Study of Tied-up Capital Level in Supply Chain in Vehicle Sector

Abstract

In vehicle industry, it has been trends towards focusing on pull-based systems and elimination of waste (Lean), which decrease the tied-up capital level in the focal factory. Research by Holweg & Miemczyk (2002) showed that the relevant supply chain has low inventory level in the focal factory, but at upstream and especially downstream; the tied-up capital level is dramatically higher in comparison to the focal factory. By conducting research and extensive literature reviews, this volatility of tied-up capital level has been studied and analysed with regard to push and pull systems. As the three main causes of this unevenness; bullwhip effect, CODP position in supply chain and intensity level of supplier relationship have been identified and explained. As a practical solution for decreasing the tied-up capital level of finished vehicles, implementation of centralised warehouse structure has been suggested and discussed. Moreover, as an application of game theory in logistics, iterated prisoners’ dilemma has been discussed as the base for a progressive relationship with suppliers (upgrading to win-win game) which is requisite for the success of pull-based supply chains.