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Chery Information Technology Analysis

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In the automotive industry, a crucial competitive factor is how efficient one's supply chain network is and using it to produce the best vehicle at the least cost. For example, one of the reasons Japanese manufacturers started to take U.S. market share from the Detroit 3 in the early 1980s was due to their Just-In-Time (JIT) delivery system. Information technology (IT) has greatly improved Chery's ability to connect with suppliers to improve in areas such as inventory management, delivery times, quality control, etc.

Information technology is the acquisition, processing, storage, and analysis of information using technology, in this case mostly computer software databases. To explain how Chery would use information technology for its delivery system we have to define JIT first. JIT delivery is a "pull" system, where supply amount is determined by actual observed demand. It uses a system of "Kanban cards" which send a message that signals depletion of a product and will trigger the replenishment of that product. For example these cards could represent the supply and demand for axels on an automobile. Let's say the cards represent the inventory of axels in three places; the factory floor, the factory store, and at the supplier. When a customer orders a vehicle the assembly worker takes an axel from the factory floor and places it onto the vehicle. The factory store would replace the axel on the line and the supplier would replace the axel inventory in the factory store. All of this is done with the transfer of the kanban cards from each location.

The purpose of information technology in the example of a JIT delivery system is to make sure the flow of information from the three locations is fast, efficient, and documented. Instead of physical "Kanban cards" being used all of this information is simply stored in a computer database which links the company and all of its suppliers. When an assembly worker runs low on axels next to the line, that worker does not need to physically walk over to the factory store and ask for more axels, this would shut down the line and cost Chery lots of money. Instead they can press a button next to the line that signals to a computer database that that worker is short on axels (say they are instructed to press the button when they are down to one bin left). The computer database transfers the data to the factory store computers telling them to transfer a bin of axels out of their storage and bring it to the line. In-fact this database may be advanced enough to have the exact location of the bin of axels and will send that info out to the forklift driver's computer (which is embedded in the forklift) so they will know where to get the axels and who to bring it to. The factory store computer database then sends a message to the supplier's computers telling them to produce replacement axels. All of this data transfer happens in a matter of minutes



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