 57,732 units in abroad gross revenues. With short supply, Hyundai failed to present more than 27,000 autos and ship 68,000 autos in that month, which caused some 1.3 trillion won ( about US $ 1.2 billion ) in lost gross. Within this period, HMC ‘s major rivals including GM-Daewoo and Renault-Samsung experienced whooping gross revenues addition of 36.6 % and 45 % y-o-y severally ( Anon 2003 ) siting on the advantage of the ingestion revenue enhancement cuts: HMC was in domestic danger.
In the US where gross revenues were surging, Hyundai ‘s dependability and reputation was at hazard. Export stocks of the Grandeur XG, the New Avante XD and the Santa Fe athletics public-service corporation vehicle to America had been wholly exhausted ( July 20 ) . Abroad cargos of 28,000 units were delayed at least one month harmonizing to Hyundai functionaries.
Operationss of its abroad assembly workss in Malaysia, Taiwan, Pakistan and Egypt all came to a expansive arrest by terminal July. The Chinese assembly works was running nevertheless on low stock of critical constituents for wholly knocked down assembly. The Indian works ; holding localised most of its supplies, was mostly unharmed by the break.
In Europe, the Russian assembly works was shut down July 16 and the Turkish works production was cut by 50 per centum by July 31 ; lost gross revenues in the European market were estimated at around $ 127million. In peculiar, the New Avante XD, which was to replace the EF Sonata as the company ‘s best seller that twelvemonth had troubles come ining the European market. The market launch was postponed indefinitely and it was hard to quantify the doomed grosss due to the launch hold.
Figure 2.2 below gaining controls the consequence of the break to European gross revenues in 2003.
The domestic state of affairs forced the Korean Government intercession into the dialogues to stop the work stoppage on 8th August 2003.
Theoretical Model and Framework
3.1 Adapted Framework
The end of supply concatenation hazard direction is basically to construct a resilient endeavor ( Handfield et al. 2007 ; Sheffi & A ; Rice 2005 ; Christopher & A ; Peck 2004 ) . The model presented below is an version of the work of Handfield et Al ( 2007 ) and Sheffi & A ; Rice ( 2005 ) for constructing the resilient enterprose. The hazard procedure Begins by mapping the supply concatenation and mensurating the exposures risks at the nodes and web, placing appropriate risk-reduction mechanisms for the vulnerable nodes and web, and deploying specific actions and/or schemes to extenuate the hazards identified at the nodes. The schemes or actions for cut downing exposure and edifice resiliency are loosely categorised as Redundancy or Flexibility and are deployed to the elements of the supply web which include the supply, transition and distribution entities.
3.1.1 Measuring Hazard in the Supply Chain
Supply concatenation Vulnerability ( or hazard ) is a map of the chance of break and the gross impact or effect of the break ( Handfield et al. 2007 ; Sheffi and Rice 2005 ; Christopher & A ; Peck 2004 ) . Harmonizing to Handfield et Al. ( 2007 ) , the chance of break among other maps depends on the comprehensiveness of the supply concatenation, in footings of the figure of planetary sourcing nodes involved every bit good as the figure of forced dependences bing in the web. Probability is ‘amplified ‘ as the figure of planetary sourcing nodes and forced dependences addition and interplay in the supply concatenation.
Constrained dependences determine the magnitude of the ‘domino consequence ‘ along the supply concatenation in the event of a break.
Table 2.1 gives a significant listing of the planetary sourcing and constrained dependence amplifiers of break.
. Source ( Handfield et al. 2007 )
On the designation of the exposures in the supply concatenation, the same may be assessed in footings of the chance and effect utilizing the Vulnerability map ( Sheffi & A ; Rice, 2005 ) . The exposure map aids the way of direction attending and helps prioritize planning. Pulling from the aforementioned, the focal point of this analysis is non in the direction of hazard in the strictest sense but to do the supply concatenation less vulnerable ( resiliency ) to these hazards in the event of a break as the planetary operations of HMC mean that several ‘amplifiers ‘ exist to do endeavor hazard direction a existent ambitious enterprise.
The exposure model is presented in ulterior subdivisions to supply analysis into the hazards within Hyundai ‘s planetary European supply concatenation.
3.2 Identify Vulnerability Reduction Mechanisms
Following Sheffi & A ; Rice ( 2005 ) , resiliency can be built in either of two wide classs of Redundancy and Flexibility.
Redundancy involves procuring resources in modesty to be used in the event of a break. Common signifiers include inventory keeping in the signifier of buffer or safety stock at fabrication workss or cardinal distribution Centres, deliberate low capacity use rates and back-up secondary providers. The consequence of redundancy such as buffer or safety stock is to make a span in clip for reacting to the break before it becomes apparent to the subsequent operations. However effectual redundancy is, it may non be compatible for the paradigms of thin and just-in-time fabrication which is prevalent in the Automobile industry so that such companies have to be careful non to stray from ‘just-in-time ‘ to ‘just-in-case ‘ stock list direction ( Sheffi & A ; Rice 2005 ) .
There is significantly more purchase in doing supply ironss resilient by other means other than redundancy ( Christopher & A ; Peck 2004 ; Sheffi & A ; Rice 2005 ) . Flexibility sums to constructing organic capablenesss that can feel menaces and besides react to them rapidly. Flexibility in the supply concatenation may necessitate a supply web redesign and although may be capital intensive to construct the capablenesss ; little sums of flexibleness are effectual in constructing supply concatenation resiliency ( Handfield et al. 2007 ; Sheffi and Rice 20005 ; Jordan & A ; Graves 1995 ) . The supply concatenation elements ( supply, transition, distribution, control systems and corporate civilization ) elucidated by Sheffi & A ; Rice ( 2005 ) represent the chance to present flexibleness in the supply web therefore, redesigning the supply concatenation to do it more resilient in the event of breaks and making competitory advantage in the market topographic point.
3.3 Manufacturing Flexibility
Further in the treatment, an interesting in-depth point of view to flexibleness is provided by Jordan & A ; Graves ( 1995 ) . Their work on accomplishing fabrication procedure flexibleness is applicable to the transition component described in discussed above. The writers submit that for realistic premises of demand ( or supply ) uncertainnesss, limited flexibleness is better than entire flexibleness. Summary of this attack to transition or fabrication flexibleness is summarised in figure 3.3.
1, 2, 3, and 4 represent Fabrication workss which manufacture Product ( s ) or Product group ( s ) A, B, C and D.
Three instances are shown: No flexibleness, 2- flexibleness and Entire flexibleness.
Jordan and Graves ( 1995 ) submit that 2 – flexibleness offers most advantages of entire flexibleness with minimum investing.
Figure 2.2: Supply Chain Elements ( Sheffi & A ; Rice, 2005 )
Fig 3.3 Manufacturing flexibleness
Key subjects from the treatments are therefore:
The end of supply concatenation hazard direction must be to construct a resilient supply concatenation
Global sourcing nodes and constrained dependences when nowadays, act to magnify the chance of breaks
Resilience can be achieved by redundancy and/or flexibleness.
The model provided here and the work of Jordan & A ; Graves ( 1995 ) shall steer the attack towards analyzing the HMC instance and bring forthing recommendations for constructing an expandible supply concatenation resiliency scheme for HMC European operations.
Expansion OF MODEL & A ; FRAMEWORK
4.1 Maping the Supply Chain
The first measure in a systematic attack to put on the line direction towards constructing resiliency in the supply concatenation is to understand the exposures within ( Handfield and McCormack, 2007 ; Christopher & A ; Peck 2004 ) . The HMC supply concatenation into its European market is mapped below:
HMC European Supply Chain Map
The map shows the being of high constrained dependences ( singularity of sourced parts and restriction on figure of beginnings ) on the Ulsan works by the Turkish and Russian workss for the supply of sub-assemblies and faculties. It has been presented earlier the consequence of forced dependences in worsening the effects of break in planetary webs ; I make no effort is made to buttress this.
Following Christopher and Peck ( n.d. ) , the hazards and exposures within the focal operating unit ( Ulsan works ) and the drawn-out concatenation can be categorised as shown in Table 4.1
The vulnerabilities/risks identified in the tabular array above are based on literature reappraisal, past events and the nature of HMC operations by and large and specifically to their European operations.
4.2 Supply Chain Vulnerability Map
Figure 4.2 shows the Vulnerability map for analyzing the major exposures in the supply concatenation. The figure shows that the labor work stoppages, internal quality jobs are the most important exposures in the focal company. The Ulsan port, though co-located with the Ulsan works is external to the works operations as the port is managed and operated independently from HMC. This significantly lowers exposures as the port workers are non members of the car workers brotherhood.
Destination port failures
Single Port Closure
Figure 4.2: Supply Chain Vulnerability Map
Given the history of S. Korean and HMC work force, labour work stoppages are a cardinal discoverable exposure.
4.3 HMC European Supply Chain Recovery
Although the event in Korea rippled through HMC ‘s planetary operations and had a important consequence on the Europe, speedy recovery after the break event was possible by the combined effects of redundancy in the Turkish works, antiphonal logistics and the low use of the ( redundancy ) available at the Ulsan works.
The extra resources and logistics reactivity here can be inferred from analyzing the break profile ( Sheffi & A ; Rice, 2005 ) which shows the events associated with the break against clip ( figure 4.3 )
The extra resources evident from the break profile and other analysis include:
In-transit and little safety stock at Russian works ; about 28days of stock list of critical parts
More than 41days of stock list ( in-transit and safety stock ) at the Turkish works
Spare capacity at the Ulsan works to rage up end product after break.
The decreased use of the Ulsan works ( coming from the Asian crises ) proved favorable to HMC in order to rage up production end product on work stoppage call-off.
The logistics responsiveness/rapidity is inferred from the minimum consequence of lead clip evidenced in the gross revenues informations and break profile ( fig 4.3 and 4.4a ) . Using the Sea distance – ocean trip reckoner, yearss at sea from Ulsan to Izmir port, Turkey and Rostov, Russia is estimated at 34 and 50 yearss severally nevertheless, this lead clip consequence was minimised as gross revenues august gross revenues were significantly higher than July gross revenues. Logisticss schemes such as air-freighting low stock critical points and increasing transportation frequence, multimodal transit HMC logistics spouses were antiphonal to implement schemes such as:
Air-freighting critical low stock constituents
Increasing transportation frequence to affected workss
Implementing transportation precedence to workss in major markets
Multi-modal transit and logistics
The trim capacity available in the Ulsan works, redundancy in the Turkish works and the logistics reactivity were critical to the recovery and resiliency of the European operations by late August. These illations are derived from the European export informations
Figure 4.4 a & A ; B: European Gross saless informations for 2002 and 2003.
4.4 The Case for Flexibility
Logisticss responsiveness/rapidity and redundancy have been shown to help the recovery of the European supply concatenation. However, the continuance of the break was far greater than the window period for which the redundancies permitted so that HMC could non prolong production degrees in the face of the break ( or closing at Ulsan ) and therefore non resilient. This lack resulted to European lost gross revenues quantified at approximately $ 127million and unquantifiable reputational losingss.
The instance for flexibleness presented here stems from the fact that a important part or all the lost gross during the break would hold been captured with minimum flexibleness in the European supply concatenation ( Jordan & A ; Graves, 1995 ) . Besides, flexibleness aligns more with the JIT fabrication
Following the work Sheffi & A ; Rice ( 2005 ) it is clear the demand to implement flexibleness in certain elements of the Supply Chain to cut down the forced dependence on Ulsan and finally enhance reactivity in the independent assembly workss.
Derived from supply concatenation elements for resiliency, Table 4.2 nowadayss enterprises for constructing supply concatenation resiliency by flexibleness. The distribution component has been precluded here given the old treatment on HMC logistics and the demand to implement flexibleness in the critical elements for such enterprises in line with the analysis provided by this instance survey.
Supply Chain Element
Enterprises for Building Resilience
Back-up faculty providers from other fabricating sites ( India )
Local provider development for Critical faculties
This enterprise will guarantee supply of Indian manufactured faculties in the face of break
To cut down the hazard associated with planetary supply of critical parts
Standard Process in workss
2-flexibility to guarantee supply of merchandise group from another assembly or fabrication works
To guarantee modularity in production which enhances flexibleness
Investing in visibleness systems
To give timely information for which antiphonal actions can be taken e.g. stock list re-allocation
Multi modal logistics
To interrupt forced dependance on the Ulsan Port
Involve brotherhood in managerial determinations within Korean works
Decentralization of determination authorization is helpful to understate the hazard of difference and besides authorise staff to respond to breaks on its happening
Table 4.2: Enterprises for constructing Supply Resilience through flexibleness
Some of the enterprises presented here associate chiefly to the focal operating unit ( Ulsan works ) which is besides the hazard beginning. The enterprises proposed here include the decentralization of authorization to cut down the hazard of labour agitation and enable quicker responses to break of any sort in hereafter.
The fabrication flexibleness deserves farther treatment. It has been aforementioned that HMC operations in India were un-affected by the breaks in Ulsan. However, the merchandises from this works were non available to relieve the deficit in the European market. This may be attributed to the independent of the concerned fabrication workss. However, following the work of Jordan and Graves, the current province nowadayss an chance for presenting fabrication flexibleness within the three workss ( or expanded to include other workss in the planetary operations ) . The conventional is shown below:
PROPOSED: Conventional 2-FLEXIBILITY AMONG MANUFACTURING/ASSEMBLY PLANTS
Current State: NO FLEXIBILITY
Figure 4.5: Fabrication Flexibility in HMC Operations
The end of the enterprises outlined in Table 4.2 is to construct a resilient supply concatenation able to react to alter ( break ) without any important punishments in operating cost or gross. The consequence is to cut down the forced dependences for the supply of critical parts and faculties and besides to construct flexibleness among workss for the industry and supply of merchandises for the different markets where HMC operate. From the foregoing, recommendations for constructing HMC Europe supply concatenation resiliency are outlined below:
At barest lower limit, the version of the Indian operations for the supply of critical parts to European operations should be pursued. As celebrated earlier, the Indian operations ‘ supply is to the full localised hence mostly independent on Ulsan. European operations can follow flexibleness of critical portion supply by sourcing from India.
Pursuant to the above, HMC Europe must take acquisition from the Indian operations to implement localization of function of supplies by provider developments. This will cut down the hazards associated with planetary sourcing nodes.
The current works administration where certain workss supply merely for certain markets is a barrier to constructing fabricating flexibleness. HMC is advised to interrupt these barriers and guarantee limited fabrication ( and supply ) flexibleness where one works possesses the fabrication resources to accommodate its merchandises to another market ( 2-flexibility ) .
The beginning of break
Flexibility and redundancy have been presented as two chief schemes for accomplishing resiliency in the supply concatenation. It has besides been shown that small sums of flexibleness ( fabricating flexibleness ) achieve really important consequences ; future research may see the optimality of uniting redundancy and flexibleness enterprises. Questions to reply associating to this research may be: what combination of flexibleness and redundancy is optimum within the concatenation for specific hazard degrees?
The function of inventoried redundancy in edifice resiliency, though premium or expensive, can non be discarded. As such, one method which may enable the accomplishment of resiliency with stock list is has been proposed ; strategic stock list arrangement. It is accepted that strategic stock list arrangement in parts ( or workss ) which reflect the associated hazard profiles. Future research into the break hazard profiles and planetary risk-adjusted stock list arrangement will be of great value in However, redundancy arrangement is cardinal to achievi