Michelin Logistic Strategy Business Essay
It is becoming increasingly difficult to ignore the fact that contemporary marketing, as well as logistics, are very complicated aspects of business. Companies attempt to optimize their logistics in order to gain a competitive advantage but face the same difficulties on a regular basis. Hence, an opinion that logistics does not present a competitive advantage but becomes its direct outcome is obviously explicit. Such concept becomes especially apparent in terms of a global tendency for sustainable performance. As a result, many companies attempt to utilize sustainable models to increase environmental presence in their manufacturing and design. Among several companies that have already realized such strategy, Michelin should be outlined as a leading one due to the fact that it manages to deploy logistics in complex with its strongest competitive advantages. In the same way, the company utilizes sophisticated approaches to supply chain management and delivery. Moreover, its methods of upstream, as well as downstream logistic positioning are unique. Thus, Michelin is a company with a complex and flexible logistic strategy that relies heavily on such advantages as innovation and customer-driven performance.
The following paper describes and discusses logistic strategy of the company to cover its basic aspects. Initially, the study provides basic information about its vision and mission statements. Then, the information on the level of customer services of Michelin is provided. The paper also covers an issue of channels of distribution and supply. As a consequence, allocation and inventories of the company are also discussed. The paper pays particular attention to transportation in order to review the issue of logistics from all its major perspectives. In addition, information management and organizational structure are also presented in the paper for a better contextualization of the study.
Michelin Company Corporate Mission and Vision
For starters, corporate mission and vision of Michelin have to be outlined. The company’s vision is a passionate innovation for making mobility safer, more efficient, and environmentally friendly. The company expects each of its workers to value a personal fulfillment, thereby creating the best conditions for self-improvement and participation for a common goal of the company (Michelin, 2015). The firm appreciates its diverse focusing on the workforce and considers its differences to be the most valuable asset. It is true, since diverse personnel, as well as approaches to performance and design, makes the company noticeable worldwide. Michelin rises environmental awareness among over 100, 000 employees so that every worker was acknowledged about connection between environmental impacts and his/her working position in the company (Michelin, 2015). In terms of the corporate vision, Michelin undertakes a support to UN Global Compact throughout providing basic principles of labor, human rights, environmental issues, and anti-corruption.
As for the corporate mission, it is based on the offering an uncompromising quality to the customers (Michelin, 2015). Michelin practices a customer-driven strategy that will be explicit in logistics and supply chain management. Michelin, as a leading company within tire industry worldwide, is dedicated to sustainable advancements in mobility of its products and workforce for establishment of effective manufacturing of a wide range of vehicles, including airplanes (Michelin, 2015). The company conducts regular researches for improvement of its quality and innovation so that the firm could contribute to the scientific progress of the society. Similarly, close relation to the community makes Michelin’s implementation of environmental policies more recognizable and high-scale. Needless to say, such profound vision and mission statements are evidently reflected on logistic strategy of the company, as well as on the other aspects of Michelin’s performance.
Customer Service Levels
To speak about customer service of Michelin, a strong technical presence should be indicated. The company manages to anticipate changes in customer preferences and market trends so that customer satisfaction was gained throughout a strong influence of technology and innovation. Michelin obtains a strong technical presence within the industry and employs approximately 500 field engineers in 45 countries worldwide (Michelin, 2015). Customer support of Michelin includes servicing of passenger car tires, truck tires, earthmover tires, and tires for various aircrafts. In such way, every event of tire service presupposes the following activities: observation of tires’ usage conditions, measuring the performance of mass-market tires on customer vehicle fleets, providing customers and sales representatives with technical advice regarding tire performance, support and assistance for unsatisfied customers, and monitoring of markets and trends for business-to-business partners. Michelin values a tradition of reliance on long-term objectives and trends that make the company always involved in a process of changing and forecasting.
Thus, Michelin conducts more than 75,000 tests each year together with its customers (Michelin, 2015). The company performs tests on fleets of its customers in order to capitalize on the most important information about customer preferences and market trends. To return to the subject of business-to-business customer service, the company established a new Group entity in 2013 (Michelin, 2015). It is particularly aimed at designing and developing flexible business models and patterns of supply chains for its business customers.
The basics of cooperative relationships with customer are outlined as follows:
- A contractual obligation with early involvement of the parties in a shared design concepts;
- Testing of products with involvement of various vehicles, roads, weather conditions, and drivers;
- Supporting recommendations concerning ecosystem of the customers for deployment of diverse environments for testing, training, telematics and electronics, and delivery of comprehensive custom solutions in terms of market competition;
- Risk-free cooperation, since the company guarantees reimbursement of expenditures in case of failure.
On the other hand, Michelin lacks knowledge in the expertise of run-flat tire design (Mathews & Brueggemann, 2015). As a consequence, service, equipment, and service-related revenues were extremely poor. Such event can be explained by the fact that run-flat tire designs imply a high dependency on quality of manufacture. Moreover, it was a new vertical element for a global tire product line, since it was developed for specific models of vehicles (Mathews & Brueggemann, 2015). A limited access to run-flat tire technologies, as well as low sales of the related cars made customer service of Michelin comparatively unsatisfactory, as long as vague approaches to implementation of a new element were mainly unsuccessful (Mathews & Brueggemann, 2015). The company failed to present value and proposition of new services, which could result in substantial discounts. Innovation was inappropriately deployed to the major customer segment. As a result, the level of customer support was provided with unclear presentation of the new service.
Channels of Supply and Distribution
Since Michelin conducts its sales operations in 170 and has production facilities in 69 countries, it is becoming increasingly apparent that a downstream supply chain management prevails in the company (Michelin, 2015). However, Michelin can be remarked with a developed system of logistics and supply. Michelin managed to implement its ICT for establishment of a meaningful B2B integration with its business customers and partners (Michelin, 2015). Such cloud-based technology enables the firm to perform with high-scale efficiency in the new environments worldwide. Consequently, it helps Michelin to proceed with its expansion of Asian market, especially in Vietnam and Thailand. Cloud B2B integration provides the company with an effective supply chain management, which greatly influences the demands with accuracy and minimum of expenses. It is particularly important to Michelin, since it deploys environmentally sustainable strategy of performance.
As for non-business target segment, Michelin implements its customer-driven supply-chain management. The company combines its supply chain strategy with its sustainable objective to reduce its carbon dioxide emissions by 10% (Michelin, 2014). Thus, Michelin incorporated JDA software for intelligent route and supply planning (Michelin, 2015). In such way, the company can forecast market trends, customer preferences, and approximate demand on a particular product to make Michelin’s logistics almost redundancy-free. It is caused by the fact that transportation does not presuppose delivery of products that are unsold or do not demonstrate a high customer demand. Overall, Michelin succeeds in satisfaction of customers’ and stakeholders’ needs and generate maximal profits throughout an immediate reaction on trends. Moreover, the company’s supply chain managers are always ready for upcoming requests as Michelin utilizes its software and Cloud technologies for calculation of probability and forecasting the sales on a regular basis (Gourdin, 2006). The company considers such solutions to be a central driving force of its customer-segmented strategy of supply and distribution.
To place the emphasis on the importance of logistics in a supply chain management of the company, general functions of logistics have to be indicated. As it has become apparent, they are served throughout software solutions descried above. Close coordination with stakeholders via B2B integration and forecasting of demands make the firm’s logistics more feasible as inventory level, as well as performance cycle, is substantially reduced. That is why the company relies heavily on its forecasts as they demonstrate a particular tendency of Michelin to reacts on different market trends with optimized flexibility and asset productivity. Logistics are known to make supply managers comply with a related demand (Gourdin, 2006). Michelin deploys its software solutions in a supply chain management, thereby changing its logistics pattern in accordance with a current trend and terms of replenishment cycle (Gourdin, 2006). In such way, supply and distribution channels are aligned with logistics that respond to customer trends.
Michelin has managed to represent its early global presence worldwide and is famous for its contribution to economic activities in 170 countries (Michelin, 2015). It is becoming increasingly evident that the company installed its production facilities within the entire world. Hence, location of production facilities considerably influences logistics of the company (Gourdin, 2006). Michelin, however, does not attempt to create a global network of logistics because it is obviously expensive and redundant method to unify its channels of supply and distribution. In fact, the company installs logistic centers for each of its major locations of marketing presence. Consequently, Asian branch is supplied by a local logistics center which is why upstream supply chain management becomes a dominant factor for a foreign expansion of Michelin (Gourdin, 2006). The company may face issues of various raw materials qualities, but all product lines comply with equal standards so that difference could be traced in production life cycles.
To explain the current issue, a proactive use of intelligent software should be noted. Michelin is aware of supply and demand situations worldwide. In case some product or material is absent or lacks, it tends to make a significant impact on the production process.
As a result, the company will organize a delivery with the best judgement of the situation and a forecast for shortcoming trends. In other words, Michelin may supply its foreign branches from the center, in case such need emerges. One may argue that such intervention may prevent foreign manufacturing facilities from a regular production life cycle. In such case, it is worth mentioning that Michelin utilizes total manufacture strategy to make the production of tires a necessary and requested process (Michelin, 2015). Expenditures on logistics are covered with smart solutions to its planning so that the products could always be delivered to the locations where they actually needed (Gourdin, 2006). In addition, the company always contacts its regular customers. It enables Michelin to complete special requests, which require special use of logistics. Consequently, the use of software and Cloud technologies is pivotal for Michelin’s logistics.
Therefore, location of Michelin’s production facilities does not depend on specific logistic requirements. The company continues intensifying a strategy of a global presence. As a result, the attempts to unify the entire network of supply and distribution become ineffective. In any case, innovative and customer-driven approach to logistics provides the company with ability to react on supply needs immediately (Mathews & Brueggemann, 2015). Moreover, Michelin supplies foreign branches with consideration of the future demands and trends so that even the most distant deliveries are not redundant. It economizes on overall costs of transportation and reduces emissions of carbon dioxide (XPOLogistics, 2015). However, such sophisticated pattern of logistics should undergo certain changes that are determined by principles of products allocation within supply chains of Michelin. Thus, allocation should be also discussed.
As it has become explicit, Michelin utilizes asymmetric distribution of products and returns expectancy (Jurczenko & Maillet, 2006). It enables the company to apply various optimization strategies to its supply chains, thereby making its logistics as flexible as possible. The main principle of product allocation in Michelin is determined by shortcoming demands at a particular location. It can be explained by the fact that Michelin never delivers products at the period of its actual trend within a certain market. At the same time, Michelin traces each of its foreign branches, since revenues are important to any of the markets. In spite of the fact that Michelin applies asymmetric distribution, a need to leverage market share remains essential for the firm (Jurczenko & Maillet, 2006). The company does not rely on its sophisticated logistics in terms of profit-generating activities. Logistics are used for an adequate reaction on opportunities created with the other components of Michelin’s performance.
Since Michelin is a part of an upstream supply chain, a need for intelligent forecasting of demands and trends is especially important. Nowadays, serving of multiple markets with products, as well as raw materials, becomes dramatically difficult even for the company with a strong innovative and global presence. As a result, the implementation of JDA software and B2B Cloud technologies are required for making accurate forecasts. The management does not rely on software outputs only so presence of human decision-making is still important (Mathews & Brueggemann, 2015). However, in this case human correction of logistics is crucial as involvement of external factors may be determining for a particular logistics pattern. Thus, software is used for forecasting only, while immersion of the decision in the logistics is a responsibility of a supply chain management. In such way, a final outcome regarding allocation of products and raw materials is determined by a management team.
As for specific requirements of business customers, they can be included in stakeholder roundtables and discussed directly with the partners. Michelin practices such approach as it establishes early contract involvement of parties and provides sufficient data for forecasting input. It is possible to argue that such negotiations are not worth arrangement, since mainstream business-to-business distribution is more cost-effective. As a matter of fact, Michelin values its meetings long-term objectives as it expects its business customers to become regular clientele. To return to the subject of customer-driven logistics, specific channels of distribution are justified in regard to their long-term performance. Michelin forecasts preferences of its particular business customers so that the company could ensure a long-term partnership with particular business customers. Additionally, the same model of intelligent forecasting and managerial decision-making is applied. Asymmetric allocation of logistics is a particular advantage of Michelin, since it satisfies its target audience with distinct benefits.
Speaking about inventory of the company, it is necessary to discuss Michelin’s total performance. Michelin’s total performance strategy strives for safety, longevity, and power-efficient solutions in order to implement a customer-driven approach in its performance. Since the company values customer information as its competitive advantage, use of inventory in logistics obtains some different connotation. Products and raw materials are handled with the most optimized performance so that they could be delivered to stores and retailers with no damage. Michelin explains such success by its profound expertise in accidentology and deep understanding of tire life cycle. The company establishes partnerships with automotive manufacturers for ensuring a safe delivery of the products, as well as for motivation its research center to develop custom designs of tires. Regarding all the given points, appliance of progressive inventory solutions becomes explicit, especially in terms of logistics.
Since Michelin proactively uses total performance strategy, inventory is utilized for gaining result-based objectives that include handling, safety, reduction of carbon dioxide emissions, etc.
Taking into consideration the trend on sustainability models, Michelin signed three partnerships that are the following:
- Manufacturing of renewable fuels and chemicals for development of isoprene renewable No Compromise;
- Development of butadiene from biomass;
- Development of old tires recycling (Michelin, 2015).
In relation to logistics, appliance of such technologies will improve safety and flexibility of product handling. Even in the worst case of product damage, Michelin will have an opportunity to recycle and substitute damaged products with the new tires. Even though only 10% of the company’s innovations are developed together with suppliers, Michelin considers inventory to depend on a type of a supply chain. As a result, the diversification and forecasting of inventory is always present in planning of logistics patterns (Michelin, 2014). Hence, dependence on software can be traced in such perspective, as well.
The company uses such raw materials as elastomers, reinforcing fillers, plasticizers, sulfurs, metal reinforcements, and textile in order not only to enhance the equality of its tires but also provide much better conditions of their transportation by making them more resistant to physical damages. Michelin strives for reduction of emissions and fuel consumption to satisfy its customers and implements the same strategy for its performance (Michelin, 2014). Consequently, inventory and logistics are aligned with such goals (Mathews & Brueggemann, 2015). In the same way, integration with B2B Cloud and JDA software, which presuppose warehousing and accounting, brings inventory of Michelin on a new level. The company practices democratic policy regarding cooperation with its business customers. Provided that inventory demonstrates a lack or delay of some deliveries, additional costs, or low quality of products, Michelin compensates the losses to its customers. It is an evident sign of customer-driven logistics, as well as internal motivator for the effective performance of the personnel.
Transportation is a comprising element of logistics, which implies a direct environmental impact. For such reason, Michelin is attempting to find the best solutions to transportation of its products and raw materials. To fulfil its environmental purposes, the company has designed an application for gaining a better mobility. It is offered to the company’s customers, but Michelin utilizes the same principles. The company is completely aware of the best routes for the fastest and cost-effective delivery, while its trucks are driven by drivers with diverse experiences. Routing is formulated with the same intelligent software and technologies (Gourdin, 2006). As a result, the entire logistics data is integrated for making the best judgement of the situation regarding a certain delivery request. According to request peculiarities, a choice of vehicles and handling equipment are chosen. Michelin optimizes its transportation not only for reduction of CO2 emissions but also for economizing on equipment and handling (XPOLogistics, 2015).
Michelin established a partnership with Vos Logistics for making its logistics more sustainable as a choice of vehicles is a pivotal factor for emission rates (Michelin, 2015). Partnership was particularly aimed at synergetic reduction of costs and carbon dioxide footprint in terms of Michelin’s optimization of European distribution. Vos Logistics trucks obtain sufficient loading capacity, as well as simplicity of handling and warehousing (Michelin, 2015). Michelin is planning to launch similar programs in its foreign branches so that European experience could become significant to the entire logistics of Michelin. Generally speaking, Michelin seeks for solutions and partners that will provide the company with cost-effective and sustainable delivery. The company does not outline any other requirements to its transportation, since its strategy is determined to meet long-term objectives. Michelin may need involvement of multiple partners, since changes in trends may considerably influence balance between transportation capacity and conditions of delivery requests.
Michelin demonstrates a complex approach to its transportation, as well as logistics as a whole, but its determination to implement sustainable performance may imply certain risks. The company outlines a certain model of risk management and internal management, but it still remains vulnerable to the external factors. Conversely, Michelin succeeds in running multi-dimensional strategy that can be traced in its logistics: sustainability, innovation, customer-driven approach, and total performance. The company does not deny its dependency on innovation, and it is especially connected with its successful performance. It is caused by the fact that implementation of innovations is always associated with risks that are not allocated. There is no any distinct threat to the company’s logistics, but it evidently lacks some contingency planning (Gourdin, 2006). Michelin obtains enough data to address the issue. Consequently, a role of information management in the firm’s logistics has to be covered.
Information management complies with Michelin Reference Framework of Risk Management and Internal Control.
Hence, internal control is designed for meeting such objectives as:
- Application of specific instructions initiated by the Chief Executive Officer and the Executive Committee;• Compliance with existing laws and policies;
- Appropriate performance of the internal assets;
- The reliability of information (Michelin, 2015).
The latter objective is especially related to information management, but the rest of goals are also applicable to information management in Michelin’s logistics. The company utilizes information that meets such objectives. For the given purpose, the data is collected and stored via the same means of information technologies the company uses for its performance. JDA software and B2B Cloud technology demonstrate their capacity to address the main tasks of the company resulting in the fact that operational, as well as managerial activities rely on the innovation in Michelin.
Such large company as Michelin has to implement certain Cloud technologies otherwise it will lose its basic competitive advantages. Information has become a standard asset for gaining competitive advantage and optimization of corporate performance. Michelin managed to realize such tendency. On the other hand, information management is a very broad term that requires the company to develop specific methodology and framework. As it has become apparent, Michelin applies its information technologies for processing data related to customers, logistics, and sales. However, the company collects any type of data that can be used for advancing in customer-oriented strategy and implementing innovations. In other words, Michelin always tries to be one step forward in its performance and prepare the best future for its customers. The same principle can be indicated in terms of logistics, especially in regards to the fact that Michelin simultaneously provides strategy of sustainability (Gourdin, 2006).
Logistics of Michelin depends on information management owing to a wide range of reasons. Information management of Michelin analyzes the entire complex of data regarding routes, road conditions, etc. for every input (Gourdin, 2006). Input data is presented by requirements of demand, amounts of products or raw materials to be delivered, distance, deadline, and forecasts for the future demands. For such reason, Michelin utilizes Cloud technologies as long as it provides such diverse information. The company does not outline any facts about its appliance of Business Intelligence, but appliance of such technology would be appropriate (Mathews & Brueggemann, 2015). One may argue that Business Intelligence does not render desired efficiency in terms of logistic planning, but a global presence of Michelin makes logistics become a driving force of the company’s sales operations worldwide. As it has been mentioned, logistics is supported with data received due to work information management and should be regarded as one of the core factors of the company’s success.
Organizational structure of Michelin is relatively simple and presented by multiple departments. Actually, Michelin Group is guided by Business Operations Department and arranged into four product lines that are particularly focused on launching various products within markets worldwide. Every product line defines its objectives, strategy, and holds responsibility for the outcomes.
In such way, product lines are divided as follows:
- Passenger Car and Light Truck Product Line;
- Truck Product Line;
- Specialty Product Line (Earthmovers, Agricultural, Two-wheeled, and Aircraft Product Lines);
- Materials Product Line (Michelin, 2015).
At the same time, all of the above-mentioned departments are mutually related. A need for unified logistics is obvious for a company. As a result, Michelin develops such sophisticated system of logistics as long as it is expected to serve the interests of all departments. Such organizational structure is obviously simpler from a managerial perspective, but it makes logistics correspond to its current objectives. Thus, it is possible to admit that Michelin designed such system of logistics in order to support organizational structure.
The company has seven headquarters in seven geographic zones. It presupposes a strong need for intelligent management of logistics, since different branches with various requests may confuse supply chain management. Similarly, a need of internal communication and rapport is also apparent to the company. Logistics play a special role as it not only motivates but also organizes communication between branches (Gourdin, 2006). Logistics are supported with information technologies of Michelin so that the same data could be available for other purposes. Furthermore, division of the company on the outlined departments specifies input data for each delivery request. In spite of the fact that all data is stored in the Cloud and does not undergo any hierarchy within the database, specification of inputs is essential because the final decision is made by humans, who have to verify a credibility of the output solution.
Eventually, organizational structure of Michelin is standard, which should not pose any difficulties. Each of departments is responsible for its special objectives, while logistics is a mean of their fulfilment (Gourdin, 2006). At the same time, each department utilizes the same unified system of logistics as long as Michelin’s stores, retailers, and business customers need a complex delivery of various products. In addition, a department of material is a major element of upstream supply chain of Michelin. It is caused by the fact that it distributes supplies in accordance with needs of every downstream-oriented department. Overall, organizational structure of Michelin defines its logistics as internally sophisticated, but linear from the perspective of delivery requests and sales operations. Logistics of Michelin provides the company with fast, accurate, and profit-generating delivery of products and raw materials.
Generally, the paper has focused on the discussion and description of Michelin logistics strategy that is uniquely sophisticated and flexible. The paper has outlined the company’s vision and mission statements. Moreover, the study has given an account on its level of customer services and described channels of supply and distribution. Such aspects as allocation and production facilities have been also discussed, since they have a primary relation to the company’s logistics. The study has also covered the issue of inventory and transportation. At the same time, information management, as well as organizational structure of the corporation has been tackled. The study has managed to fulfil its purpose, since the main findings of the paper can be presented as follows. Michelin values innovation and close relation to its customers, which results in reflection of such elements on its logistics strategy that is supported by modern software and customer-segmented model of logistics.
It is appropriate to make a general statement that such approach is unique and Michelin is a pioneer not only in terms of market competition but also in regard to current trends on logistics, supply chain management, and establishment of sustainable innovation. The company has managed to expand its operation in 17 countries worldwide. Consequently, its expertise in supply chain management and distribution is based on smart solutions in logistics. Nobody would argue the fact that customer-driven logistics is particularly beneficial for Michelin, as well. Implementation of intelligent software enabled the company to react on changes in tendencies timely and accurately, which has made firm’s logistics extremely flexible throughout the years. At the same time, Michelin does not pay much attention to its external risk management. Since the company cannot be isolated from a global environment, Michelin may become a vulnerable target to external risks. For such reason, the future research should be dedicated to suggestion of possible solutions for protection of Michelin’s logistics from possible external threats.
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