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World Class Manufacturing

Wen Li, the head of Global Sales at Fuyao Glass, must recommend whether to source automotive glass from their factory in Tianjin, China or their factory in Moraine, Ohio to the company chairman. While labor costs are lower in Tianjin, transportation costs from China are higher. The report recommends sourcing from Moraine to avoid delivery failures from customs issues and because costs can be reduced through productivity gains within a year to match Tianjin's costs. Moraine also offers tax credits and a higher level of automation.

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Adlin Kaushal Dsouza 19008
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326 views6 pages

World Class Manufacturing

Wen Li, the head of Global Sales at Fuyao Glass, must recommend whether to source automotive glass from their factory in Tianjin, China or their factory in Moraine, Ohio to the company chairman. While labor costs are lower in Tianjin, transportation costs from China are higher. The report recommends sourcing from Moraine to avoid delivery failures from customs issues and because costs can be reduced through productivity gains within a year to match Tianjin's costs. Moraine also offers tax credits and a higher level of automation.

Uploaded by

Adlin Kaushal Dsouza 19008
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
You are on page 1/ 6

St

Joseph’s Institute of Management


5th Trimester 2020

Professor: Mr. RR Alluri


Email: adlinkaushal@sjim.edu.in

Adlin Dsouza
World Class Manufacturing
___

Fuyao Case Analysis

PART I: Q&A

1) What drives the cost differences between Moraine and Tianjin? Why?

o Tianjin has a lower labour cost than Moraine because China has a lower
average wage rate than the USA.

o Tianjin has a higher packaging and transportation cost than Moraine


because of custom charges for imports from China and the actual shipping
cost between the two continents.

2) What should Wen Li recommend to the chairman?

o Wen Li should recommend going ahead with Moraine for sourcing.


3) Should Wen Li recommend sourcing from Tianjin or source from
Moraine? Why? Provide a clear justification for your response.

o Can achieve productivity of Tianjin in less than a year.

o Costs can be reduced by online staff cuts, learning curve progress, and
increased productivity.

o Less security inventory (money available for other activities).

o Lower probability of delivery failure.

o Investment use of $1 billion in plants

o Possible tax credits from local governments.

o Higher level of automation

PART II: CASE REPORT


1. Introduction

o The key problems and issues in the case study were decisions regarding
sourcing and site selection for production, maintain sustainable
volume through the product life cycle, dealing with fluctuation in
factors of cost, production workforce, meeting customer requirements.
o Choosing Tianjin over Moraine or the other way around.
o A further in-depth analysis about Fuyao is provided below in a SWOT
chart, to add flare to the introduction.



Positive Negative

Strengths Weaknesses
● It's #1 in automotive glass
● A lot of time is wasted when
● Vertically integrated
Intern

changing specifications on
● Specialized production for cars
al

production lines.

● Leaders in R&D ● Strong capital production
● Plants around the world ● 3-month lead time



Opportunity Threats

● Obtain long-term contracts to 1. Tax and rate changes
External

provide glass to car producers. 2. Fines for delayed


● Good deal with governments for transportation
all taxes they pay

2. Background

o Fuyao is automobile glass manufacture not only for Chinese OEM’s but
also international players such as GM, Ford, Toyota, Nissan, kia, BMW,
Mercedes, Rolls-Royce and Bentley.
o Cho Wong the chairman and founder of the company has an up hand in
the market because of his membership in the CPPCC and also due to
his generous contribution at times of natural disasters.
o They own two factories in USA it’s The Moraine Factory and in China
it’s The Tianjin Factory
o Wen Li, the head of Global Sales has to recommend either to source
from Tianjin or from Moraine, to the chairman taking into various
considerations.
Productive process employed by Fuyao

I. Mixing materials -> Heat to 1500°C & Pour unto smooth plates -> Slowly
cool the glass & Cut glass.
II. Mark the glass & Soften edges -> Wash.
III. For curved glass methods used are Gravity method or pressure method.
IV. Finally depending on the use, the glass can be laminated or tempered.

3. Alternatives

o Possible alternatives solutions were either to produce locally in


Moraine or import it from Tianjin.
o The alternatives of choosing Tianjin was rejected because of the
following:
1. High import costs of Packing and Shipping.
2. Longer duration of transportation that lasted about 40-50 days.
3. Susceptible to (import) tax changes, due to conflicting treaty.
4. Increased likelihood of penalties such as anti-dumping duty or
countervailing duty.
o Constraints needed to overcome for choosing Moraine are:
1. Higher wages
2. Delayed in learning curve
3. Lower productivity

o The Tianjin alternative was not possible at this time because of the
following:
1. Lower level of automation
2. Major Lead Time
3. Higher shipping costs
4. More inventory costs

4. Proposed Solutions

o Moraine was a recommended solution because of lower probability of


delivery failure due to customs check.
o The other reasons why Moraine was chosen is because:
1. Higher level of automation
2. Minor Lead Time
3. Lower shipping costs
4. Less inventory

o I support this solution because of:


1. Costs can be reduced by online staff cuts, learning curve progress,
and increased productivity.
2. Moraine can achieve productivity of Tianjin in less than a year.
3. Lower probability of delivery failure.
4. Less security inventory (money available for other activities).
5. The state governments of US provide tax credit for local operations.
5. Recommendation

o The planning decision category: This strategy is suitable as it


focuses on defining decisions related to the general goals and strategy
of the company and specific goals of the procurement department.
o Therefore, a decision made by Wen Li and the Global Sales team under
Li based can be determined by various sourcing metrics. Such as the
following two sourcing methods are defined:
o SWOT analysis: The company’s external properties, opportunities and
threats and internal properties, strengths and weaknesses, that are put
together and evaluated in the introduction of this case report, can form
the basis of this analysis to generate strategic alternatives.
o Purchasing Chessboard: is based upon the Kraljic Purchasing
Analysis but uses also the four power positions from the Cox Power
analysis. This approach advises to examine the demand power and
supply power. The same four sourcing strategies as Kraljic Purchasing
analysis can be proposed.

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