Companies are always faced with various management challenges; one among them is challenge of translating their corporate strategy in order to come up with their operations strategies. This entails product portfolio and process design strategies. One of those companies is Volkswagen a world leading automobile manufacturer that has its headquarters in Wolfsburg, Germany and sells its cars mostly in Europe. The company has various strategies that it has used to develop its product designs and manufacturing processes hence it features as the leading car maker in Europe. These include; Just In Time for receiving materials and delivering orders , Electronic Data Interchange for structured business data exchange, Activity based costing and many others. These have helped the company to reduce costs, to make decisions on data with certainty, to speed up its processes and attain quality. However for the company to have a world class performance and leadership, it needs to establish Total Quality Management practices which will enable it to satisfy its target customers. As a result the customers will be delighted and will in turn be loyal to the company’s products. Through the same practices employees will be empowered and the company will hence have an opportunity to maximize its return on investment.
Most companies especially manufacturing companies are faced by the challenge of translating their corporate strategy in order to come up with their operations strategies. This entails making some choice decisions concerning design as well as operations control (that is of the operation system). Product portfolio is one of these decisions where the company decides what to produce, the number of variants and the level of customization. Process design is another strategic decision where the company decides the various activities of the production process so that they happen in a certain consistent fashion. (Mahadevan, 2007)
Volkswagen Group operations and supply chain management strategies and techniques
Volkswagen Group, the largest car maker in Europe is headquartered in Wolfsburg and manufactures and sells nine brands of vehicles ranging from luxury cars to small cars with low-fuel consumption. It has various operation strategies which has enabled it to be among the leading automobile manufacturers in the world. These can be explained as under: in its logistical processes, the company uses “Just-In-Time (JIT), whereby it can sequentially align the different parts of a technical component or can put together the logistical mix of parts which are obtained from suppliers of raw materials and service providers (Volkswagen, n.d).
The company has a supply process that brings in production material which is held up by Electronic Data Interchange (EDI). This is used to exchange structured business data between the company and its suppliers. The JIT suppliers are consistently linked to EDI; as a result the company has achieved leaner and low-cost processes. The company has also embraced Activity Based Costing in its process-improvement work where some employees are tasked continuous improvement of the processes, whereby each week they focus on a particular process as they try to improve it. They come up with suggestions, implement them and monitor the improvements. This they do through a tool known as KVP2 (Kontinuierliche Verbesserungspozess) (Volkswagen, n.d).
As a result the decision makers have been provided with accurate and precise data on cost, the management and employees can therefore concentrate on important matters and be are able to prioritize the targets. Volkswagen Group mostly uses Continuous production as one of its manufacturing method, particularly because its produces similar models of a given brand continuously. This method is supported by various technologies used by the company such as Computational Fluids Dynamics (CFD) Process, which has the capability of performing predictive simulations. This technology therefore has made the company to be cost effective, as well as be able to produce customer specific requirements with high accuracy (Gurowka, n.d).
Another development on the products has been brought about by the incorporation of ESI Group’s Virtual Performance software suite in to the company’s operations. As a result the company can efficiently achieve simulation of its products with increased certainty and test the safety of products with ease. The company has also witnessed acceleration in the process of development. Lastly the company monitors the manufacturing process through Axis network signal cameras which are able to monitor and detect defects on products and hence improving the company’s JIT strategy (. Particularly because employees do not have to examine each car to check defects and as a result more time has been saved (ESI Group, n.d, Axis Communications, n.d)
Volkswagen Group improvement recommendations
Quality Management; as the business environment continue to face pressure from global competition and uncertain economic trends, successful businesses will be those that will adopt world class manufacturing practices which ensures there is quality in all areas. This was witnessed by the emergence and success of Toyota as one of the largest car maker in the world, particularly because it could produce quality products at low cost as compared to its competitors such as Ford, Volkswagen and GM. Therefore companies that want to achieve operational excellence must focus on quality, flexibility and delivery as well as the costs (Mahadevan, 2007)
Volkswagen needs to focus on quality to satisfy customers and as a result have more sales and gain market share. Customer satisfaction here should mean fulfilling customer needs when he/ she uses the company’s product s or and associated services. To address quality the focus should be on Total Quality Management. ISO 9000 which is not only focused on the product quality or based in the department of quality control but also includes other functions such as marketing, personnel finance and production Dr. P. N Mukherjee, a Management professor and Management Consultant of national prominence developed a holistic model which can be beneficial to Volkswagen Group (Mukherjee, 2009).
Total Quality Management produces a ‘world class management system’ within an organization, however to attain It, the organization must develop its foundations. The strong foundation practices include customer focus, strategic quality planning ensure continuous improvement and lastly ensure total organization involvement. Customer focus; focus on the customers and their satisfaction is compulsory because they are the ones to buy the products that are being produced. Therefore the company should be able understand and identify what the customers stated or implied and their latent needs. This can be done through Value analysis and market research as well as new product development (Klassen &Menor, 2006).
Secondly we have continuous improvement, whereby Volkswagen takes continuous improvement and growth as its way of life. This can be done by setting standards, measuring performance, identifying and finding the reason for the deviations and then taking corrective measures. The third foundation is strategic quality planning, which involves defining where the company is and where it wants to go. It starts with developing a strategic action plan, which should define the mission and vision of the company and identification of the target customers. Total organizational involvement is another foundation, whereby the employees and the management are unified in purpose as well as with the customers, the suppliers and the society. Supply Chain Management is the last foundation, whereby Dr. John Gattorna a professor at the University of Wollongong explains that this should be a single business unit involving the supplier and the customer and its focus is in achieving maximum customer satisfaction as well as reducing lead time and cost of processing customer orders (Gattorna, 1998).
After achieving a strong foundation, the company can now work on Total Quality Management which has three successive tools: First quality planning, whereby the specific functions of Volkswagen are defined for each functional area. Performance standards are set with time-lines. Resources to achieve quality are defined and are made ready just in time. Alternatives are evaluated and the best option is chosen. Individual and organizational goals will then be achieved through the quality plan as it provides a specific organizational direction. Secondly quality control and this ensures that the quality plan is adhered to. It involves production of appraisal reports at regular intervals on whether there was adherence or deviation on the expected performance and rectifying the deviations. This ensures that the company’s performance is sustained at a particular level and does not go down (Mukherjee, 2009).
Thirdly quality improvement; whereby the company has a quality council that assesses the shortcomings of the company, its products and services as well as its input resources. It finds out the factors causing the weaknesses and lists them in order of priority. Through Juran Quality Improvement Project (JQIP), the company can be able convert its weaknesses in to strengths and threats in to opportunities. If the company implements the process diligently it will achieve its end objective and world class performance and leadership. This is whereby customer needs are met, the customer is delighted, the employees are empowered because they have grown to take responsibility, and as a result the company will be able to maximize return on investment (Mukherjee, 2009).
Dr. P. N. Mukhrejee’s theory of holistic management practice for world class performance and leadership
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