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Global operations and logistics

Introduction

Operations and logistics management is curial for all the organisations, where the management of logistics, supply chain and distribution network provide a scope to the organisation to enhance their operations in the market and develop effective strategic planning to secure future sustainable development (Balon, Sharma and Barua, 2016). The aim of the study is to analyse the operations and logistics supply chain of the company Volkswagen and recommend some suggestions for strengthening their operation strategy to improve their global presence. Volkswagen group is one of the renowned brands which are specialising in producing cars. The Volkswagen group was established with the intent of providing low prices cars and now become one of the renowned brand with almost every class of cars presented in their line of assembly, which ranges from low priced cars as well as high prices and luxurious cars and its headquarter is also located in Germany. The Volkswagen group was founded in Germany in the year of 1937 with the intention to produce low price cars for the people of Germany and with the span of time the Volkswagen group has now started its production and delivery in almost every regions of the world due to the wider acceptability of cars all around the world and development of efficient supply chain and distribution network. Moreover, due to the World War II, the Volkswagen Company was completely destroyed due to its involvement in producing and providing military vehicles and equipment to the military of Germany but later on, after the World War II was over, the company was again established and organised in the year of 1949 and started to produce low cost cars.

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The production of Volkswagen cars were widely accepted and admired around the world and the company also introduced van apart from cars in order to fulfil the needs and requirements of the peoples. Furthermore, the reason of introducing a van was due to the fact that the small sized cars provided by the Volkswagen Group unable the company to increase their sales and therefore the company provided the sluggish sale which was enhanced by the introduction of van by the Volkswagen Company. The company has established its reputation by introducing several brands which are widely accepted and are well known all around the world which includes Audi, SEAT, SKODA, Bentley, Bugatti, Lamborghini, Porsche etc (Luthra, Garg and Haleem, 2015).

SWOT analysis of Volkswagen

The SWOT analysis of the company enable to determine the strengths, weaknesses, opportunities and threats of the company which is the core information of the company through which suggestions, solutions and problem solving activities is performed by the company to remain competitive and build its brand reputation within the industry in which the company is prevailing (Luthra, Garg and Haleem, 2015).

Strengths:

One of the main strength of Volkswagen Group is the numerous brands which are possessed by the company which includes Bugatti, Porsche, Lamborghini and Bentley. The portfolio of brands possessed by the company has overtaken the huge market share due to the features and other specification provided by the company under the portfolio of the brand names. one the major strengths of the company is the strategy of stay together 2025 which is focused on shaping the mobility for the coming generations by focusing on electric cars and cars with more environmental protection measures which indicates that, the company is efficient to utilise their resources to develop appropriate cars for the benefits of the stakeholders and society as a whole. Aim of this strategy adopted by the company is to focus on environmental protection and producing advanced technology cars for the future generation to enhance and improve the experience of the customers by offering specification according to their desires (Gopal, and Thakkar, 2016).

According to Gopal, and Thakkar (2016), the diversification strategy enables the company to become prominent within the Industry and capture the larger share of the automobile industry through its unparalleled diversification strategy. Furthermore, the company has also mark its footprints internationally and provided tough ground to other companies in the automotive industry by obtaining partnerships and joint ventures with the investors across the globe. Hereby, the financial strength, strong brand reputation, product diversification as well as technological advancement and innovation are the major strengths for which the company is able to gain high competitive advantage across the global automobile manufacturing industry.

Weaknesses:

One of the weakness of the company is the scandal of the diesel engine cars of the Volkswagen which were not designed in accordance with the environmental protection and affecting the environmental condition which was determined by the environmental protection researchers. The negative publicity of the company regarding the environmental protection was one of the major concerns for the company because the scandal resulted in hampering the brand reputation of the company which the company build by investing number of years in providing superior services to its customers. Additionally, highest recall rates in the United States of America, delivered vehicles consists of faults such as less environmental friendly engines led the company to recall the vehicles and low market share of the company in the US market and hampering the potential of sales of the company are other weaknesses of the organisation for which it is difficult for the brand to strengthen their customer’s base and enhance the performance in the market.

Opportunities

Electric care because the price of the fuels are expected to rise in the near future and if the company initiated to develop its expertise and competence in the manufacturing battery driven and electric care then the company can avail the opportunity of increase its sales or revenues of the company through capturing the market of battery driven and electric cars. According to Massimo Merlino (2017), the demand of autonomous vehicles is also one of the major opportunities in front of the company which the company can avail through the manufacturing of autonomous vehicles which are in high demands by the customers. It in turn helps to enhance the reputation of the company and overcome the situation of low sales and profitability. The company will expand their business across the globe by strengthening their operations and supply chain in the market (Luthra, Garg and Haleem, 2016).

Threats:

High competition is faced by the company from the number of competitors prevailing in the automotive industry where the threats or the competitors of the Volkswagen are Toyota, General Motors, Ford, Renault, BMW, Chevrolet etc. Moreover, the increasing governmental regulation regarding the automotive industry is also one of the concern or threat for the company which will restrict the company in the production of vehicle without adopting the technological advancement (Stowell, 2013). As stated by Gopal, and Thakkar (2016), due to high concern of environment friendly cars, the company will have the threats of producing the electric cars as the demand for the electric cars will be increasing as compared to the normal diesel and petrol cars.

Global supply chain network of Volkswagen

The supply chain of the company plays a crucial role in enhancing their operational activities as well as strengthens their position in the global automobile industry where the leader and the managers can expand their services across the international borders and deliver the quality cars to the customers (Rajesh Katiyar et al., 2018). As stated by Stowell (2013), the suppliers in this regard are efficient to support the managers and cooperate with each other for developing sustainable operational strategies to distribute the cars and operate in the market proficiently. One of the suppliers of paint used on the car by the Volkswagen is the BASF coatings which provides plants as well as the materials painting the cars to Volkswagen group and assist the company in managing their operations efficiently and effectively. Furthermore, the DHL supply chain plays a crucial role in managing the Volkswagen plant’s logistics activities which is pivotal for managing the production and operational activities smoothly and efficiently. The logistics work performed by the DHL supply chain includes management of inbound receiving, storing, picking and sequencing activities that enable the production lines of the Volkswagen group to operate and assemble the parts without any disruption.

As opined by Rajesh Katiyar et al., (2018), the manufacturing facilities in Germany also play a crucial role to develop efficient global operations where the company is able to develop quality cars with innovative technology and creativity to improve their brand reputation. The company is also focusing on the implementation of the modular platforms which will enable the company to install disparate modules on the receiving and purchasing goods sites which will further enhance the production activities through vertical integration (Prerna Gautam et al., 2019). In order to enhance and boost the production efficiency and rely less on materials and goods which are supplied by the suppliers, the Volkswagen group has initiated to produce the goods of the vehicles through in-house production system which enables the company to produce its own interior and exterior goods according to their own customization and desire required for the completion of the vehicles.

The global network supply chain is hereby implemented by in-house operations, logistics and procurement management and vertical integrations where the company is able to beat their competitors and produce the high quality cars in the market. The global supply chain of the company is hereby efficient to retain the long turn customers and distribute the products proficiently to meet the customer’s requirements (Massimo Merlino, 2017). On the other hand, as opined by Rajesh Katiyar et al., (2018), the company also focuses on transforming the raw materials safely which are installed in the Volkswagen and it has been passing through 15000 stations in the course of production, treatment, finishing and transportation. The suppliers of the company are able to develop complex and environmentally compatible strategy to strengthen their digital and green supply chain and secure future sustainable development. The supply chain strategy is hereby beneficial for the organisation to strengthen their global operations and satisfy the customers by fulfilling their choice and preferences by delivering the quality cars to them.

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Rationale for facility location

Facility location is one of the important factors in the development of the efficient supply chain management because locations assist the company in managing the procurement and logistic works on time and efficiently which enable the company to compete its competitors through advancement in supply chain activities. Furthermore, As opined by Jiangtao Hong (2018), the rationale behind the facility location is manage the supply chain management activities which includes sustainability of operations performed by the company, maintaining the value of procurement and logistic operations, protection of brands of portfolio through maintaining the receiving and purchasing activities regarding materials and other accessories and optimizing the cost of operational activities with respect to logistics and procurement (Larry Li, 2018). One of the rationales behind the facility location is the protection of disparate brands which are maintained by the company and assist the company in maintaining the brand reputation by providing ease and comfort to the customers through disparate specification and features applied on the brands by the company. This is effective for the organisations to develop appropriate strategic planning to expand their business in specific location and achieve future success.

As opined by Rajesh Katiyar et al., (2018), maintaining the value of brands and the vehicles produced by the company is also one of the factors which are considered by the company in terms of facility location. Evidently, value is an important factor of the Volkswagen Group in building the brand reputation which is maintained by selecting a top quality suppliers or building a vertical integration through production of accessories and other materials required for the production of vehicles. As stated by Jiangtao Hong (2018), optimising the cost and managing the sustainable location is also one of the important factors which are considered by the company in term of facility provided to the company through locations selected from plant and equipment for production purposes. Company focuses to minimise the cost by locating the plant at those locations where labour cost and other costs are lower so that high profit margins for the company can be achieved. Furthermore, quality work is also considered while selecting the location in order to provide sustainable management of work (Julia Koplin, 2007). Cost minimisation for the production and distribution of the cars at affordable price is one of the rationales of choosing sustainable location where the company have the opportunity for transportation and distribution of raw materials and final cars also.

Competitiveness achieved by the company

Volkswagen faced tough competition from its competitors in the automotive industry. Interestingly, Volkswagen has managed to compete with its competitors that include BMW, Mercedes, Toyota, Hyundai etc. Moreover, the German Auto Giant, Volkswagen has adopted number of disparate and significant strategies in order to cope up with the high completion provided by the competitors. In this regard, As stated by Luthra, Garg and Haleem (2016), the strategic planning of product diversification and cost minimisation will enhance the operational strategic planning of the firm which would provide an opportunity to gain high market share in the market (Jiangtao Hong, 2018). One of the strategies adopted and implemented by the Volkswagen Group under the supervision of CEO Matthias Muller is that the Volkswagen Group initiated a strategy to target the market of China by specifically designing the vehicles for Chinese driver. Furthermore, China is one of the largest markets for vehicle automakers and fierce competition is presented in the market of China. As stated by Julia Koplin (2007), the strategy of targeting the fiercely competitive market by the Volkswagen group is to learn the competitive strategies through building partnerships with Chinese automakers.

Moreover, entering the fiercely competitive market is also one of the strategies to indicate other competitors that Volkswagen Group is ready to compete with the auto giants in competitive market even after the company reputation has deteriorated after scandals of environmental friendly cars (Burki, 2015). One of the main factor in entering the largest market of automotive vehicles i.e. China is the fact that Volkswagen thrive to achieve the supply chain management efficiency and optimising cost efficiency by building partnerships with the Chinese automakers who can provide the production services and facilities to the Volkswagen Group at low price in comparison with the other automakers prevailing all around the world. Furthermore, the efficiency in supply chain management activities and modular platforms which are placed in different production locations along with the partnerships of the company with disparate automakers is one of the crucial steps undertaken by the company in order to maintain the achieved competitiveness earned by the company since its inception.

Recommendations for Volkswagen

It is recommended to the Volkswagen Group that the strategy, expertise and competence regarding the production of battery driven vehicles and electric car vehicles can enable the company to compete with the other automotive manufacturers who possess expertise and competence in the manufacturing activity of battery driven and electric cars. Moreover, product diversification would be another important strategy which will be beneficial for Volkswagen to achieve competitive position in the automobile market where it can expand its product portfolio and strengthen their customer’s base in the market. Apart from obtaining the competency in the production of battery driven and electric vehicles, the main focus which the company should adopt in order to remain competitive is to enhance and boost the supply chain management activities including logistics and procurement which will assist the company to remain competitive within the industry.

The implementation of modular platforms must be implemented by the Volkswagen Group in almost all the production and storage facilities which are located all around the world. Moreover, the competitiveness which is obtained by the Volkswagen Group through the implementation of efficient supply chain management activities which will enable the company to supply and manage the manufacturing and production line of vehicle assembly in order to boost the production and supply the vehicles to the point of sales which are the showrooms and other authorized dealers of the Volkswagen Group. Moreover, the adoption of technological advancement in all the facility location of the Volkswagen Group which will enable the company to maintain its competition with the competitors where it is possible for the company to develop creative designed cars and enhance technology in the cars as people in the recent era of globalisation are concerned about latest technology and facilities where the company also needs to focus on delivering more facilities in the cars to meet the choice and preferences of the customers. In this regard, the company also needs to focus on the creative design and innovation while producing electric cars.

Apart from that, for enhancing the global supply chain, the company needs to provide effective training and development program for all the suppliers so that they can improve their technical skill and knowledge to enhance the quality of the cars and improve performance of the brand. In addition to these, the company needs to choose proper location with effective availability of transportation and international trade so that the raw materials as well as final products can be distributed well. For gaining high competitive advantage, the company also focuses on cost minimisation in case of production and distribution so that they can set appropriate price so that the customers can afford the cars in the market. On the other hand, improving product portfolio and developing global operational network would also be beneficial for the organisation in order to promote their quality cars in the market and strengthen their customer’s base in long run so that the organisation can secure future sustainable development.

Conclusion

It can be concluded that, the company is efficient to develop global supply chain and operational strategic planning in order to sustain in the market and serve the customers innovatively with latest technological up gradation and creative design. The location and supply chain management are also other strengths for the company through which it can grab the future opportunities of increasing demand of electric cars where the company Volkswagen has the scope to invest more in the production of electric cars and expand their service across the international borders.

Reference List

Balon, V., Sharma, A.K. and Barua, M.K., 2016. Assessment of barriers in green supply chain management using ISM: A case study of the automobile industry in India. Global Business Review, 17(1), pp.116-135.

Burki, T. K., 2015. Diesel cars and health: the Volkswagen emissions scandal. The Lancet Respiratory Medicine, 3(11), pp. 838-839.

Gopal, P.R.C. and Thakkar, J., 2016. Sustainable supply chain practices: an empirical investigation on Indian automobile industry. Production Planning & Control, 27(1), pp.49-64.

Jiangtao Hong, Y. Z. M. D., 2018. Sustainable supply chain management practices, supply chain dynamic capabilities, and enterprise performance. Journal of Cleaner Production, Volume 172, pp. 3508-3519.

Julia Koplin, S. S. M. M., 2007. Incorporating sustainability into supply management in the automotive industry – the case of the Volkswagen AG. Journal of Cleaner Production, 15(11), pp. 1053-1062.

Larry Li, A. M. J. X. Z. L. M. S., 2018. Industry-wide corporate fraud: The truth behind the Volkswagen scandal. Journal of Cleaner Production, Volume 172, pp. 3167-3175.

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.

Luthra, S., Garg, D. and Haleem, A., 2016. The impacts of critical success factors for implementing green supply chain management towards sustainability: an empirical investigation of Indian automobile industry. Journal of Cleaner Production, 121, pp.142-158.

Massimo Merlino, I. S., 2017. The Augmented Supply Chain. Procedia Engineering, Volume 80, pp. 308-318.

Prerna Gautam, A. K. A. K. C. K. J., 2019. Strategic defect management for a sustainable green supply chain. Journal of Cleaner Production, Volume 233, pp. 226-241.

Rajesh Katiyar, P. L. M. M. K. B. R. T. G. K., 2018. Impact of sustainability and manufacturing practices on supply chain performance: Findings from an emerging economy. International Journal of Production Economics, Volume 197, pp. 303-316.

Stowell, D. P., 2013. Porsche, Volkswagen, and CSX: Cars, Trains, and Derivatives. Investment Banks, pp. 577-586.

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