Universal Motors Aquires

Topics: Supply chain management, Semiconductor, Automotive industry Pages: 8 (2029 words) Published: August 30, 2012
SCMA 311




Assignment Brief

In your study syndicates, you are expected to read, analyse and interpret the key underlying issues of the following case-study titled "The Universal Motor Company Acquires Semiconductors". Six (6) questions have to be answered and these questions can be found at the end of the case study.

Your answers to the questions must relate to the issues in the case, however you are expected to support your responses with appropriate and relevant literature from the prescribed text: Monczka et al, 2009. You may also reference internet sources if you wish to do so. The Harvard method of referencing applies to this assignment.

The assessment will be assessed along the following rubric items: • Style and structure20%
• Introduction to the Topic10%
• Data Analysis40%
• Grammar & Language10%
• Literature Review10%
• Conclusion & Recommendations10%

Fritz Hillen (Senior Lecturer)



The Universal Motor Company is one of the world’s largest manufacturers of automobiles and trucks. In 1980, purchase content was 65 percent of the cost of goods sold. The supply management organization was well managed and staffed with seasoned, well-educated professionals (for the time period). During the late 1970s, the U.S. government began addressing the air pollution issue by establishing vehicle emissions standards and corporate average fuel consumption targets for vehicles sold in the United States. The auto industry was faced with major technical problems. The U.S. government-mandated standards could not be achieved with available technology. These mandated standards required the auto industry to design engine control computers (fuel intake, spark timing, etc.) to manage engine efficiency more precisely. Management was highly confident that established supply management policies and procedures that had been used successfully for so many years would apply to the procurement of the new semiconductors required for the manufacture of the new engine control computers.

By 1980, it was obvious to the individuals directly involved that something was wrong. The tried and true methods of supplying stampings and plastic injection molded parts were not getting satisfactory results when applied to the procurement of semiconductors. The company purchased about R$10 million worth of semiconductors in 1980 from twenty suppliers. Stock outs leading to production disruptions (absolutely forbidden in the auto industry) were occurring regularly. In fact, semiconductors were a greater cause of production disruptions than were all other purchased materials. Semiconductor suppliers, for the most part, seemed uninterested in the firm’s problems and did not react to these emergencies in the way that more traditional auto industry suppliers react.

Those responsible for the procurement of semiconductors were under intense pressure from management to resolve these difficulties. But nothing they tried seemed to make a difference. During these dark days some important observations were made:

• The total 1980 worldwide auto industry semiconductor requirement represented less than 2 percent of the semiconductor market. Therefore, members of the Semiconductor industry did not see the auto industry as an important market requiring or deserving any special service. • The supply management practice of sourcing from many suppliers (to ensure competition and a low purchase price) was aggravating an already difficult supplier relation’s issue and further complicating the situation. Supply management...
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