Michelin case
Problem statement
“sale forecasting does not match the actual sales of Michelin”
-Forecasting error and lack of coodination between groups, these lead to high logistics, inventory costs,
and shortage of stock.
-has to provide and maintain high service level to be the leader of this tyre manufacturing industry.
Forecasting
-Because of error in forecasting Michelin should improve its forecasting techniques.
Sale
-demand and customers preferences are different in each country. This leads to huge variations in global
sale foecasting.
-Sales forecasting must be region specific and centralized for each country
Production
-The production volume of tires are either less or more than the actual tire sales. This lead to shortage
of stock or excess inventory and poor customer service.
Inventory
-the wrong sales forecasting is leading to excess inventory or inventory stockout. Inventory management
should be localized to serve individual market for each country.
- Trying the JIT system, a JIT treats inventory as a sign of inefficiency. In order to change to JIT system,
Michelin should have the suppliers near the production site to quickly get the stuff.
Logistics and distribution
- the huges differences in logistics orpertation in each of the EU market, lead to variation in inventory
cost and transportation cost.
-Building more distribution centers to reduce the frequency of deliveries and transportation costs
leading an increase in supply uncertainty.
Instead of building more distribution center, one or two localized distribution centers for each country
is sufficent to meet each regions demand leading to less inventory cost.
-in the global scenario, Michelin can outsource some of its distribution function to outsidelogistics
/transportation providers. So it can focus on its core business competencies.
Information system
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To get beter customer service, Michelin should go for Web-based system for taking order form
the customers instead of telephone order because this way is cheper and more accurate. But
this way may depend on region, technology, and customer preference. (some like to talk more
than go to the web-site).
Allow its dealers to access to real time inventory and the process status.
Michelin needs intregrated information for every sections of the supply chian functions to get all
information in order to improve their forecasting.