LogisticDepartmentINTERVIEWDATE:Feb22nd,2000INTERVIEWERNAME:WeiZhu,BillHe,AnneWangIntervieweeNameMr.ZhangLinchengPositionDirectorofLogisticDepartmentCompanyandAddressFAWTradingCompanyTelephone/Fax0431-7614303BackgroundAfteranorganisationalrestructureatthebeginningofthisyear,FAWTradingCompany'sprevious9functionaldepartmentsarenowstreamlinedinto5.LogisticDepartmentisoneofthefivenewfunctionaldepartments.Thereisnow4(usedtobe8beforetherestructuring)sectionsunderLogisticDepartment,whichareLogisticManagementResponsibleforinventoryplanning,on-sitecoordinationofinventorylevel,assistingandmonitoringofregionallogisticoperations,on-sitesecuritysupervision,etc.TruckWarehouseResponsibleforthechecking,moving,storekeepinganddeliveringoffinishedtrucksinwarehouseQualityInspectionResponsibleforqualitycheckingwhenthefinishedtrucksgointooroutofcentralwarehousefordeliveryManoeuvrableSectionResponsibleforallkindsofequipmentmaintenance(e.g.heating,electricdevices,forthewholeFAWTradingCompany)Morethan1/3oftotalFTEsintheTradingCompanybelongstoLogisticDepartment.Mostofthemreceivedlittleeducationandworkasbluecollarsinthewarehouse.SincethereisnoITsystemintheLogisticDepartment,theyneedthosepeopleformanualoperation.1KeyProcesses/OperationsWarehouseThereisonecentralisedwarehouseinChangchunaswellas31regionalwarehousesinallprovinces/citiesaroundChina.LogisticDepartmentisonlyresponsibleforthemanagementofthecentralisedwarehousewhiletheregionalsalescompaniescontrolovertherespectiveregionalwarehouses.Averageinventoryvaluewasaround20MillionRMBateachregionalwarehousefor1999.Averageturnoverratiofor1999was1.1:1(Inventory:Sales).DuetotheimpactofChineseNewYearandcustomer’santicipationofthefallingpriceoftruckinthepostWTOera,turnoverratioisnow0.25forthefirsttwomonthsofthisyear.Averageinventoryvolumeinthecentralwarehouseforlastyearis3,615units.Maximumvolumein1999reached13,000units.Currentinventoryisover7,000units.Usuallyinventoryiskeptbelow3months.Inventoryover6monthsisnotallowed.Forinventoryinregionalwarehouses,thedepartmenthasnodirectresponsibilitybutwillworkwithSalesDepartmentformonitoring.Methodsforthiskindofmonitoringincludesregularon-siteinspection,controloftruckkeysandcertificates,etc,whicharetotallymanualoperations.Mr.ZhangstronglyopposestotheconceptofJITandthinksitisimpracticalatFAWbecauseoflackofthestate-of-the-artITsystems.OrderingSystemFordirectordersfromendusers,LogisticDepartmentreceivestheorderanddeliversthetruckfromcentralwarehousedirectly.Itisnotresponsiblefortransportationfee,neitherisitaccountableforinsuranceofdamageintransportation.Forordersfromregionaldealers,thedepartmentreceivesthetotaldemandfromPlanningSectionandfinishedtrucksfromFAWassembly,checkstheorders/contractsandthendeliverstruckstodifferentregionsaccordinglyThereissomelevelofblindnessintheregionalsalescompany’spredictionofmarketdemandandorderplacement.Mr.Zhangsuggeststhatsomekindofincentive/penaltysystemshouldbeappliedsoastodisseminatetheinventoryrisk/losstotheregionaldecision-makers.Virtually,nolongtermbindingcontractinplace.Theproductionplanningisdonebasedoncustomer/dealer’sintentofpurchase.Dealer’sordersarenotbinding.Duetothemarketcompetition,itisverydifficultforFAWtoimposeanybindingelementsindealer’sorders2Onesub-optimisedalternativeFAWtradingCompanyappliestoresolvetheinventor...