The Economic Benefit of a Shortened Supply Chain, A Case Study Involving Molded Composite Parts 2002-01-2041

Shortening the supply chain is a universal business goal in the global automotive industry. A shorter supply chain is generally recognized to be leaner, more agile, more “accountable,” and, most importantly, less expensive. However, the real economic value of a shorter supply chain has rarely been critically measured. In this paper, a case study involving molded composite parts is presented, and the value of removing a “link” from the supply chain is assessed.

Traditionally, a separate compounder and molder are involved in producing molded composite parts. The compounder combines the ingredients-resin, reinforcements, additives-and produces a pellet or a sheet of material that is sold to the molder who, in turn, molds this material into a part. Today, an alternative is emerging. This alternative involves in-line compounding and molding, combining two “links” in the supply chain into a single “link.”

This paper analyzes the economics of this shortened supply chain, including the direct and indirect cost benefits in detail. Direct economic benefits result from lower materials, energy, and labor costs. Indirect economic benefits include reduced overhead costs, the elimination of “stranded inventories,” and increased manufacturing flexibility. Composite Products, Inc. and its in-line compounding and molding technology are used as the basis for this analysis.

Finally, the results of this analysis are generalized to other automotive manufacturing operations.