Kuiper Leda Supply Chain Defense: Strategy & KPIs

Introduction to Kuiper Leda's Supply Chain Environment

The automotive OEM industry is characterized by long lead times, highly competitive design-in cycles, procurement and strategic sourcing strategies that demand a very high level of synchronization, and supply chains that are continually attempting to manage unforeseen spikes in demand. Product assemblies can also change significantly mid-production as auto manufacturers and OEMs launch new models and products to stay competitive, attempting to leverage previous-generation componentry in the process. All of these factors contribute to a very high degree of variability in supply chain forecasting, management, and optimization. Kuiper Leda faces these uncertainties through a series of processes aimed at making the manufacturing of Electronic Control Units (ECUs) and Radio Frequency Identification (RFID) tags for automotive manufacturers and OEMs as accurate, efficient, and profitable as possible.

The supply chain practices of Kuiper Leda form the basis of this paper, which seeks to defend their approaches and strategies and also define Key Performance Indicators (KPIs) and metrics of performance the company can use to better manage its supply chain. At the most strategic level, Kuiper Leda needs to concentrate on making their supply chain as efficient, transparent, and quality-based as possible. Inherent in this analysis is an assessment of the current level of supplier collaboration at the system and process level, and the ability of Kuiper Leda to integrate suppliers into their new product development and introduction (NPDI) process. This latter process is illustrated by Kuiper Leda's introduction of a new RFID tag. The combined effects of supply chain collaboration and inter-process integration to support the NPDI process also illustrate how the company is using Just-In-Time (JIT) inventory management to increase inventory turns and reduce carrying costs.

Lean Manufacturing and JIT Strategy

The catalyst of Kuiper Leda's use of supply chain planning, collaboration, and optimization strategies is their continual pursuit of lean manufacturing strategic objectives, as evidenced in the combining of Kaizen, supply chain management (SCM), schedule optimization, and JIT inventory strategies. Lean manufacturing is widely considered to be the result of the maturation of JIT scheduling methods combined with intensive supply chain collaboration, knowledge transfer, and supply chain synchronization (Holweg, 2007). The impetus of the research that combined these factors originated and continues at the Massachusetts Institute of Technology (MIT) International Motor Vehicle Program (IMVP) and its studies of the Toyota Production System (Holweg, 2007). For Kuiper Leda, their efforts at knowledge transfer and knowledge integration are critical to their ability to transform a series of disconnected supply chain processes and provide the impetus for unifying them as part of a lean strategy (Ferdows, 2006).

JIT as a supply chain strategy has many implications for how effectively Kuiper Leda will serve customers. As the simulation shows, there is an immediate and direct correlation between the company's ability to manage JIT inventory and its ability to meet production and delivery dates. This in turn entirely determines whether customers' orders for ECUs and RFID tags can be met. JIT thus becomes a catalyst for meeting or exceeding customers' expectations. For Kuiper Leda, this is a critical part of their role as a supplier in the automotive value chain. They need to concentrate on managing customer expectations through the execution of their own supply chain strategies, as automotive manufacturers and OEMs typically have design-in cycles defined during the NPDI process (Quesada, Syamil, & Doll, 2006). This translates into the need for Kuiper Leda to perform at a JIT level as a supplier to their own customers.

In effect, this is the essence of an efficient, profitable supply chain, where lean manufacturing processes ensure a sufficiently high level of demand management and demand sensing (Truss, Wu, Saroop, & Sehgal, 2006). JIT is therefore essential to Kuiper Leda's ability to retain existing OEM customers and gain new ones. The ability to earn and keep the trust of their auto manufacturer and OEM component customers is directly related to Kuiper Leda's ability to execute JIT-based supply chain, sourcing, and manufacturing strategies on a daily basis. There is also the direct influence of JIT on the cost of capital, which is a critical rate of interest that Kuiper Leda will have to pay for new development over time. Strong adherence and execution of a JIT strategy over time delivers all of these benefits, with one of the most valuable being the reduction in cost of capital, an increase in inventory turns, and the ability to meet or exceed customer expectations over time (Kros, Falasca, & Nadler, 2006).

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