A Case Of Ford Fiesta Company Marketing Essay

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By
Sittikorn Charoonjindakul
UP669973
Subject to
Dr Nasarin Asgari
Date 14/3/2013
A CASE OF FORD FIESTA COMPANY
SUPPLY CHAIN MANAGEMENT
1. MRP table for Ford Fiesta and Steering Wheel Company for the next 12 weeks
Figure 1: MRP table for Ford Fiesta Company for the next 12 weeks
MRP for Ford Fiesta for next 12 weeks
For the Ford Dagenham they have lead time of 2 weeks, projected on hand of 50, none of safety stock and allocated while the lot sizing policy is lot-for-lot and scheduled receipts are 150 on week one and 20 on week six which will make projected on hand equal to 200 on week one and increasing to 220 on week six. The net requirement, the reduction of gross requirement with 500 by scheduled receipts with 20 on week six plus with projected on hand on of 200 on week five will equal to 280 on week six which have to planned order on week 3 due to the lead time is three. Later week 7, 8, 9, 11, and 12, the demand are 200, 100, 150, 450, and 250 respectively but there was no projected on hand and scheduled receipts which make net requirements to 200, 100, 150, 400, and 250 start from week 4, 5, 6, 8, and 9 respectively.
Figure 2: MRP table for Car Seat Company for the next 12 weeks
MRP for car seat company for next 12 weeks
For the car seat supplier for Ford Dagenham which based in Manchester and considers two weeks as lead time to provide the orders. The demand begins on week three with 560 because the company needs two seats to produce one car. Then the supplier must plan to produce the car seats on week one due to the lead time is 2 with amount of 560. While the week 4, 5, 6, 7, 8, and 9 with the demand of 400, 200, 300, 800, and 500 respectively and have to produce on week 2, 3, 4, 6, and 7 due to the lead time of 2 while the policy is lot-for-lot.
2. A diagram of an automotive supply chain network.
Figure 3: Automotive Supply Chain Network
http://www.edibasics.co.uk/wp-content/themes/EDI-Basics/images/industry-auto-supply-chain-structure.jpg
The OEM (Original Equipment Manufacturer) operates in an environment with strong global competition, market is more turbulent, complex and uncertain. From the Figure 3, OEM or car manufacturers which have upstream of first tier suppliers, these are mainly global world players with their own production or assembly capacities establish near to OEM. The tiers 1 or first tier suppliers are incorporated into the production development projects and innovation process. These mean that they make their own engineering and designing decision with establishing local engineering or development centre. These make tier 1 are the most important to the car manufacturers. This make tier 1 mostly have a plant close to the OEM to support Just-In-Time processes.
Tier 1 suppliers have their own tier 2 or tier suppliers who procured parts for tier 1 suppliers such as pump units, electric motors or typically components to the tier 1. This make the tier 2 suppliers can base anywhere around the world but mostly there were based in low cost countries such as India and China. Tier 3 suppliers are local home companies which provide some parts to the tier 2 suppliers such as plastic parts, metal parts, aluminums parts, or raw material suppliers.
The third party logistics (3PL) at downstream from the OEMs, providers will deliver finished vehicles to storage at the distribution hubs located around the world. This will make the shipped to the dealer networks as soon as possible when required.
3. Without cooperation, what is the volume per shipment you propose for your company? What is the annual shipment cost? What is the average cycle time? Which transportation strategy do you prefer, in-house or outsourcing?
Figure 3: Fixed cost
Fixed cost
Truck
Van
Price
£60,000.00
£20,000.00
Year
8
8
Sale at the end
£ 15,000.00
£4,000.00
Depreciation (year)
£0.375/mile
£0.133/mile
Insurance (year)
£0.106/mile
£0.086/mile
Average miles
15000
15000
Load and Unload ( cd + cs)
200
200
Figure 4: Variable cost
Variable cost
Truck
Van
Fuel cost
£0.24/mile
£0.24/mile
Labour cost
£0.19/mile
£0.17/mile
Shipment cost (£/shipment) or Cp = cd + cs + ct l
Where cd is fixed cost of initiating dispatch (£/shipment) = £100 (loading cost)
cs is cost per stop at customer location (£/stop) = £100 (unloading cost)
ct is transportation cost unit per distance (£/mile) = fixed cost + variable cost
= £0.375+£0.106+£0.19+£0.24
= £0.911 (for trucks)
= £0.133+£0.086+£0.24+£0.17
= £0.629 (for vans)
l is distance between depot and customer = 212*2 = 424 miles
Therefore, Cp (Trucks) = cd + cs + ct l
= £100 + £100 + £0.911(424)
= £586.264
Cp (Vans) = £100 + £100 + £0.911(424)
= £466.696
Figure 5: Volume Per Shipment
Volume Per Shipment
 
Cost per shipment (Cp for trucks)
£586.264
Cost per shipment (Cp for vans)
£466.696
Demand
24000
Price per unit
200.00
Seat space
0.5
Holding Cost (Ch)
£40
From the Figure 5, holding cost or Ch - the cost for keeping one unit of product in warehouse for one year = αp = £200 (price per unit) * 0.2(α)
The volume per shipment (or q*) is =
= 593.09 seats per shipment (for trucks)
=
= 529.17 seat per shipment (for vans)
Figure 6: The average cycle time
The average cycle time
Truck
Vans
q*
593.09
529.17
Demand
24000
24000
To find the average cycle time for one year has to use q* divided by demand of the annual from the Figure 6. So the average of cycle time for trucks will be
= 0.0247 * 12 months * 4 weeks
= 1.18 week
vans will be
= 0.0247 * 12 months * 4 weeks
= 1.18 week
Figure 7: Total Shipment
Total Shipment
Truck
Vans
Space available
20
12
q*
593.09
529.17
Seat space
0.5
0.5
Space needed
297
265
Vehicle needed
14.85 ≈ 15
22.08 ≈ 23
The total shipment will tell how many times the company have to deliver seats to Dagenham for making ford fiesta car. From Figure 7, total space needed is the space that require for deliver all seat at a time from Manchester to Dagenham. The total space needed = * 0.5 (space for one seat) which equal to 297 for trucks and 265 for vans. At the same time, a truck space is 20 so
By using truck to deliver seats it require = 14.85 ≈ 15 trucks at a time.
While a van space is 12 which required = 22.08 ≈ 23 vans at a time.
Total shipment: referred to how many time the supplier has to deliver the seats to Dagenham in a year, which is calculate by using total demand (D) divided by q*,
Which equal to 40.46 ≈ 41 times/year (for trucks)
Which equal to 45.35 ≈ 46 times/year (for vans)
Therefore, total cost for trucks in one year
= £586.264 (£/shipment) * 15 trucks * 41 times in one year
= £360552.36
total cost for vans in one year
= £466.696 (£/shipment) * 23 vans * 46 times in one year
= £493764.368
As a result, the total cost for using trucks is obviously cheaper than using vans. However, when comparing to the outsourcing price which in Figure 8.
Outsourcing cost:
Figure 8: Outsourcing cost
Outsourcing
 
 
Total distance
130,380
miles
Cost per mile
£2.5
 
According to Figure 8, if the car seat company want to use in-house strategy, the car seat company has to spend £360,552.36. However, if the car seat company want to use outsourcing strategy then we can assume the total distance of 15 trucks * 212 miles (from Manchester to Dagenham) * 41 times (one year) = 130,380 miles (Figure 8). CVME truck rental company offer the contract of 2.5 per mile so from the equation Ci (d) = K + c d, where K is zero and c is £2.5 per miles. The total annual shipment for outsourcing (130,380 miles * 2.5) = £325,950.
Therefore by using outsourcing company will save cost of £360,552.36 – £325,950 = £34,602.36.
4. Investigate the potential of collaboration with one or more other players.
Figure 9: Distance between city
Distances
Dagenham
Manchester
Liverpool
Sheffield
Dagenham
 
212
224
180
Manchester
212
 
33.7
38.1
Liverpool
224
33.7
 
77.2
Sheffield
180
38.1
77.2
 
Lead time – Due to the lead time of car seat and piston suppliers are two. This makes those two companies can sharing the truck at the same time. However, the distance also important to consider before decided.
Distance - From Figure 9, if the supplier collaborates between Manchester and Sheffield, the total distance to Dagenham will be 38.1 miles (from Manchester to Sheffield) + 180 miles (from Sheffield to Dagenham) = 218.1 which is just 6 miles longer than from Manchester directed to Dagenham. In addition, the cost per stop at customer location () would be reduce to 50% due to the sharing of the trucks. Moreover, the new Shipment cost (£/shipment) or Cp = cd + cs + ct l (from Manchester to Sheffield) would be
cd = £100 (loading seats from supplier at Manchester)
cs = £0 (due to no unloading occur at Sheffield)
ct = fixed cost + variable cost
= £0.375 + £0.106 + £0.24 + £0.19
= £0.911
l = 38.1 miles (from Manchester to Sheffield)
Therefore, Cp (from Manchester to Sheffield) = £100 + 0 + (£0.911) * 38.1 miles = £134.709
While Cp (from Sheffield to Dagenham) = 0 + £100 + (£0.911) * 180 miles = £131.99, this because there supplier have to pay for loading cost on Sheffield and sharing unloading cost at Dagenham and the cost will share with the pistons’ supplier (base at Sheffield) which make new Cp = £266.699.
The demand will increasing to 36000 due to the demand of seats is 24000 and 12000 for pistons So the volume per shipment (or q*) =
= 489.927 seats and pistons
Figure 10: Total shipment information
Total Shipment
Truck
Space available
20
q*
489.927
Seats(0.5) and Pistons(0.1) space
0.6
Space needed
293.9562
Vehicle needed
14.70 ≈ 15
As a result, to find the annual total shipment = = 73.48 ≈ 74 times ,and the total annual cost when collaboration with piston’s supplier at Sheffield would be
= £266.699(cost per shipment) * 15 trucks * 74 times = £29,6035.89
In this case we will not consider to the other player except pistons due to the distance from Manchester to Liverpool then Dagenham is 257.7 miles which is extremely high when compared with Manchester to Sheffield then Dagenham which is only 218.1 miles and product space for brake supplier base at Liverpool is double of piston space needs and the lead time of piston company is the same with car seat company which is 2.
5. Alliances: investigate how the transport could be organised jointly between all companies, or perhaps between two of the companies (round-tour mixed-loading). Work out exactly how the trucks will be used.
Figure 11: Distance between supplier and destination
Distances
Liverpool (Brake)
Manchester (Car seat)
Sheffield (Piston)
Dagenham
Liverpool
 
33.6
77.6
225
Manchester
33.6
 
39
212
Sheffield
77.6
39
 
180
Dagenham
225
212
180
 
Figure 12: Total distance for every possible route
Liverpool
Manchester
Sheffield
Dagenham
Total Distance
 
33.6
39
225
297.6
Liverpool
Sheffield
Manchester
Dagenham
 
 
77.6
33.6
225
336.2
Manchester
Liverpool
Sheffield
Dagenham
 
 
33.6
77.6
212
323.2
Manchester
Sheffield
Liverpool
Dagenham
 
 
39
77.6
225
341.6
Sheffield
Manchester
Liverpool
Dagenham
 
 
39
33.6
225
297.6
Sheffield
Liverpool
Manchester
Dagenham
 
 
77.6
33.6
212
323.2
According from Figure 12, the shortest path of jointly between 3 companies which base on Liverpool, Manchester, and Sheffield is 297.6. While the Figure 11 gives the information about the distance between 3 companies (Liverpool, Manchester, and Sheffield) and 1 destination (Dagenham). As a result, by jointly between all companies we can either loading goods start from Liverpool, Manchester, Sheffield, and then go to Dagenham or we can start from Sheffield, Manchester, Liverpool, and final destination at Dagenham which both require 297.6 miles. For our agreement, we decide to use outsourcing truck to transfer the product to the Dagenham (Figure 14).
Figure 13: Shipment cost
 
Car Seats
Brakes
Pistons
ETQ
296.545
119.4
28.9
Cycle time
9 days
18 days
9 days
Frequencies
41 times
20 times
42 times
Figure 14: Outsourcing data
Trucks (Outsourcing)
Price
£385
Capacity
24
Due to the ETQ of q* of each type of product, the total capacity for one shipment will be equal to 296.545 + 119.4 + 28.9 = 444.845. Concurrently the truck’s capacity for outsourcing is 24 per one truck. So the truck need for one shipment will be ≈ 19 trucks. However, the cycle time for break is 18 which are double of car seat and piston companies and the frequencies of brake is also twice lower than the car seat and piston’s company. This will make the brake’s company cooperate only 20 times with the other two supplier’s company and piston’s company is on their own at the last time of cycle (Figure 13).
As a result, the first time in 9 days car seat and piston’s company will use round tour mixed-loading together by loading at Manchester first then go to load at Sheffield and unload at Dagenham by using:
≈ 14 trucks.
To calculate space using for each type of product in one truck by using:
(car seat)
Which loading:
0.91 * 24 = 21.86 or
21.86 / 0.5 = 43.73 ≈ 44 car seats in one truck
While 0.09 * 24 = 2.16 or
2.16 / 0.1 = 21.6 ≈ 22 pistons in one truck
Moreover, for the next 9 days, the trucks will be loading goods by jointly between 3 companies which start from Liverpool, Manchester, and Sheffield then unloading at Dagenham by using:
≈ 19 trucks
To calculate space using for each type of product in one truck by using:
(car seat)
Which loading:
0.66 * 24 = 16 or
16 / 0.5 = 32 car seats in one truck
The space using for piston is
Which loading:
0.06 * 24 = 1.68 or
1.68 / 0.1 = 16.8 ≈ 17 pistons in one truck
While the space using for brake is
Which loading:
0.27 * 24 = 6.48 or
6.48 / 0.2 = 32.4 ≈ 33 brakes in one truck
In addition, the brake’s company will jointly with car seat and piston’s company until reach 20 time while the car seat company will jointly with piston and brake’s company 20 times and keep continue jointly with piston’s company another 21 times and the piston’s company has to deliver without jointly for the last time (Figure 13).
6. Apply the Shapley Value to propose a mechanism of who pays for what.
Due to our group agreement will use trucks outsourcing to deliver the product. The outsource company offer the price of 24.38 per (Figure 15) which make cost per shipment (by individual, not sharing) of car seat, brake, and piston:
£24.38 * 296.545 = £7,229
£24.38 * 119.4 = £2,911
£24.38 * 28.9 = £705 respectively.
Figure 15: Outsourcing price
 
q*
Cycle time
Cost per
Cost per shipment
1.Cars seat
296.545
9 days
£24.38
£7,229
2.Brake
119.4
18 days
£24.38
£2,911
3.Piston
28.9
9 days
£24.38
£705
However, when we consider to share the outsource company and calculate the maintenance cost to be share by using the outsourcing price to apply the Shapley Value to find out how much each player would pay. For the maintenance cost we consider to the outsource price which is £385 for one truck of a shipment.
Total of truck use for each shipment will equal to (Figure 16)
.
Therefore, total cost per one shipment is
(Cost per shipment + unloading cost (sharing cost)) * 19 trucks
(385 + 100) * 19 = £9,215 (maintenance cost to share)
Figure 16: Outsourcing data
 
3 companies
2 companies (Car Seat and Piston)
Total q*
444.845
325.45
Capacity/truck
24
24
Cost/shipment
£385
£385
unloading cost
£100
£100
Total Cost/shipment
£9215
£6790
Figure 17: Final cost for individually
Supplier
Truck use
Unload cost/truck
Final cost
1.Car seat
12.354167
£100
£8,529
2.Brake
4.975
£100
£3,411
3.Piston
1.2041667
£100
£905
To find out how much money for each supplier capable to pay, we consider to the real cost if those 3 supplier weren’t sharing the outsourcing for each shipment (Figure 17).
Due to the car seat has q* = 296.545 and capacity of a truck is 24
so truck used = 296.545/24 = 12.354 13 trucks, then total unload cost will be 13*100 = £1300 and final cost or real cost that each supplier would have to pay if using outsourcing trucks individually is
Cost per shipment (Figure 15) + Unload cost (all truck used)
= £7,229 + £1,300
= £8,529 (car seat)
= £2,911 + £500
= £3,411 (brake)
= £705 + £200
= £905 (piston)
Figure 18: Shapley for maintenance cost for 3 suppliers
 Option
Car Seat
Brake
Piston
 Total Cost
1,2,3
£8,529
£686
£0
£9,215
1,3,2
£8,529
£686
£0
£9,215
2,1,3
£5,840
£3,411
£0
£9,215
2,3,1
£5,840
£3,411
£0
£9,215
3,1,2
£8,310
£0
£905
£9,215
3,2,1
£4,899
£3,411
£905
£9,215
 Total
£41,875
£11,605
£1810
 
 Actual Pay
£6979.167
1934.167
301.6667
£9215
By applying Shapley (Figure 18)
The option 1,2,3 would be £8,529, £686, and £0 for car seat brake and piston companies respectively.
The option 1,3,2 would be £8,529, £686, and £0 for car seat brake and piston companies respectively.
The option 2,1,3 would be £5,840, £3,411, and £0 for car seat brake and piston companies respectively.
The option 2,3,1 would be £5,840, £3,411, and £0 for car seat brake and piston companies respectively.
The option 3,1,2 would be £8,310, £0, and £905 for car seat brake and piston companies respectively.
The option 3,2,1 would be £4,899, £3,411, and £905 for car seat brake and piston companies respectively.
Figure 19: Shapley for maintenance cost of Car Seat and Piston companies
 
Car seat
Piston
Total
1,2
£6,790
£0
£6,790
2,1
£5,620
£1,170
£6,790
Total
£12,410
£1,170
 
Actual Pay
£6,205
£585
 
However, another 21 shipment that Car Seat and Piston companies will cooperated has to be consider so the total of truck use for each shipment will equal to (Figure 16)
.
Therefore, total cost per one shipment is
(Cost per shipment + unloading cost (sharing cost)) * 14 trucks
(385 + 100) * 14 = £6,790 (maintenance cost to share)
The Brake company cooperate with other two companies only 20 times to sharing the trucks so we also have to consider about actual pay on Shapley for Car seat and Piston companies (Figure 19) which cost £6,205, and £585 for Car Seat and Piston companies respectively.
An agreement
To conclude, for our group decide to collaborate together of 3 companies (Car Seat, Brake, and Piston companies) by using outsource company with 24 and cost £385 per truck, plus £100 for unloading cost which our group decide to share so actual cost for one truck is £485, the outsourcing will be decide which product will be pick up first, in every 18 days (Figure 13) with 20 times shipments by using 19 trucks for each shipment and collaborate between Car Seat and Piston companies in every 9 days due to the different in lead time with another 21 shipments, using 14 trucks per shipment. However, because of the different usage of the space we decide to pay the shipment cost by calculate from the space usage which pay cost according to the space used which make the Car Seat Company pay the most value between 3 companies for the 20 shipments and also highest when collaborate with the Piston company with another 21 shipments. Nevertheless, the total annual cost when collaborating with other 3 suppliers still less than when compare to the Car Seat Company using outsourcing individually.
7. Estimate for your own firm the cost savings obtained as a result of the agreement.
By using Shapley Value to find amount of money have to pay by using 6 options (Figure 18) and divided by 6 for each supplier will get the average maintenance cost for each car seat, brake, and piston companies would be £6,979.167, £1,934.167, and £301.667 respectively. According to Figure 18, the saving cost for sharing the truck instead of not sharing per one shipment (Figure 17) of each supplier would be:
Car seat £8,529 - £6,979.167 = £1,549.833
Brake £3,411 – £1,934.167 = £1,476.833
Piston £905 – £301.667 = £603.333.
Due to the amount of cooperation between 3 companies is 20 times (Figure 13). Therefore, the total cost for first 20 shipments of Car Seat Company is
20 times * £6,979.167 (Figure 18) = £139,583.34
And another 21 shipments of Car Seat company with Piston company is
21 times * £6,205 (Figure 19) = £130,305
Which makes total annual cost is £139,583.34 + £130,305 = £269,888.34. Nevertheless, the total annual cost for sharing trucks by cooperate with Brake and Piston companies is less than outsourcing annual total annual cost (question 3) which is £325,950. By cooperate with other two companies to share trucks will saving £325,950 - £269,888.34 = £56,061.66 (cost saving).
8. Reflect on what you have done well, or perhaps what you could have done better in order to get a better outcome to optimise your costs and profits. Could you choose a Vendor Managed Inventory (VMI) strategy to reduce your distribution cost?
Meanwhile the selling revenue of the company is £200 (per seat) * 24000 (demand) = £4,800,000 which make profit contribution £4,800,000 - £325,950 = £4,474,050 when using the outsourcing offer individually without any collaboration. The reflection of collaboration make much better outcome on transportation cost which is reduce from £8,793.96 (question 3) to £6,979.167 (question 6) or about 20.6% per shipment and the total annual cost reduce from £325,950 to £269,888.34 by collaboration of sharing trucks between Brake and Piston companies for 20 shipment times and another 21 shipments with Piston company only which make profit contribution increasing to £4,800,000 - £269,888.34 = £4,530,111.66 in case of collaboration with other two supplier companies which is Brake and Piston company.
By using Vendor Managed Inventory (VMI) strategy might help to reduce the distribution cost more or less (Vendor Managed Inventory, n.d.). This is because VMI is involve with the seller process to buyers into what they are buying and using that information to manage inventory investment. VMI’s collaborative help driven increasing present of the partners and retail’s operation which make decision in day by day or week by week of the process to understand what the customer’s behavior is and how to supply the products, because if the company can get the customer level information from the buyers, the company can use it to forecast generation shipment to manage the inventory and meet the customer’s expectation simultaneously. Hence, VMI can help to manage multi distribution and manufacturing network because when the company knows about buyer’s behavior or can generate the customers forecast, it can ship the product to customer whenever the customers need. However, to be able to generate the customers forecast level the company needs to have a certainty system to process the numbers of record by using AMR. Nevertheless, the AMR needs only 20% of customers (ibid). There are some more advantages of VMI such as (Why do Vendor Managed Inventory? What are the Benefits?, n.d.)
Increased in sales – according to the previous paragraph due to the understanding of customer’s behavior the company will make the fewer customer stock-outs and improve product mix by looking at expectation demand. The company also increased in sale by continues sales growth due to the collaborative planning for promotions such as special offers.
Operation cost reduction – due to the VMI involving with the customer forecast demand which help to reduce the bullwhip effect that might occur (Disney S.M., Towill D.R., 2003), exceptional demand for early visible which might occur due to the good communication and understanding with customers about upcoming special activity such as promotion, and immediate visibility of actual demand of NPI or New Production Introduction.
Stronger customer’s relationships – due to the VMU is involving to build a strong relationship with customers. So it makes to reduce the cost of sales to protect and grow of market share.
On the other hand, there are some disadvantages of VMI such as:
Size of the buying organization and consumption rates – This is because if the company have thousands of branches and where customers are smaller buyers may be less willing to risk on the financial cost.
Trust – take time to build a relationship which require certain level of trust such as appropriate deliver from the supplier, accuracy of expected customer, produce the right products of selection from the customers.
Reliant on technology – because VMI has to depend on technology which the cost is high and reliability of the VMI sometimes are inaccurate for stock level data.
Willing of stakeholders – the stakeholders has to involve in the VMI but they might feel that have to depend on VMI and if the stock out or some glitch happen they might feel negatively to work with the VMI.
Therefore, VMI might have the benefits of increasing in sales but planning and consideration of the drawbacks also has been required.
9. Which strategies can be done by your company to improve the sustainability of the supply chain? Can you define any Reverse Logistics for the automotive industry?
Figure 20: Carbon footprint release
Carbon footprint
Trucks (Diesel)
Vans (Diesel)
Trucks (LPG)
Vans (LPG)
K/litre
8
10
8
10
gram of Carbon/km
331.25
265
290
232
Distance(miles)
424
424
424
424
Distance(km)
7119.737856
7119.737856
7119.737856
7119.737856
Sustainability and efficiency are clearly linked in the global supply chain. Companies that want to improve sustainability must become hyper-efficient to reduce fuel consumption and emissions. For the strategies to improve the sustainability of the supply chain for my company is that to reduce the carbon emission and using remanufacturing process which is a part of Reverse Logistics. From the Figure 10, the table shows that if a truck was used Diesel as fuel will release 331.25 gram of carbon per kilometer, while the distance for one shipment is 424 miles or 678.4 km. As a result, for one shipment the truck will release 678.4 km * 331.25 grams = 224720 / 1000 = 224.72 kilogram per one shipment. On the other hand, by using LPG, gram of carbon per kilometers is 290. Then the carbon emission is 290 grams * 678.4 km = 196736 / 1000 = 196.736 kg per one shipment which is approximately 14 per cent reduction.
For decades, supply chain management was prior on ‘forward’ transactions but neglect on the environmental issues. In particular the automotive industry is facing the pressure from growing to apply green activities within supply chain management. In a product recovery environment, the process of transporting, handling and returning of used products from end-user (customer) to a processing facility plays a major role. This defined as ‘reverse logistics’. Reverse logistics is mostly has complex activity within product recovery management, as product have to be collected and delivered from many locations (customers) to one recovery plant (processor).
Remanufacturing is just one of the reverse logistic options. Nevertheless, it offers the transformation of end-of-life products and components into products with an as good as new condition through machining, rewinding, refinishing or others similar operation (Kerr et al., 2001) when compared with to other recovery option such as reuse and repair. Remanufacturing sometimes called ‘the ultimate form of recycling’ (Helms, S & Goldstein, J, 1999). In a remanufacturing environment, the used products or ‘cores’ serve as raw material for the remanufacturing process. The core is usually seen as trade-in for a remanufacturing product but it can be different in quality, depending on what they have been used. However, the remanufacturing operations obviously differ from conventional manufacturing operation. Due to the time lag between the dates when the product entered the market for the first time and the date that remanufactured entered the aftermarket. For example, car engine, used to have different pistons than today. Therefore, remanufactured engines have to upgrade to meet national legislation.
To conclude, using remanufacturing seem to be the most efficient in automotive industry due to the advantage such as reducing the volume of materials in the recycled, and much better chance of avoiding to degrades material quality due to the contamination of the materials. However, there is a high chance of failure when compete in market which have price involve in the competition except available of low labor cost due to the high cost than other when compare to the others process (Statham, 2006).

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