Fiat Auto Spa Case Study

Fiat Auto SpA

Case Study for Fiat Auto SpA

Identify the reasons why the current Fiat logistics system is incapable of delivering the required higher customer service standards.

The Fiat logistics system today has degenerated into trying to be a system for all things to all members of the supply chain and distribution system. As a result, the current logistics system is unmanageable from an auto manufacturing standpoint. Both the made-to-customer and made-to-dealer workflows cannot scale for the 18 new models that Fiat is intent on launching during the timeframe of this case. Evidence of the lack of scalability is seen in offering dealers the option of selecting literally any of the thousands of options on an auto, yet not being able to provide any commitment on the promised delivery date. This is symptomatic of having too many options available for ordering a made-to-dealer auto. Fiat has set the objective of fulfilling a made to customer order is six weeks for 90% of cars yet today, on more predictable made to dealer orders, takes between 10 to 15 weeks. Second, the logistics system functions responsible for made-to-customer and made-to-dealer workflows cannot accurately predict delivery times. Third, there is only a 40% success rate of conformance of initial autos produced to customer requirements. All of these are actually symptoms of a much more fundamental disconnect between the core processes that Fiat uses for logistics and the sales systems used to take orders from dealers and customers. There is also a complete lack of knowledge of how to report back the status of a given made-to-customer and made-to-dealer based auto as well. Taken together, all these factors, compounded by the 18 new product lines and their product introductions and 20 strategic initiatives which are a major distraction, all contribute to Fiat's inability to meet or exceed its customer service standards.

Identify the factors which will be critical to the successful implementation of any proposed solution.

There are several critical factors Fiat must take into account for the successful implementation of a redesigned logistics system. The first and most critical is getting the resistance to change overcome throughout the organization. The case specifically states that any successful solution will need to be "bought-in" by senior management. In fact this is the most essential aspect of any new logistics systems implementation due to senior managements' buy-in being critical to getting employees to overcome resistance to change. As any new logistics systems that Fiat implements is going to require intensive process-level change, it is imperative that senior management illustrate committed and passionate buy-in for the change overall.

A second factor that is critical for the successful implementation of a new logistics system is alleviating the conflict between production efficiency and the rigidity that strategy requires vs. The flexibility that made-to-order manufacturing strategies require. The three competitive logistics systems analyzed clearly show that the more rigid the forecasting process, the greater the accuracy attained. Yet in each of these logistics systems there are lost sales due to not being able to respond to customers' requests for more customized and tailored autos. At the center of alleviating this conflict between manufacturing strategies concentrating on production efficiency vs. make-to-order, Fiat must take a hard look at their car customization process and how it impacts inventory management through their distribution channels. Today the company takes between two to four weeks to deliver cars from inventory, with their goal being one week. In addition, Fiat today is struggling with the made-to-customer order performance levels, with 90% of cars delivered in six weeks and 100% of cars delivered in eight weeks. While having slightly better performance with made-to-deliver manufacturing workflows, Fiat is at a significant competitive disadvantage relative to its European and global competitors. The made-to-customer and made-to-dealer processes need significant revamping if any new logistics system is to be successful.

Third, the proliferation of new products throughout Fiat's division needs to be carefully planned for from a logistics standpoint if any system implementation is to be successful. As the case study states, Fiat has designed 18 new models which includes coverage of additional market segments such as mini-vans and sports cars, in addition to launching 20 new major projects. All of these major initiatives taken together is going to lead to massive amounts of confusion in the event Fiat does not prioritize them. After prioritizing them, Fiat must take into account the logistics system and process integration points into each of these strategic initiatives and design any new logistics system accordingly.

Finally the new logistics system needs to first concentrate on re-defining processes throughout the manufacturing supply chain first, then address the logistics with channel partners including dealers. As the case study states, any logistics system should not require intensive it support, as this organization is already deluged with requests according to the case study. This translates into the need for any proposed logistics system to have a highly process-centric approach developed first. Only by isolating which logistics processes, both from a supply chain and reseller standpoint, can Fiat hope to be successful.

Identify the constraints within which the logistics planning team must work.

The most critical constraint for Fiat to overcome is the process inefficiencies in their made-to-customer and made-to-dealer workflows. These time lags are exacerbating the time loss in logistics, in turn making supply chain coordination with key suppliers difficult. The selection of new suppliers will only lead to greater confusion until the made-to-customer and made-to-dealer workflows are made more aligned to customers and dealers specifically.