MGT 26 PROJECT –PHASE 1

INDUSTRY – AUTOMOBILE
ORGANISATION - VOLKSWAGON

SUBMITTED BY –
PRIYANKA GUPTA – 2K19/DMBA/070

SWARNIM – 2K19/DMBA/100

SAMYAK JAIN – 2K19/DMBA/086

RAJAT DIWAKAR - 2K19/DMBA/073

PRADHUMN DHAKAD - 2K19/DMBA/066

ADITYA SINHA – 2K19/DMBA/005

 1. Sectorial Brief and Trend Analysis
2.1 Sectorial Brief

The automobile industry refers to a manufacturing industry which manufactures, design; discover new
vehicles to be launched in a particular country keeping in mind the various environmental factors. The
growth rate of automobile industry is quite high. The turnover from this particular industry accounts to 4
trillion USD & an employment to approximate 5.6 million people.

The supply chain for this particular industry is quite effective in comparison with other industries and hence
has set for itself great amount of opportunities as well as threats, and operates in an environment which
helps to satisfy the customers by delivering them the products on time.

The level of technology which has been used by this particular industry has also lead to many changes as
well as innovations to produce an automobile which is equipped with high class technology & provides high
amount of satisfaction to its customers (Vickery, 1996). The industry is quite volatile in nature. There has
been a rise in the per capita income of the all the developing as well as developed countries. This has also
lead to a steep growth in the automobile industry. The industry is quite competitive in nature & majorly
focuses upon the exports rather than manufacturing or importing it from other countries.

The major players in the automobile industry all over the globe include Toyota, Mercedes Benz,
Maruti Suzuki, Hyundai, Mahindra & Mahindra, etc.

In order to survive in the overseas market, satisfying & meeting all the requirements of the
customers refers to the major reasons. Industry can attain sustainable competitive advantage
through following ways- high class labor, capital efficiency, availability of the raw materials, latest
technology.

2.2 Trend Analysis

Today, the automobile industry is a major component of economic growth in all industrialized
countries. Operation management is seen as a vital part in any organization and it is a widespread
activity embracing all sectors of the economy. “Operation management deals with decision making
related to productive processes to ensure that the resulting goods and services are produced
according to specifications, in the amounts and by the schedule required, and at minimum cost. Inputs
of materials, labours, and resources are used to obtain goods and services using one or more
conversion/ transformation processes, thereby adding value.” Shim & Siegel.

Different factors that affect organizational success-

 Strategic factors

 Market, Product, Technology, Customers, Suppliers, Vision, Value Creation Strategy

 Organizational factors

 Strategy Deployment, Effective Leadership, Policies, Procedure, Processes, Continuous

Improvement Culture, Problem-solving, Commitment, Culture, Measurement of Performance;
Trust, Honesty and Ethical Behaviour

 People factors

 Employee Involvement, Education, Training, Internal Supplier-customer Relations, Motivation,

Teamwork, Communication, Safety

 Environmental factors

 Social, Economic, Competitive, Technology

Effective operations management is must in every organization and the role and importance of
effective operations management in automotive industry are summarized below-

 Improve in profitability

 Increase in customer retention

 Reduce in customer complaints and warranty claims

 Reduce in cost through less waste, rework, and so on

 Greater market share

 Increase in employee involvement and satisfaction, lower turnover

 Increase in ability to attract new customers

 Improve in competitiveness

 Improve in customer satisfaction

 Improve in management-employee relations

 Improve in focus on key goals

 Improve in communication

 Improve in teamwork

 Improve in employee morale

 Improve in company image

 Improve in revenue

 Improve in service to internal and external customers

 Improve in effectiveness

 Greater adaptability

 Improve in planning

 Improve in work environment

 Improve in decision making

To meet the organizational objectives, the operations objectives must be met considering the five
following competitive objectives:

 Quality: In the context of operations, quality means what enables you to do things right. It
means error free processes and error free products and services. Quality has several
meanings. The two most common are:

Quality as the specification of product or service

 Quality as the conformance with which the product or service is produced.

So, we can define quality as consistent conformance to customer’s expectations.

 Speed: In the context of operations, speed means which enables you to do things quickly. It
means quick delivery and fast throughput. Speed has different interpretations. Externally, it
means the elapsed time between a customer asking for products or services and getting them
that too in satisfactory conditions. In other words, it enhances the value of product or service to
customers. Internally, speed reduces the need to manage transformed resources as they pass
through the operation, thereby saving cost.

 Dependability: In the context of operations, dependability means which enables you to do things
on time, that is, delivery or making available products and services when they were promised to
the customer. It means dependable delivery and reliable operation. Dependability prevents late
delivery and lateness causing disruption and wasted time and effort.

 Flexibility: In the context of operations, flexibility means which enables you to change what you
do. It means ability to change and offer frequent new products with maximum choices.
Flexibility has several distinct meanings but they are always associated with operation’s ability
to change. It is the degree to which an operation’s process can change what it does, how it is
doing it, or when it is doing it.

Product/ service flexibility: ability to change the products and services it brings to the market.

Mix flexibility: ability to change the mix of products and services it produces at any one time.

Volume flexibility: ability to change the volume of products and services it produces.

Delivery flexibility: ability to change the delivery time of its products and services.

 Cost: In the context of operations, cost is which enables you to do things cheaply. It means
minimum cost, maximum value and minimum price, highest value. The cost of producing
products and services is influenced by many factors. The most important is 4 V’s: volume,
variety, variation and visibility.

Identifying the areas of good practices and improving performance

There are numerous methods to increase the performance of any organization. Each method includes
regular recurring activities to establish organizational goals, monitor progress toward the goals, and
make adjustments to achieve those goals more effectively and efficiently. The following approaches
improve organizational performance only if they are implemented comprehensively and remain
focused on organizational results.

 Balanced Scorecard: It focuses on four indicators- customer perspective, internal-business

processes perspective, learning and growth perspective and financial perspective, to monitor
progress toward organization’s strategic goals.

 Benchmarking: It is used as the standard measurements in a service or industry in comparison

to other organizations in order to gain perspective on organizational performance. It is often
perceived as a quality initiative.

 Business Process Reengineering (BPR): It is a management approach aiming to improve by

means of elevating efficiency and effectiveness of the process that exists in an organisation.
  ISO 9000: It is an internationally recognized standard of quality, and includes guidelines to
accomplish the ISO 9000 quality standard. Organizations can be optionally audited to earn ISO
9000 certification.

2. VOLKSWAGEN
2.1. Introduction

A brief introduction to the VW group, the company is based in Wolfsburg Germany. It is the second largest
manufacturer in the world and the largest in Europe. The company has 12 brands that fall under them.
Each brand name has its own market and they operate independently from each other. The company
caters for all the different classes in society from the expensive cars to the low fuel consuming cars to the
student and also the businessman. The group operates in 150 countries and they pride themselves in
making attractive, safe and environmentally cars.

2.2. Operation Management planning at Volkswagen

Operations planning for the company is a very important and critical working document that company
meets every year to take a look at the coming 5 years what to achieve and how to do it last year in 2016
that company came out with an operations management task named strategy 25 where they looked to be
the number one leader in automotive manufacturing in the world.
The company systematically looks at each project and sees how they would accomplish each project by
setting both economic and technical goals to get maximum liquidity efforts. The company looks at
streamlining or operations to speak to the strategy. According to the report in 2015, the company also
looked at each time frame of how long an operation would take to execute such as
- Unit sales over a period of time and its effects on the market.
- Location planning for all different sectors and also the capacity and utilization.
- The corporate policy also dictates how long a product will be in production.
Looking at the sustainable economy the company plans to move into the sustainability race also by joining
the e-mobility race.
The company has also made a serious commitment to fixing all the issue when it comes to the
environmental issues through its Environment Operations Management.
Digital planning is also part of the company plans which will increase the efficiency of operation planning,
by using a software packing that gives the company an easier way to simulate different plans and scenarios
and being able to tell if they would work, thus minimizing error.
2.3. Operation Management Objectives at Volkswagen

The company has embarked on strategy 2025 where the VW group has said they want to be the best
engine manufacturing in the world based on performance, speed, and durability. The company has four
main objectives that it has chosen to reach this through its operations management, the following four
points is how the company see themselves achieving strategy 2025.
- Excite Customers
- Excellent Employer
- Role for Environment, Safety, and Integrity
- Stay Competitive
Which is similar to the ones that I early mentioned in the section on the role of operations management.
In summing up the objectives of VW, I get that the company wants to design and control a process that will
be eco-friendly, the company seeks to surprise their customers by exceeding their expectation through the
four primary objectives. The whole process is based on the company building high-quality cars that are
customer specific and are economically viable in terms of cost to the consumer.
According to the Group, Operations Management is very challenging and they are fully aware that the
dynamic market can make it very difficult to keep aligned to the vision and objectives. The forever
changing market produces a factor that is a threat to the objects such as rapid development of technology,
ethical sensitivity between the groups, economic cost implications and security awareness and all of these
factors demand Operations Management to respond from a manufacturing organization.
The challenge in all of this is that a company might need to change its primary design to stay competitive,
for an example consider if one of the competitors would release a more powerful engine then the strategy
2018 engine, the company would have to change certain components to stay ahead. The changes are
needed in order to be aligned with the objectives, the development of more efficient systems will be
required to maintain the objectives through Operations Management strategy. The need of a more eco-
friendly sensitive production systems will be needed also to stay ahead and this can be achieved through
lean manufacturing.
In summary, the company is in constant check of the objectives and market to see how they need to adjust
so as to stay ahead. The company also makes sure that it employs the competent people to make the
correct decisions through the organization to not lose focus of the objectives, meaning that the company
must invest in the Operations Management team to have the analytical ability to keep the company ahead
of competition.

2.4. Operations Management Strategy at Volkswagen

In the 2014 annual report, the company revealed that it had a new operations management strategy which
was named strategy 2018 and now 3 years later we are fast approaching the target of strategy 2018. The
surprising thing is that in the same year of 2014 the company already had achieved its major milestone of
that strategy by being able to sell 10.6 million cars in that year. In 2015 the company again revealed a new
strategy given the name together strategy 2025, which had similar goals as to 2018 but now more generic
to Volkswagen according to the current CEO of the company Mr. Matthias.
The company has said that it would be the world leader in innovation, quality product producer and
customer satisfaction. Obviously, through this strategy, the company would like to up its sales and the
group understands that in order to do this they will need to look after their employees, which is why part
of their 2025 strategy is to be the best employer in the world.
The company in order for the strategy to be a success it has they would have to focus on being more eco-
friendly through their plants worldwide and through their production of electric vehicle. The VW group will
work on lean manufacturing system and changes such as standardizations both direct and indirect sectors
while maintaining a low throughout time. The company will measure their process performance using 7
different key factors being;
- Customer timely deliveries.
- Sales revenue.
- Operating profit.
- Capex revenue
- Operating return on sales
- Return on Investment
- Net cash inflow.
The main objectives of the organization are a build on the 2018 strategy, the current CEO of the Group Mr.
Matthias Muller reiterated that the strategy the 2025 strategy is not from an external consultant but rather
comes from the heart of the company. The words from the CEO really give me the impression that this
strategy is really for and about the relationship that the company has with its customers and the
environment. The Objectives of the vision 2025 are as follows;

2.4.1. Excited Customer

The company seeks to exceed customers’ expectations by providing them with a much more high quality
and stylish product. The group understands that faithful clients tend to recommend good products, so the
company seeks to impress existing clients to attract new ones.

2.4.2. Excellent Employer

The group has planned to invest in its workforce and also seek to motivate their employees. The company
also seeks to afford equal opportunities to better the working conditions for the workforce coupled with a
more transparent organization that is forward-looking. The company is planning of retaining workforce
through inspiring confidence and also through exemplary leadership that will promote a positive corporate
culture which will not only keep employees but also attracts new talent.

2.4.3. Role of Environment, Safety, and Integrity

Since the emissions scandal the company has vowed to work on their impact on the environment []. The
company on a daily basis seeks to improve on their carbon footprint through environmental awareness
and on the safety of their employees and also on the integrity of the product.

2.4.3.1. Environment
The company has looked at getting eco-friendly raw materials and resources to manufacture the product.
All the plants of the organization are part of the blue factory project where each plant needs to meet
certain conditions to reduce its carbon footprint and lower emissions.
2.4.3.2. Safety
The group through their innovation and experience in making cars is planning on producing high-quality
vehicles. The strategy 2025 is also there to try and rebuild and restore the image of the company to the
world and its customers.
2.4.3.3. Integrity
The company prides itself with complying with rules and regulations, as to ensure they have safe and
secure processes and deal openly and honestly with their mistakes so it will be easy to fix and resolve
mistakes [9]. The need of constant transparency will ensure that it is an enterprise that has integrity.
2.4.4. Competitive Profitability
The group understands that investors will only invest in a company that is growing, so the company has
made it a point to deal with the repayments of its debts. The growth of any organization will make
investors take note so the company will make investments that will have high returns and are profitable.
The company has set goals in place to achieve this objective, goals such as operational excellence in all
business processes as to end up the benchmark in the industry.

2.5. Sustainable Operations Management at Volkswagen

The VW group has green factories all over the world, where the company looks into cutting our all
pollutant emissions and also becoming eco-friendlier. In the 2016 Annual report, the company in reference
to sustainability and their approach to it echoed that it would look at pursuing economic, social and
ecological objectives. The organization also acknowledges that it had failed to uphold and live up to the
standard referring to the diesel emissions scandal, however, the company has vowed to rectify their fault
and guard against making such a mistake again to sure that it never happens in the future .
The company is busy undergoing a transformation where it will be using blue efficient technology to be
able to be world leaders in combating pollution of any kind; they will also enter the e-mobility market. The
company has placed sustainability as an important task throughout the organization with the 2025
strategy, it will also ensure that there are four workshops for sustainability as to inform people about the
importance of going blue. The key focus on sustainability at VW will be people, environment, and
economy.
For an example, we will look at VW SA as a company that has implemented the Think Blue strategy.
The company defines the Think Blue strategy as their commitment to balancing mobility and sustainability.
The Think Blue program encourages the customer also to play their part in looking after the environment.
The program is not just about the ecological impact but also about promoting resource efficient methods.
The 2025 strategy makes it very clear that the company wants to be the leader in the automotive industry
when it comes to sustainability.
The company has focused on 3 main objects to drive the Think Blue program namely.
2.5.1. Eco-Innovation
The company made some big changes to the paint shop where it said 26% of water after the company had
invested in a water harvesting project that helped them collect 200 000 liters of water to add to that the
shop also uses its own reverse osmosis water. Through the new changes in the paint shop, the company
has managed to save about 28% on energy, where 20% was for electricity and 8% was from the LPG gases.
Furthermore, the shop has looked into using less material when it comes to sealing and painting the
vehicle at no compromise to the quality.
2.5.2. Waste Management
The organization made drastic changes to how their waste management, where they now recycle 23000
tons of waste compared to the 2900 tons they used to recycle. Through this project, the waste yard has
been able to generate enough money to sustain itself and also pay the 19 employees that work in the
waste yard.
2.5.3. Employee Awareness Campaign
The Company launched an internal Think Blue factory awareness campaign, where the company
communicates and engages the workforce on how to be more aware of sustainability. The company built a
Think Blue Pavilion where the employees can go and learn more about they could implement certain things
at homes such as a tire vegetable garden and water harvesting. The whole drive of this is that the
workforce can be able to understand the vision and goal of the company and move together to achieve it.
The company believes that in order to make the Think Blue program successful is by making small changes
that will last and have a meaningful impact.

 
Conclusion

What I have observed through my research on operations management is that it is very important to have
a good strategy because operations management is strategy driven through certain activities in the
organization.
The main function of operations management is getting the output which is the end product through to
the customer and through certain activities as I already mentioned, such as in the transformation process
where we find out that the input the process itself and output mixed with the feedback give you a perfect
product. The importance of operations management is that it gives the company a direction of moving
forward how to optimize processes and how to go about on a daily business operation.
What I also learned while conducting the research on operations management is that quality is very
important to give out a good product at the end.
The study on the VW group I came to the understanding that operations management in their case is a way
of running the organization it is the holistic approach that the companies use to execute all of its
operations.
Operations management has got a vital importance the company in terms of how to get the product to the
customer and through certain measures of operations management such as their strategy 2025 the
company has been able to transform itself to one of the world’s leading or to manufacturing companies.
Strategies such as 2018 the company was able to achieve there are 10 million units in one year through
operations management strategies and I believe that the company will achieve all its desired goals for the
year of 2025.
The VW sustainable operations management program where they look to join the E-mobility race where it
produces electrical vehicles to have a less impact on the environment around them and with a collective
partnership of all their plants in the world the company will be able to have a massive and significant
impact when it comes to sustaining and developing other measures through Innovation economy and
through their workforce.Volkswagen (VW) Group set a strategic plan known as “Strategy 2018” that
aims to make the VW Group a worldwide leader in 2018. Over the long term, VW aims to increase unit
sales to more than 10 million vehicles a year and intends to increase its return on sales before tax to at
least 8%. To achieve these goals, Volkswagen announced an introduction of new manufacturing design
platform called Modular Transverse Matrix or (MQB), which will play a vital role.

Volkswagen Group is a German multinational automotive manufacturing group headquartered

in Wolfsburg. It is the world’s second-largest motor vehicle manufacturer by 2011 unit sales and the
largest based in Europe. The Group is made up of various big brands: Volkswagen, Audi, Porsche, Bugatt
Lamborghini, Bentley, Skoda, SEAT, VW Commercial Vehicles, Scania and MAN.
 

Generally, each automobile platform is designed specifically for a market segment and shared
between cars of similar size. A typical mass market of VW platform underpins different brands with
several model variants. VW is now creating shared modular platforms to serve needs of its
different subsidiaries. One of the prominent features of the MQB is the uniform position of all
engines designed to accommodate two new four cylinder engine cars. The new engines will
reduce the Group’s engines and gearbox variants in the MQB system by 90% and the MQB will
also enables an identical mounting position for all current alternative drive concepts from natural
gas and hybrid versions to the pure electric drive.
 
Soon, all of the models and brands under VW Group will be produced on the same assembly line,
and even will produce MQB models of different brands together. The advantages of creating
a modular design are: simplifications of manufacturing and assembly; easier repair and
replacement; parts interchangeability; standardization; and easier diagnosis and remedy of
failures. By creating a standardized, interchangeable set of parts from which to build a variety of
cars, VW plans to cut the time taken to build a car by 30%. The MQB platform will allow the VW
Group to produce a worldwide high volume and niche models at extremely competitive costs over
the long term. The MQB takes advantage of synergies in key technologies and allows for greater
boost in sales