Industrie Pininfarina: The New Customer Decision

 Assumptions & Scope

Industrie Pininfarina is known for participating the designing and manufacturing of some of the most popular cars known to date; Alfa Romeo Spider Duetto, Fiat Coupe and Bentley Azure among others. This leads to the general assumption that the manufacturer is a power house in vehicle production, which to some point was. However, after close observation, it is evident that the company was not well invested in mass production of cars meaning that the designs the company produced would be what is referred to as limited editions today. The expansion proposal by Mitsubishi seemed easy for the company to accept. This was not the case as the case study by Professor Nell Jones documents in, Idustrie Pininfarina: The New Customer Decision. (2011)

The scope of this writing is on the ability of the company, Industrie Pininfarina to accept a new customer, satisfy the demand of mass production, transportation of the raw materials as well as expansion of their production capability while maintaining high quality products (Jones, 2011). This is a business undertaking that should be seen to help the company grow into a diversified motor vehicle manufacturing company in Italy.

Major Issues

• The first major issue at this point is the viability increasing production volumes the company being a niche manufacturer. The company has been producing small volumes of cars with the maximum standing at 17,000 for the Fiat Coupe. At this point, Mitsubishi proposing that the company manufacture the Pajero Mini to supply the whole of Europe. This would mean that the company has to increase the production space, resources and work force for the project (Jones, 2011).
• The company had to re-organize their operations to ensure that future manufacturing technology and client needs are being catered for. The aspect of quality in the proposed model by Mitsubishi challenged the company. This is because the company did not have a clear description of what a defect in car that they have not designed looked like.
• There was the issue of logistics and supply of the parts to be used in the manufacturing. The supply of these parts had to be pre-arranged and negotiated by Industrie Pininfarina. The volumes of orders made it difficult to negotiate for lower prices from the suppliers. This ultimately meant that the manufacturer had to find another way of producing to ensure quality is maintained while at the same time, the profit margins are increased.

Objectives

• Estimate the amount of capital that the company requires to contribute to the project; the expansion of production and the workforce required to effect the same.
• Understand how the partnership is beneficial to Industrie Pininfarina. This is the profit margins and infrastructural benefits that the company will get from the partnership once the project is completed.
• Understand how the various manufacturing processes are likely to be altered in the process of satisfying the goals of Mitsubishi in the European market.

Recommendations

• I recommend that the manufacturer accept the proposal by Mitsubishi as a new customer. This will mean that the old set up of the company would have to be switched up, the space for paint more cars; more workers to work in the manufacturing and more advanced equipment will have to be bought. For a niche company to venture into such investment is a risk but when the project pays off, the company remains better off. The company, therefore, should be encouraged to take the deal and produce the Pajero mini in Europe (Mitsubishi Motors, 1999).
• I would recommend that the company communicate with Mitsubishi to ensure that the definition of quality and defects were well explained. This would mean that the Mitsubishi Company as a new customer would give Industrie Pininfarina the clear cut definition of the product they wish to put out to the market. At the same time, Mitsubishi would offer nuggets of wisdom on the manufacturing after having carried out a similar project previously.
• The company would benefit in being introduced to the parts suppliers. For the company, this is a major milestone. I would recommend that the company accepts the proposal to produce the Pajero mini, then once this production is over, the company will have created links with suppliers for future use. Mitsubishi will have helped the company to expand their networks in terms of trade.

Analysis and Conclusions

Industrie Pininfarina had reduced the production output by the year 1996. This is the time during which Mitsubishi approached the management with a counter proposal where the company looked to sub-contract Pininfarina to produce the Pajero mini for Europe. The company’s performance in 1996 had reduced greatly compared to that of 1992 due to the changes in the supplier’s technology of production of car parts. The decline in performance is evident when looking at the average production per hour in the two years. In 1992 60 cars per hour were produced which is quite a high number compared to the 42.5 cars per hour in 1996 (Jones, 2011). This is a 29.1% decline in productivity. All factors remaining constant means that the production of the company needed to be turned around. 

In conclusion, the company needed a top-down intervention to change the situation. The management needed to see why the production was low and whether the partnership with Mitsubishi was going to change the situation. The levels of specialization needed to be leveled up. More employees needed to be trained on working a specific part of the company. This means that the company will produce faster because each employee has a specified role in the company. The management will also have to be diversified to ensure that the partnership will be beneficial to all three parties; the clients, Industrie Pininfarina and Mitsubishi.

References

Jones, N. (2011). Industrie Pininfarina: The New Customer Decision. Ontario: Richard Ivey School of Business Foundation.

Mitsubishi Motors. (1999, March 2). Mistubishi Pajero Pinin Compact SUV. Retrieved from Mistbishi Motors: www.mitsubishi-motors.com/en-corporate/pressrelease/corporate/detail781.html