Navistar Company

Executive Summary

Trimco is a main supplier to Navistar. Navistar relies heavily on Trimco at their assembly plant. Navistar and Trimco must improve their quality management systems in order to have the right parts, in the right number shipped at the right time without any damages or defects. Navistar and Trimco must start imploring a more collaborative approach to their business process. Navistar needs to address their policy problems. Our last minute design changes seriously disrupt the supply process. The robbing of parts also creates a snowball effect of problems in other areas, or down the line. Trimco has several problems including high employee turnover, mixed technological capability with respect to manufacturing processes, and a lack of internal control. Areas of deficiencies must be jointly identified and solutions to these deficiencies must be collaboratively tackled. With these improvements, the cycle time from customer order to delivery should be reduced, which would allow a higher level of customer service at an overall lower cost.

The delivery times for the custom-designed trucks should decrease with the recommended implementations. Navistar must identify the problem to Trimco. Trimco must be aware of these deficiencies and collaborate with Navistar to remedy these. Navistar must then look at the problem internally. Top management has given them support in this matter and they must be utilized. Input across different business functions must be taken. Working with other departments will help identify issues that were previously not seen. Incomplete parts can be monitored with a quality control system that compares parts ordered or required with actual parts sent. Last minute design changes must be stopped, as they are not sufficient to let Trimco manufacture the parts on time. Quality of the parts can be addressed by raising awareness of the issue, and by also ensuring packaging and handling of parts are done in meticulous order in order to reduce damages. The “robbed” parts must be stopped as it creates additional problems. It is a short-term fix that produces long-term negative effects.

Issues Identification

There are several issues for both Navistar and Trimco. I have asked shipping and receiving at both Navistar and Trimco to record the frequency of the trim problems as well as the root causes for each occurrence over a 6-month period. Firstly I will outline the problems here at Navistar. I find that we are storing/handling parts following improper receiving procedures, which include lost, misplaced, and damaged materials. Often parts contained within kits were damaged to the point where they could not be installed into truck interiors causing added costs for Trimco, and delay our assembly here at Navistar. We have also accepted parts that are defective. These parts sometimes went undetected until installation. These parts had to be either scrapped or returned to Trimco for replacement and credit. We must collaborate with Trimco in order to reduce their costs in this area.

Communication between Trimco and Navistar will help reduction in total supply chain costs, which is a key measure in the strategic initiative that we are trying to plan in order to reduce these issues. Another issue is the robbing of parts for higher priority uses, which are caused due to supply failures. This of course translates to even more supply failures. This has caused continual shortages, lost stock, (which is the highest reason identified for trim part shortages) and excessive ordering. Another issue is last minute design changes. Navistar needs descriptions or specifications in describing the need in sufficient detail to ensure that the correct goods are ordered in the correct quality, at the correct time, at the correct place. It is considered one of the most important keys to successful strategic management. This is an issue for both Navistar and Trimco in that Navistar has to rework the parts, or order new parts to fill the demand. Specification outlining must be looked at in a strategic sense with Trimco and Navistar communicating different ideas in order to make these situations minimal.

Another issue is the JIT suitability. Safety stock is still required which would beget calling it a just in time system. This must be addressed on both sides. Issues for Trimco include quality control problems. Shipping defective material, incorrect material, and even damaged parts, causes increased cost and decreased productivity for both Trimco and Navistar. Another issue for Trimco, which was also an issue for Navistar, was JIT suitability. It seems that at times Navistar expectation can be too high with the last minute specification changes, which can lead to incorrectly punched parts, or incorrectly sent parts that has been an issue.

Environmental and Root Cause Analysis

The main cause of the issues for both Trimco and Navistar are quality issues. Both the supply plant and we the assembling plants are running into quality issues. Trimco Industries is a large supplier of automotive trim parts. It is also a very large Navistar supplier. Trimco faces several problems including mixed technological capability with respect to manufacturing processes; high employee turnover that affects employee training and awareness levels that impacts its ability to meet customer needs effectively. Shipping is an issue in that it lacks internal process. Correct parts aren’t always shipped, and the shipping of materials is not sufficient as damaged parts are ranked second as a reason for trim part shortages. Internally we have some issues as well. The last minute design change that we allow to occur, seriously disrupt the supply process. The stealing policy that allows workers to rob parts from one job for another only worsens existing problems.

Inventory count, and easy identification of parts is negatively affected. This represents a short-term solution that equates to problems in the long run. The control over incoming parts seems to be an issue that needs to be addressed. Parts that are missing, damaged, defective or incorrectly sent, are being identified too late for Trimco to send appropriate replacement parts in time for assembly. Parts that are being stored at Navistar are being damaged between the time they are received from Trimco and the time they are required for production. This can equate to inefficient packaging, t even mishandling in our receiving area. This damage would indicate that inappropriate storage and handling procedures are being used at Navistar and Trimco. Navistar operates in a highly competitive industry. It has a long-standing history, and reputable background, but there is always pressure to reduce margins in any way possible in order to stay competitive in the industry. Navistar is in the custom truck business and currently has a 28.6% share in the North American market. At any given time 50-80% of our orders can be customized.

Customers took time in designing their trucks to their specifications and expect timely delivery with impeccable quality. Missing and/or parts are directly impacting both the customer and bottom line costs. This represents 60% of trim part shortages. Trim shortages account for an estimated $200,000. This is a very generous estimation with the estimated cost potentially being far higher than this figure. The processes used both at Navistar and at Trimco are not sufficient to respond to last minute design changes, maintain a continuous supply of defect-free and correctly ordered parts, prevent internal stealing of parts and control the damage of parts during shipment. The quality management programs at both Navistar and Trimco need improvement to effectively change their current processes.

All processes, both Navistar and Trimco’s must be in control, centered, and possess minimal variation. Strategically, if these problems were resolved, this would improve Navistar’s offering to our custom-designed truck customers. Trimco also has a high rate of attrition, which adds to the overall cost. This rate of turnover affects the training levels of employees and their ability to control processes, to respond to last minute design changes and to ensure the accuracy of trim part shipments. The cost of this employee attrition is high in many respects. Employees are paid $23 an hour in 1997. When these shortages occur there will be overtime needed which equates to $34.50 per hour. The constant turnover also has training costs, which can’t be measured in the employee’s hourly wage.

The JIT system utilized is perhaps too stringent on time, especially with the issues at hand. A balance must be reached between a JIT system’s tightness and the ability of both the supplier and customer to work together to ensure a smooth and efficient supply chain system. There is not one root cause but rather two. The quality management programs at both Navistar and Trimco need improvement to effectively change their current processes. Strategically, if these problems were resolved, this would improve Navistar’s offering to the custom-designed truck customer. Navistar and Trimco’s JIT system must also be looked at.

Alternatives and/or Options

Again supplier relationships come to the forefront. Communication with Trimco is necessary in order to get a better understanding of Trimco’s problems, and where we think we can help. The JIT system utilized is  too stringent on time, especially with the issues at hand. A balance must be reached between a JIT system’s tightness and the ability of both the supplier and customer to work together to ensure a smooth and efficient supply chain system. Navistar employs a strategic centralized purchasing structure where all communication is done at Navistar headquarters. An alternative would be to have collaboration at both companies’ headquarters as to get a better line of communication. Another alternative would be for a better ERP system to be implemented. This would require additional costs, and would be a strategic move for the long run, but this could help with specification issues, as well as demand on both levels.

Recommendations and Implementation

The quality management programs at both Navistar and Trimco need improvement to effectively change their current processes. Strategically, if these problems were resolved, this would improve Navistar’s offering to the custom-designed truck customer. Some options that can help both Navistar and Trimco would be to delve deeper into their supplier relationship. Both parties can conduct a careful study of the processing line for both Navistar and Trimco in order to obtain a complete understanding of both companies manufacturing processes. The first step would be to notify Trimco of the supply problem. We understand the problem, and Trimco has had added costs, but we need to communicate with Trimco and have them understand how the supply problem effects Navistar’s bottom line, and ultimately how it affects our customers. This step should help open the lines of communication and help facilitate the beginning of the process.

Next step would be to internally have top management involved. Top management already supports quality improvement efforts as it’s so important to Navistar’s bottom line. Let them know of the issues being faced. Support from management will help facilitate the necessary authority needed with Navistar to gain cooperation amongst the needed employees to help identify and resolve the supply problem. Upper management is primarily concerned with financial impact, but they must be aware of the impact of the problem both to the customer and those finances. The policy issues surrounding the problem with respect to last minute design changes and robbing and the deficiencies associated with Trimco must be communicated. Next would be to gain input from stakeholders. Input and feedback must be taken from other Navistar employees. Communication with Trimco is also vital in order to access additional data related to the problem as well as potential solutions to effectively resolve the interior trim supply problem.

Navistar can start by gaining input from the shipping manager, line manager, line employees, the chaser, quality managers, and design engineers. Trimco should also gain input from the shipping manager, shipping employees, and design engineers. This method will have multiple outcomes. It will start by identifying the problem to the company as a whole. The impact of the workers can be better communicated by identifying the issue. Feedback can be attained based on this as well. Line employees and shipping employees are first hand with respect to being effected by the problems, and they may voice their concerns. An added benefit of this will be that several implementation issues will be addressed before encountered. Communication and brainstorming will help identify the problems before implementation and this will be facilitated through a team approach. The design changes need to be stopped as it causing major delays and issues with Trimco.

We must collaboratively agree to a set time frame that is feasible for both parties. Navistar can look at Trimco’s operation thoroughly—from design through manufacturing and delivery. Supplier relationship can take a bigger role, as Trimco is a major Navistar supplier. Communication is vital between Trimco and us. Some options and alternatives to other problems: To tackle incomplete shipments. A better EDI or implementing a joint ERP systems in which Trimco can improve control over parts being sent to Navistar with tracking being done in the ERP system. This will cost Trimco both financially and time wise, but will have a longer strategic impact in their business operations.

An option to the parts quality problem would be to have Trimco have a better process when sending out parts to Navistar. Trimco needs to stop sending defective parts to Navistar, as Navistar has used these parts and ultimately had to scrap and replace them later on in their production. This is added cost and inefficiencies. Also damaged parts are second highest behind missing parts. Trimco will need to improve packaging and packing of shipping containers. On Navistar’s end, better storage of materials must be looked at in order to prevent the damage of parts while awaiting assembly. Parts can be stored in strategically  bins, or Navistar can look at other options such as storage towers. There would be added cost, but parts can be easily located, and can be much safer from damage.

Monitor and Control

Collaboration and communication between Trimco and Navistar is paramount in the monitoring and controlling of this outcome. Quality departments for both companies will be heavily involved in the monitoring of this implementation. Monitoring in the form of regular reports on defects, damages, and incorrect parts must be implemented in both companies. Reports to be conducted by shipping managers and line managers. There will be regular intervals where these figures will be displayed and addressed in a collaborative setting between the two companies. Integrating other business functions will be crucial as budgets can be looked at. Costs associated with these implementations should reflect a decrease in added costs and addressing expenses and looking at the budget can monitor this. The bulk of monitoring will go to the quality departments through internal reporting and tracking of damaged, defective, and incorrect parts.

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