Operations

Assignment: Operations Management

 Introduction

This paper discusses the operational structure of the Volkswagen. In addition to this, operational structure plays a significant role in regards to efficient use of resources and implements the business operations in an organised manner. Basically, the operations management is concerned with designing and controlling of production and redesigning business operations in the production of products and services. This practice allows to using the company resources in a well manner. In a similar manner, Volkswagen operation structure will be defined. Moreover, it will identify that whether Volkswagen achieve the competitive advantage with the operation strategy (Drake and Spinler, 2013). The sustainability practices in the operations will also cover in this report. Thus, this report addresses the detail understanding of operations statement of Volkswagen.

Discussion

Overview of Volkswagen and its operational structure

Volkswagens is considered as a world leading automotive manufacturer based company which is in Wolfsburg, Germany.  However, the company is producing approx. 10 million vehicles annually and it share 1 or 2 position with Toyota Motor Corporation. It also includes broad portfolio investment in the automotive companies and it mainly deals in Europe and China with brand portfolio. It includes various product portfolios such as VM passenger cars, Skoda, Bentley, Bugatti, Audi group (Lamborghini), commercial vehicles (Nutzfahrzeuge) etc. At last it focuses on the financial service sector. The Company also uses various strategies as per the changing business environment. This strategy allows it to stay in the competition over long run. The company future programme is “together strategy 2015” (López et al., 2015). Through this strategy, the company aims to become the leader in the sustainable mobility. The new strategy is not worth it for the external consultants. Therefore, it always uses unique strategy which allows to achieving high market share.

Additionally, Volkswagen uses the effective and unique operational structure which supports to attain the leading position in automotive industry. The Volkswagen group mainly deliveries are the passenger cars and commercial vehicles. Currently, company in 2017 sells less passenger cars and commercial vehicles as compare to 2015 (Pudar et al. 2014).

Table 1: Deliveries of Volkswagen vehicle in 2016 & 2017

Vehicles type 2017 2016 %
Passenger cars 2,327,336 2,353,381 -1.1
Commercial vehicles 167,717 154,698 +8.4
Total 2,495,053 2,508,079 -0.5

The company mainly deals with the deliveries in Europe and other markets such as china, UK and USA. The demand for the commercial and passenger vehicles has increased in North and South America as compare to previous years but there is slowdown in sales of commercial vehicles is identified in the Germany. This is considered as a good sign for its key competitors. Other than that, Volkswagen deals in two segments such as power engineering segment and group financial services etc. The power engineering segment mainly part of the investment projects. It is recorded that sales revenue in this segment largely driven by the engines and marine systems (Luthra et al., 2015). Besides that, the company combine its financial services with the group dealer and customer. The combat provide offering such as financing, leasing, fleet management, banking and mobility offering etc. the demand of financial services products and service has string network in 2017 at global market.

Furthermore, in regards to production, the company focuses on the quality in each equipment or tool of the vehicle. It does not compromise in the safety areas of vehicle that’s why it ensure that each vehicle would be produced in a way that customer feel safe and convenient to use. The period from January to March 2017 increase its production from 7.1% year after year. For the production, company also stock large set of inventories without wasting the single one. Currently, the company recorded 609,138 employees currently which is itself a great achievement (Brendehaug et al., 2017). The expansion plan factor of Volkswagen give rise to the recruitment of specialist engineer. Likewise, company hires various experts for the new plant in Germany, Mexico, Poland and china etc. On the basis of study, it can be analysed that Volkswagen uses the systematic and organised operations structure which helps the company to function each task properly without any delay and confusion.

Lastly, the Volkswagen operational structure statement is to offer the innovative and value product through sustainable operation activities so that maximum customer would be satisfied and become a loyal towards the brand over longer duration.

Discuss Volkswagen competitive advantage

The competitive advantage can only be achieved when company create a system which is differentiate yet unique from the key competitors. Similarly, in context to Volkswagen, it uses different concept in its global operation strategy. These are mention below:-

  • Vertical Integration: The Company uses this practice in order to enter the new market by alliance with new partner for the product manufacturing.
  • Manufacturing Process: Under manufacturing process, company design its plant in a way to minimize the cost of manufacturing and create innovative models (Hussain et al., 2017).
  • Facility & design planning: it focuses on the sustainability in the design planning. This practice helps to bring service quality in the Volkswagen product or services.

From this practice, it is stated that Volkswagen incorporates the modular platform in the operational activities such as production and manufacturing unit. Basically, modular platform is the method of outsource the activities and service in order to develop the right final product. It is largely used by the manufacturing unit in order to create great vehicle model on the same line. This different concept helps the Volkswagen to bring differentiation in its product feature and service quality. It allows to achieving the competitive advantage against the key competitor. The competitors are the Ford Motor Company, General Motor Company and Daimler AG etc. Volkswagen also gives its presence in the hybrid cars and motor sports. This also makes it differentiate from its competitors. The company also position itself well between in target market. These are the young executives, businesses and urban families. It does not comprise in its quality just because of cost. That’s why for its product or service, it chooses the urban class group rather than lower level people (Kausar et al., 2017). Moreover, company also focus to improve operational excellence through create efficiency in the research and development department. It is done through cut the necessary cost of the company. The use of sustainable practice such as recycle and reuse also help the Volkswagen to reduce the maximum waste. Other than that, the company install the advanced information system so that they could identify the requirement of stock in warehouse. This strategy helps to save the obsolete of stock.

Furthermore, Volkswagen also concentrates on the logistics are under the operations management. It mainly uses the logistic for the Europe and china as it majorly exports in such countries. Additionally, it uses the international shipment of product delivery. In 2016, the delivery rate has increased to around 74.5 million. Material logistics is another key business area which brings quality into the Volkswagen logistic group. Company hires in specialize two team for handling the logistic of company. However, one team is for the IT department which manages the stock requirement and another one is transportation team. The transportation team is responsible for delivery the product at right time and correct location. This work is undertaken by the specialized team and such staffs are put into an extensive training. Through this way, the Volkswagen accomplishes efficiency and relevancy in its operations. It results in the form of competitive advantage.

Volkswagen strategy development and implementation practice

Volkswagen incorporates new strategy which is quite unique and distinct as compare to competitors (Volkswagen, 2016). This strategy is “Together Strategy 2015” it is biggest change process tactic which allows the business to grab new segments. In this strategy, electrification initiative is planned in order to boost the annual sale. Besides that, company also pursue towards the digitalization, autonomous driving and technology of battery for bring efficiency in operations.

Group strategy is another strategy development for Volkswagen. In this, company concentrates on the technology and intelligent innovation. The quality and customer satisfaction tends to be preference for the company. The aim of group strategy is to develop the business strategy in a way to achieve the environment friendly variants. This strategy is achieved by performing the operations in group. The group means outsource the production, manufacturing and distributors etc. This strategy helps to bring specialization in product. Other than that, the merger and acquisition strategy uses by the company in order to enter or cover the new market. Thus, these are the activities that Volkswagen uses in the group strategy.

The company Volkswagen also includes the different level strategies into business operation that are as follows:-

  • Current business level strategy:

It uses the integrated cost leadership and differentiation strategy through focus on standardisation while designing the vehicle.

  • Corporate level strategy:

Lower level of diversification is carried out by the company as there is common platform and technology exists in the automobile sector. It follows the horizontal integration with the vertical integration.

  • International strategy:

It uses the “GLOBAL” approach by providing the local and global quality. In this, it follows the transnational technique in which it caters the needs of each class of the society. It proves to be helpful for increasing the customer base.

  • Cooperative strategy:

It uses strategic alliance in order to bring the quality, competencies and efficiency under the cooperative strategy. Through this strategy, Volkswagen achieves 16 automobile strategic alliances with some famous brands.

Implementation process of Volkswagen:

There are various steps that Volkswagen follows while implementing the strategy:-

  • Developing the strategy to carry out the functions successfully
  • Creating strategy in order to encourage the policies
  • Develop the policy that fitted best to the operations strategy (Wan and Sanders, 2017)
  • Making use of strategic leadership
  • Connecting of reward structure for achieving the results

Through this manner, Volkswagen implements the strategies into the functions and provide positive outcome to the company. This study clearly indicates that the company uses the organised and systematic strategies in order to become the leader.

VW operations with a view to Sustainability and Supply Chain Management

For Volkswagen, sustainability refers to accomplish the various objectives whether economic, social or ecological. The aim of the company is to offer its customers with the value, to offer the good and healthy working conditions, to conserve and protect the various resources as well as the environment. In its relationships with its suppliers, sustainability is firmly included in the processes of the Volkswagen group. In the context of the sustainability in the supplier relationship, it includes four main elements: standards of sustainability for the suppliers, transparency in the procurement process, an effective early-warning system that helps to detect or minimize the risks and lastly supply evaluation and development (Gold et al., 2010). The company is entirely committed to responsible, sustainable corporate governance. The company’s biggest challenge that is been faced is that it is difficult to implement this at all the level of the supply value chain which makes it complex. The company defines sustainability as to strive for the economic, environmental and social goals in such a way that will help to give them all equal priority. Volkswagen aims to ensure that it identify its various risks as well as opportunities in the areas of society, corporate governance and environment at the very initial stage along with the value chain. This also helps the company to fulfil its obligations towards fulfilling its corporate social responsibilities and also to enhance its corporate image and reputation in the long run. Volkswagen has clear cut management structure that helps to coordinate its activities as regards sustainability. The company has also taken an initiative to appoint an International Sustainability Council in 2016 in a way to enhance as well as improve its sustainability management (Hofmann et al., 2014). This council is combined of various experts from the politics, society as well as those from the academic world. The goal of this council is to continuously review the developments taking place in the Company and in the society. Volkswagen’s model for the sustainability development was been formed back in 2002. It focused on three min points: bringing lasting balance of economic, social and ecological systems, being responsible for your own actions at the global, national and regional level and lastly to bring transparency in communication along with fair cooperation. The company is continuously focusing on promoting an environmentally as well as socially compatible approach to business among its various suppliers.  The main activities for implanting sustainability in the company are: water management, the behavior of the suppliers, resource saving, renewable energies, education as well as development, etc. Supply chain management is been viewed as the integration of the various activities such as procurement of the materials, to transform them into goods and deliver those to the ultimate customers (Schaltegger and Burritt, 2014). The Volkswagen is not only buying the raw material but at the same time it also purchasing the labor and related services. The suppliers are integrated within the network of the company. The major aim of the company is that it aims at maximizing the value and tries to reduce or minimize the waste. The suppliers aim in supply chain is to supply the demand at the lowest possible cost s well as to respond instantly to the various needs. It develops responsive system in order to minimize the inventory throughout the chain to hold down the costs as well as to ignore obsolescence. The company also have focused on shorten its lead time and tries to design its products in such a way that leads to maximize its performance and minimize the costs (Seuring, 2011). Volkswagen have brought flexibility in its supply chain management so that it become effective enough to react to the sudden changes in context of shorten of supply, changes in parts availability, shipping channels, any import duties, etc (Fan et al., 2017). The company also focuses on Make/Buy consideration in which it tries to focus on making because it leads to assure adequate supply, utilize the extra labour which helps to make marginal contribution. On the other hand, the reason for buying is that leads to lower acquisition costs, the inadequate capacity, etc.

Conclusion

From the above discussion, it is concluded that Volkswagen uses unique operations structure and different strategies to maintain its leading position in this competitive environment. Additionally, it uses the “together strategy 2015” in order to become the world leader in the sustainability mobility provider. Other than that, differentiation, strategic alliance and global strategy are used by the company. Other than that, it focuses on vertical, horizontal diversification, product quality and logistic areas and this helps it to achieve the competitive advantage. This strategy is implemented through hire the specialied staff and develops the reward system into the business. The combination of operational strategy allows it to become the leader in the tough competitive market.

References

Brendehaug, E., Aall, C. and Dodds, R., 2017. Environmental policy integration as a strategy for sustainable tourism planning: issues in implementation. Journal of Sustainable Tourism25(9), pp.1257-1274.

Drake, D.F. and Spinler, S. 2013. OM Forum—Sustainable Operations Management: An Enduring Stream or a Passing Fancy?. Manufacturing & Service Operations Management, 15(4), pp.689-700.

Fan, J.P., Huang, J., Morck, R. and Yeung, B., 2017. Institutional determinants of vertical integration in China. Journal of Corporate Finance44, pp.524-539.

Gold, S., Seuring, S. and Beske, P., 2010. Sustainable supply chain management and inter‐organizational resources: a literature review. Corporate social responsibility and environmental management17(4), pp.230-245.

Hofmann, H., Busse, C., Bode, C. and Henke, M., 2014. Sustainability‐related supply chain risks: conceptualization and management. Business Strategy and the Environment23(3), pp.160-172.

Hussain, M., Alameeri, A. and Ajmal, M.M., 2017. Prioritizing sustainable practices of service organizations: an empirical evidence from automobile dealers in UAE. International Journal of Information Systems in the Service Sector (IJISSS)9(1), pp.22-36.

Kausar, K., Garg, D. and Luthra, S., 2017. Key enablers to implement sustainable supply chain management practices: An Indian insight. Uncertain Supply Chain Management5(2), pp.89-104.

López, M.A., De La Torre, S., Martín, S. and Aguado, J.A. 2015. Demand-side management in smart grid operation considering electric vehicles load shifting and vehicle-to-grid support. International Journal of Electrical Power & Energy Systems, 64, pp.689-698.

Luthra, S., Garg, D. and Haleem, A., 2015. Critical success factors of green supply chain management for achieving sustainability in Indian automobile industry. Production Planning & Control, 26(5), pp.339-362.

Pudar, N.J., Woody, G.R., Welchko, B.A., Bereisa, J., Lauckner, J.J. and Posawatz, A.L., GM Global Technology Operations LLC and General Motors LLC, 2014. Remote power usage management for plug-in vehicles. U.S. Patent 8,912,753.

Schaltegger, S. and Burritt, R., 2014. Measuring and managing sustainability performance of supply chains: Review and sustainability supply chain management framework. Supply Chain Management: An International Journal19(3), pp.232-241.

Seuring, S., 2011. Supply chain management for sustainable products–insights from research applying mixed methodologies. Business Strategy and the environment20(7), pp.471-484.

Volkswagen (2016) Annual report. Available at: https://www.volkswagenag.com/en/InvestorRelations/news-and-publications/Annual_Reports.html (Assessed: 6th February 2018)

Wan, X. and Sanders, N.R., 2017. The negative impact of product variety: Forecast bias, inventory levels, and the role of vertical integration. International Journal of Production Economics186, pp.123-131.

 

 

 

Leave a Comment