Logistics the Case of Porsche Term Paper

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In the past decade, new auto plants have pursued a different strategy to increase line efficiency and reduce logistical problems: have the major parts suppliers build their plants next door to the main auto assembly plant. This was pioneered at Opel's Eisenach (Clarke 2005), Jeep's Toledo (Clanton 2004), and Smart's Hambach (France) plants (Lewis 2004). In each case, the suppliers shared in the investment in product development, the capital cost of the plant, and the risk of new model introductions. In return, the suppliers received a long-term contract at a rate that guaranteed that they would make money -- as long as the autos were a success.

Porsche faces some difficulty in performing the same feat in Zuffenhausen for two reasons: (1) it is still a niche manufacturer, with fewer than 100,000 total units (even counting production in Leipzig and Bratislava), and (2) the Zuffenhausen plant is difficult to expand, and to automate further.

While Porsche's short-term strategies of sharing manufacturing facilities has helped, it may be due for a consolidation in the future.

At present, final assembly takes place in four places (including Valmet in Finland for Boxsters). With the addition of a fifth line and concomitant increases in expected production, Porsche may want to consider a consolidation at a "Greenfield" plant, in which it can consolidate some of its assembly.

Given the difficulty of laying off workers, and the need for long-term supplier relationships, the new plant may need to be located near Stuttgart, but out of the suburban/urban sprawl that has grown around the original factory in Zuffenhausen.

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In order to reduce logistical risks, Porsche may want to concentrate warehousing next to its plant, in a way to create a small buffer stock and keep the assembly plant performing at best efficiency.

This is a better solution for a small, niche manufacturer like Porsche. The cautionary tale here is the Hambach plant for Smart. Although Mercedes was successful in gaining the commitment of parts manufacturers to create factories on site, they then proceeded to fall short of production targets by 50%, making the whole investment unsatisfactory for all concerned. The target volume of 200,000 units per year was twice what Porsche can expect in the next few years -- and therefore an unattractive volume for many of Porsche's suppliers to build new plants next door.

Conclusion

Porsche's problems in 1992 nearly forced it into receivership. Wiedeking's willingness to bring in Toyota engineers to revamp their logistics and assembly processes shaved man-hours by half, saving the company and restoring acceptable profit margins.

Porsche's potential problems today could still come from logistical issues. The addition of a fifth, very different type of platform could destabilize its production and logistics system. Without the unit volume to justify an "assembly campus," a la Mercedes or Jeep, means that the company will need to find other solutions to improve logistics. By creating a new, nearby "Greenfield" plant with a parts-positioning warehouse, Porsche has the opportunity to take the best of "Just-in-Time" logistics concepts while rationalising its production further......

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