Saturn's Supply-Chain Innovation: High Value in After-Sales Service

Buy this article E-mail this page 

The company adopted and continues to refine the concept of jointly managed inventory, a variant of vendor-managed inventory that involves sharing inventory risks with Saturn retailers (dealers). The implications extend beyond the automotive industry: Companies that match their parts-supply strategy to the criticality of the customers need for the part can dramatically improve satisfaction in after-sales interactions.

A key difference is Saturn's pull system — a response to the highly unpredictable nature of parts demand. Saturn does not position inventory in advance on the basis of forecasted consumption but rather replenishes retailer's supplies on a one-for-one basis.

The demand-based approach triggers movement of parts down the supply chain. But although Saturn determines what to stock, retailers may counteract the decision. And if a part sits for more than nine months at the retailer, Saturn buys it back. Saturn shares other costs as well. If a part cannot be found through the local retailer pooling groups (a rare event), Saturn bears the cost of the search.

Managers in other industries can meet customer's needs efficiently if they align their companies service-network strategies with the urgency of a customers need. The authors show how to do that by plotting a company on a matrix that ties the company's service strategy to criticality (most service strategies are somewhere between centralized and distributed).

Saturn's approach has helped it build strong and cooperative retailer relationships that end up benefiting the customer.

Morris A. Cohen  is a professor of operations and information management at the Wharton School. Carl Cull is manager of benchmarking and operations research at Saturn Corporation in Spring Hill, Tennessee. Hau L. Lee  is a professor of management science and engineering operations at Stanford University. Don Willen is a former director of parts, plants and logistics at General Motors Service Parts Operations, Grand Blanc, Michigan. Contact the authors at: cohen@opim.wharton.upenn.edu, carl.v.cull@gm.com, hau.lee@stanford.edu and dlwillen@cs.com.

$	6.50	Buy PDF
$	12.00	Buy PDF and permission to copy
$	5.50	Buy permission to copy from your own original
$	6.50	Buy paper reprint
$	12.00	Buy paper reprint and permission to copy

Academic pricing and volume discount information

[top] [back]