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Magna International Inc Case Solution
Magna is a tier 1 supplier of automotive parts. As a tier 1 supplier, it has facilities that are located close to the original equipment manufacturers (OEMs). Some key automotive products of Magna International Inc. are vehicle manufacturing and engineering, seating systems, mechatronics, lighting, mirrors, electronics, powertrain, roof systems, exteriors, and chassis. The company’s growth drivers are its ability to produce large volumes, effective business relations with OEM customers, promoting sustainability such as fuel efficiency, pricing, and timeliness of delivery. Magna has also been seen to have followed automotive industry trends like strong alliances with the OEMs and the emergence of new low-cost markets (Magna International Inc., 2019).
This report will assess Magna International Inc.’s operations in terms of the SIPOC model, the Pareto model, as well as explore the strengths and weaknesses of the company to finally suggest recommendations for improvement.
Following questions are answered in this case study solution:
Case Study Questions Answers
Magna depends on a number of suppliers for the supply of critical components like semiconductors. During the pandemic, Magna was impacted by the inability of the suppliers to supply semiconductors and other important components to manufacturing the supply parts. There are also some conflict materials that need to be sourced for manufacturing. However, Magna makes sure that it does not source conflict materials (Magna International Inc., 2021).
During the ice storm in Texas in 2021, there were shortages of inputs like resin and seating foam which are critical components to the manufacturing of parts like roof systems and seating systems (Magna International Inc., 2021). Steel and aluminum are also inputs and if they are subject to tariffs and price changes, the business is impacted.
The process with a new client starts with the identification of new opportunities in electronics and powertrain products. The company is also looking forward to full vehicle assembly opportunities. In China, there is a potential for meeting with new OEMs, however, the localization strategies pose some threats to the process. The second part is understanding the requirements of the client. In the agreement options, Magna assesses the long-term viability of the OEM. This includes an assessment of the financial health of the customer. In the case of a new entrant, Magna assesses its long-term viability to assure that the risks with the investment are minimized.
If the requirements are new in terms of new technologies. Magna considers either investing in R&D to attain the technology to manufacture the product or acquire companies that offer the technology that Magna is looking for. Since the industry has the need for the tier 1 supplier to be in close proximity of the OEM assembly facilities, the geographic footprint of the company matches that of the main customers. In the case of a small customer or that with some risk such as a new entrant, Magna possesses the ability to supply products from multiple locations. It then begins the manufacturing process and then developing relationships with the lead OEM. Magna states that it has a risk of a decrease in sales where the relationship with the OEM was weaker.
Manufactured parts like seating systems, other parts like mechatronics, lighting, mirrors, electronics, powertrain, roof systems, exteriors, and chassis are some outputs of Magna which are then supplied to the OEMs. Magna also engages in vehicle manufacturing and engineering which makes it a valuable partner to many car manufacturers and OEMs.
Scrap steel is also one of the outputs of byproducts of manufacturing. As a result, scrap steel is sold. A decline in the price of steel causes an impact on the profitability of this output as well.
The customers are OEMs. For Magna, the major customers as of 2021 were General Motors, BMW, Daimler, Ford, FCA, and Volkswagen. The remaining 21% sales were comprised of other customers which had a lesser than 10% share in the overall parts sales.
Other customers like Lyft and Waymo require some solutions like self-driving systems.
Some of the important requirements for Magna as a tier 1 supplier are an investment in R&D, geographical footprint, acquisition of software expertise, and engineering talent. The geographical footprint is required since the tier 1 supplier is supposed to be close to the OEM. Since the industry is inclining towards sustainable manufacturing practices, Magna should also invest in sustainable manufacturing. It has indulged in a project called smart mobility services which are designing products for manufacturers which have zero-emission, electric, or autonomous vehicle manufacturing. Prior to the pandemic, Magna was involved in several collaborations like self-driving systems for companies like Lyft, Waymo.
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