Approach to Material Management and Logistics in Volkswagen Organization

This report discusses the approach to material management and logistics in Volkswagen organization, including the structure of supply chain management, management of intermediaries, and the role of relationships in materials management and logistics.

Systems and Operations
Management

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
Approach to material management implied in Volkswagen organisation..............................1
Structure of supply chain management..................................................................................3
Approach to management of intermediaries ..........................................................................4
Application of Lean and agile practices.................................................................................4
TASK 2............................................................................................................................................6
Role of relationships in organization approach to materials management and logistics........6
TASK 3............................................................................................................................................9
Role of emerging technologies in organisation's approach to supply chain...........................9
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Operations management is defined as an continuous practice through which all the
operating business activities managed. This helps in utilising all the available resources of
business in effective manner and generating positive results. Automation also help in generating
productive results. In this regard, usage of technology for integrating business systems help in
better management of operation within an organisation. Through ERP whole business system is
operated through one information system and operations are managed by making appropriate
utilisation of resources. In the process of managing business operations, Integrated business
system and Enterprise resource planning can be use for effective management of logistics within
the prevailing business structure of an organisation. Supply chain management is a process
through which management activities of goods are handled from its production to final
destination of consumption. In this project report, to demonstrate an understanding of systems
and operations, management Volkswagen organisation is considered. It was introduced in the
year 1937 and market in auto-mobile industry at worldwide level (Behera, Mohanty and Prakash,
2015). This organisation was founded by German Labour Front and managed by Dr. Herbert
Diess as a key person of this organisation.
The aspects which are covered in report includes identification and critical review of the
approach to material management and its intermediaries along with structure of supply chain.
Also, critical review is performed regarding the role of relationship exists between the
approaches to materials management, its logistics & handling reverse logistics and considered
the aspects like contractual agreement and outsourcing activities to determine the impact over
relationships and operations. Finally, covered about the role played by emerging technology in
the existing approach of an organisation's supply chain in respect to material planning and
system development.
TASK 1
Approach to material management implied in Volkswagen organisation
Volkswagen is one of the largest auto-maker organisation by sales and this group possess
largest market in China. This organisation operates in number of international markets and
possess huge market share in different nations. This organisation is selected in this project report
because it possess effective operating and management system in auto mobile industry.
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Analysing this organisation will help in providing good knowledge of effective operations
management to become successful in competitive environment.
De Young, Charles and Hjort, (2018) defined material management as “the process that
leads to controlling the kind, amount, location, movement and timing of various commodities
used in the production by industrial enterprise”. Through material management all the activities
such as planning, organising, purchasing, storing and delivery that are related to management of
required material is made.
Currently, the approach used by Volkswagen for management of their materials within
the organisation is named as FIFO principle and repacking process (Approach to material
management, 2019). This performs function under the organisation as all the material and other
related information stream on the basis of consumer demand. This depicts that organisation is
required to manage all the operations and processes in accordance to their production stream and
deliver the same to other working places in compliance with customer time. Following this
process, organisation deliver single piece that goes from the downstream process for detection of
quality problems.
The aspect used in respect to identification of issues during adherence of process is
visual management. The major benefit which is associated with the usage of same is about
prompt resolution of issues. The impact of this process over organisational operations and image
will be positive and aid in building of strong brand image. The process at some stage having
negative impact due to high competitive nature of industry. Adherence of single piece delivery
system reduces the capability of an organisation regarding speedy completion of activities. This
will resultant into waiting by final consumers for organisational product in market. So, in this
situation sales will be impacted negatively.
As per Ćurovac, Persia and Campagna, (2015) Barcode is a separate approach that is used
to manage material availability in business organisations. This material management is cost
effective and involves less chances for error. As all the materials are provided a barcode and
entry and exit is made through such codes. Scanning is done and tracking of barcode improves
this material management process in most effective manner.
In order to ensure effective material management at production of their Smartwatches,
Volkswagen group has initiated a trial of Barcode at its plant in Wolfsburg so that smartwatches
can be build through optimum utilisation of available resources. An app to use this technology
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across different plants of company was developed by IT department of Volkswagen (Technology
in Material Management, 2019). This functions under the organisation as detection of exist and
entry of all materials related to production of smartwatches. The benefit of same ascertained in
the way that allows the proper flow of materials in accordance to the demand of watches in
market. This further help to provide safeguard from the situation over and under stocking. So,
proper utilisation of raw materials along with money help in deliverance of total quality products
to end consumers. The negative influence due to adherence of this process ascertained in the
form of reduction in flexibility and consumption of large period of time that hinders the capacity
of an organisation to met with consumers demands. This resultants into persuasion of behaviour
of consumers towards usage of other brand offerings
Structure of supply chain management
Supply chain is a network that is established among producer and final consumers to
facilitates distribution process from their specific producers to targeted consumer group
(Chaabane, Ramudhin and Paquet, 2011). In the supply chain structure different individuals and
organisations are involved establishing a relationship among themselves and performing all those
activities required to facilitate supply. Business organisations in the process of being competitive
and satisfying large number of consumers, establish a system through which demand and supply
will be managed to minimise unnecessary cost.
Other than this, for effective execution of Value chain of Volkswagen, Generic value
chain of Porter is used by Volkswagen. This was determined due to the basic structure followed
by an organisation includes production, treatment, finishing and treatment. All these have major
resemblance with structuring persists in model that includes inbound logistics, operations,
outbound logistics, marketing and sales and services (Structure of Supply Chain Management,
2019).
Inbound logistics of an organisation is working from ONE. Konzern Business Platform.
This aid in procurement of different materials at worldwide level. Simultaneously, it provides an
opportunity in enhancement of qualitative suppliers along with adhered processes. All these
suppliers deliver the materials directly to the manufacturing plants. At the stage of operations,
five different stages are exist includes press shop, body shop, paint shop and assembly line. All
the goods of an organisation along with used materials passed from these stages for attaining the
final shape that can be deliver to final consumers. Outbound logistics of an organisation working
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for delivering the goods to distributors from factory. Its working includes the usage of vehicle
logistics plans and transport control processes. Also, includes the usage of auto port controls that
help in performance of import and export activities (Tang and Musa, 2011). Marketing and sales
stage includes the activities related to promotion of products for improvement in sales figure. In
this regard, organisation use double marketing activities along with new marketing
communication techniques to spread awareness about their products and derive sales in positive
direction. Lastly, the function does by an organisation is related to services to end consumers.
Organisation take the self in-charge of all kind of after sales services to satisfy the demand of
consumers. Adherence of this structure provides an opportunity to effectively operate functions
in appropriate manner. This allows them in performing functions uninterruptedly in future.
Approach to management of intermediaries
Intermediaries are those which are persist within an organisation at different platform and
performs functions for the purpose of attaining individual and organisational goals. It is the duty
over the management of an organisation to manage all of them in positive direction because
their working aid in driving path towards success in future. In this regard, organisation must
ensure to formulate the proper structure or strategy that provides an opportunity in automatic
management of all intermediaries along with their integration in functioning.
Currently, the strategy followed by Volkswagen in this relation is known as
Together4Integrity. It bundles all the different activities like integrity, compliance, culture, risk
management and HR that have potential to change the organisational activities towards success
(Copacino, 2019). This will brings an obligation over all the managers and employees performs
at different departments under the platforms that perform their work with integrity and in
accordance to the rules or standards framed by an organisation. Ultimately, this will help an
organisation at ground level to create the working environment where all personnels are under
control and performs in relevance to the organisation objectives (Approach to management of
intermediaries, 2019).
Application of Lean and agile practices
These practices are widely popularized in the process of software development that helps
in delivering all the required information in faster and more sustainable manner. Lean
encourages teams to deliver all the required information fast by managing flow. In this process
the amount of time required in WIP (Work-in-progress) is minimised so that improvements can
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be focused. This practice is highly concerned with optimizing production process. Agile
practices flow by working in cross-functional teams on delivering one iteration at a time.
Through this practice development process is introduced. The concept of lean and agile practices
are based on seven principles that are: eliminate waste, build quality, create knowledge, defer
commitment, deliver fast, respect people and optimize the whole. Together with this,
Volkswagen company continues to be forge ahead with modernization as well as digitalization of
company. So, in this case application of both on performance of different functions provides an
opportunity to get positive improvements. Lean is foundation in consideration to the concept of
Agile but both are totally different from each other in context to the final outcomes.
Practice of Lean can be use for further improvement in structure of supply chain through
minimisation of risks and wastes along with maximisation of customer value. Effective usage of
this will provides an opportunity to an organisation about acceptance of common platform or
source that have sufficient power to perform both inbound and outbound functions. The benefit
of same can be ascertained in the way that help in minimization of the risk related to attainment
of defective materials due to having large business relations (Eguchi and et al., 2017). Also,
improves the functioning regarding deliverance of product to distributors and final consumers on
time that ultimately creates value for consumers at some point. The competitive advantage
created from the point of an organisation will be persuasion of consumers behaviour towards the
product quality of an organisation.
Application of Agile practice can be used over T4I process. Here, this will be used for the
purpose of strengthening the concept through diversification of rules and standards in accordance
to working nature of personnels. Measures are also taken regarding more effective exploration of
relation and integration in between the different concepts covered under T4I. This will clearly
depicts the process reliability to all personnels related to each other. So, functioning their
separate part with quality along with support of other help to grab flexibility where process can
be changed easily in accordance to the need (Myerson, 2012). This will provides competitive
advantage in the form of generating power regarding handling of the frequent changes noticed in
external environment.
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TASK 2
Role of relationships in organization approach to materials management and logistics
Material management is the process which involves number of activities such as
planning, organising and controlling flow of material in the business organisation. Material
management ensures availability of required material at each stage of production. Management
regarding purchasing, inventory control, order placing and receiving is performed as per material
management process so that effective budgeting is achieved for material management. Logistics
involves management transportation and other activities like packaging, supplies and security
related to inventory. Their are number of logistics and Volkswagen organisation uses business
logistics in order to perform its operations. Reverse logistics is defined as performance of set of
activities that are required in order to recapture the value. Through this process management of
material is performed beyond the final sales. Organising a effective reverse logistics is important
in order to minimise number of cost so that level of performance of business in financial terms
can be improved.
Material management involves all the activities performed form analysing requirements
for material to supply and managing reverse logistics. This process of management is followed
through establishing a effective supply chain through which collection of raw material and
distribution of finished goods are performed. Supply chain management of Volkswagen
organisation is complex as size of the business and intricacy and quality item is maintained.
Material management is facilitated with logistics as it helps in ensuring flow of material among
one origin point to destination (Poth and et al., 2019). Logistics are performed for information
flow, material handling, packing, inventory, transportation and warehousing. Having a business
logistics ensures that right material, in right quantity, at right time, at right place, in right
condition to right consumer become available. Their are two types of logistic one of inbound and
other is outbound. Inbound ensures that flow of resources within business and outbound ensures
flow of resources for storage and transportation. Reverse handling refers to management of
material resources that are acquired after making final sales.
Material management, logistics and reverse logistics are interrelated in business
organisation. As material managers at Volkswagen group planes how requirement of raw
material and finished goods for a particular time period. Logistic helps to ensure that these
requirements will be fulfilled with proper storage and transportation as and when required.
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Reverse logistics ensures that any material when received back is properly transported and
managed properly to make supply chain effective. Material management is related to marketing
and sales services of Volkswagen organisation. For example- when finished goods will be
provided on time then only marketing activities can be initiated and sales are conducted.
Logistics helps in effective transportation and storage of goods and it creates a direct impact on
the final distribution of goods. Reverse logistics increases stock in business and improves
availability of finished goods for supply. As Volkswagen organisation is a manufacturing
organisation and its effective material management ensures that material remains available at
each stage of production so that effectiveness at each step can be improved. In order to manage
revised logistics in Volkwagon organisation third party services are used by the managers of
business. As third party who has efficient resources to manage revserse logistics will help to
ensure that effective management is performed for material management of reversed logistics.
When analysis of material management, logistics and reverse logistics are made for
Volkswagen organisation then it is recorded an issue of weak distribution system. As
organisation is highly dependant on retailers and wholesalers to distribute their products to final
consumers. Inefficient management of logistics hampers distribution system due to delay in
providing finished goods on demand. This weakness in the material management system of
Volkswagen organisation needs to be resolved with increase in the combined dealer and
distribution centre inventory. A shorter led time through establishing a good relationship among
material management and logistic needs to be achieved for providing required materials on time
to large number of general public. Their are more and more amount of technical facilities
implemented at each stage in the business and this compex information technological structure
ensures generation of some complex issues. Failure of the technology, requirement of highly
skilled employees and financial requirements made IT facilities complex.
Contractual agreement is a legally binding written agreement between program and the
participant or legal representative (Volkswagen, 2013). Outsourcing is an activity through which
number of operations are performed for others. For example- a outsourcing organisation
providing accounting services will prepare all the accounting statements for other business
operations. In the present scenario there are number of business activities performed through
outsourcing so that effectiveness can be maintained. In order to establishing one of the best
relationship among material management, logistic and reverse logistic with other operations in
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company. Volkswagen has outsourced to Tata Consultancy services in order to ensure that an
effective technological system is developed for managing its operations. A mixture of on-sure
and off sure resources is utilised in the information technology system. Through this system TCS
is improving quality of material management by effective management and distribution system
of Volkswagen. Business environment is highly competative and in order to enjoy some amount
of competative advantages necessary cost is incurred. Introducting of best suitable technology,
management and workforce will require some amount of necessary cost so that competative
advantages are received by Volkswagon organisation.
Improvement in the process of material management will help in ensuring that all other
activities are supported to become effective. As good distribution will make sales activity more
secure and frequent that minimal lead time will be taken to deliver final goods. Managing goods
will help to enhance financial position of business through making availability of resources as
and when required and success will be achieved.
TASK 3
Role of emerging technologies in organisation's approach to supply chain
Approach to supply chain
The main approach which is used and preferred by mangers in Volkswagen organisation
is blockchain strategy which is used in the process of supply chain management. The supply
chain management defines a process through which goods and services form working location or
factory are made available in the hands of targeted consumers (Chopra, Meindl and Kalra, 2013).
In the process of supply chain management information in relation to all the stages form
production to channel of distributions are mentioned in complete and defined manner.
Volkswagen uses block-chain to ensure more transparency and security in supply chain.
Volkswagen collaborated with Minespider to trace supply chain for lead form the point of origin
to the destination (Factory).
A common digital infrastructure is created so that transfer of information can take place
in related to supply of goods. A block chain is a distributed, digital ledger. In this all the
transactions are recorded in form of blocks. This chain management system is used over multi-
pal computers and managed effectively. This form of chain management is implemented by
leader and all the followers needs to follow the same sully chain management system. There is
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no dispute in the chain regarding transactions because all the entities on the chain possess same
vision for supply as of leader. The process of supply chain management becomes complicated
over a period of time and block chain management make it easy. Every time when a transaction
takes place then in that case it leads to nodes in the block chain gets connected and updated
version of ledger takes place every time.
Volkswagen in order to introducing more amount of transparency and security in supply
chain Volkswagen will be collaborating with Minespider to trace supply chain for lead from the
point of origin to the factory. With Block chain, supply chain management information is made
accessible up to one layer and other layers are protected in most effective manner (Tayur,
Ganeshan and Magazine, 2012).
Role of emerging technology over organisation's approach to supply chain
In today's environment, technological changes are exist with rapid rate in business
environment. The main impact of these technological depends over the capability of an
organisation. If organisation has sufficient internal resources then it creates the opportunity for
them regarding their acceptance along with improvement in functioning abilities and vice versa.
It is all organisations management duty to accept the technologies because this will not only
improves the productivity but in long term provides an opportunity to improve their goodwill and
brand image too. In relation to Volkswagen and its supply chain, there are many changes are
frequently occurs in technologies. The impact of these is not limited to over some one function.
Improvement can be noticed over all the different aspects associated with the point of supply
chain. The lots of technological improvements occur on continuous basis includes IOT,
Driverless vehicles, Drone delivery, RFID, Software's like Flash Trac etc.
Currently, Block-chain is used by the organisation which is effective in nature and help in
proper management too. Failure of such technologies is common that impacts the whole process
negatively and diminishes the ability of an organisation to perform competitive in market
(Seuring, 2013). There are various reason behind their failure such as loss of server, internet
connection etc. One of the emerging technology that help in performance of supply chain
function with its integration in existing technology will be Radio Frequency Identification Chips.
Application of RFID chips provides an opportunity in tracking of materials in more speedy
manner along with reduction of errors. The benefit of same ascertained in the manner that help in
working functions even after the failure of IOT along with bringing transparency in operations.
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The negative aspect associated with application of this technology that transparency can be
determined only in the situation when products or materials present in organisation on due date
(Emerging technologies in supply chain management, 2019).
This will also not integrate all the stages simultaneously, but aid in performance of
regular functioning without disruption. The impact over material planning will be positive in
nature because chance of error is around none while using this over functioning of supply chain.
The overall system is developed through integration in the form of regular functioning along
with backups for contingency situations. Also, it provides double security so any kind of
misshapen not occur due to fault of any personnel. The relationship in all the three aspect is
clear. This depicts from the point that successful application is only aspect that enables in
performance of the functioning of material planning (Pagell and Shevchenko, 2014).
For ex., application of RFID provides an opportunity to identify the material on their
occurrence at location through scanning of chip. The same will improve system in way of
creating errorless and continuous operations. For ex., RFID help in removal of the condition of
failure that can be faced in situation of the usage of IOT. RFID has their own limitations but in
overall form this will strengthens the continuity of process.
Change management
It is the process which includes acceptance of procedure that aid in continuous adoption
of every type of change exists in business environment. In this regard, the framework helpful for
an organisation to manage change will be lewin change management model. The steps along
with their application to manage change is presented below:
Unfreeze: This is the step which includes about identification and exploration of all kind
of changes present in business environment and have relevance with organisational operations.
This will help in identification of changes which are helpful in improvement of the existing
operational capacity of an organisation.
Change: This is about acceptance of change on the basis of the internal operational
capacity of an organisation. This will provides an opportunity to build the business process more
efficient to operate functions in effective completion of business objectives.
Freeze: This is about motivation of employees to be familiar with new process to
continue working with application of same . This will help in ascertainment of support of
employees along with persuasion of behaviour regarding acceptance of frequent changes.
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CONCLUSION
From the above project report it has been concluded that systems and operations
management plays most important role in improving performance of organisation and enhances
its competitive advantages. In the process of development technology up-gradation plays most
important role. Their are several technological changes that are adopted by a manufacturing
organisation in the process of material management. All the activities related to supply chain
management are upgraded time to time with technological innovation so that changes can be
made in most profitable manner.
In the present time information technology is one of the most prominent area that leads to
contribution towards achievement of organisational success in easy and accurate manner.
Changes are taking place on continuous basis and in the process of managing raw material,
manufacturing, billing, transportation and supply is made as per technological system used for
the same. Logistic plays important role in defining the method of supply chain and material
management and appropriate technology is used so that effective coordination can be managed in
all the operations performed as per changing requirements.
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REFERENCES
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operation (Vol. 232). Boston, MA: Pearson.
Copacino, W. C. 2019. Supply chain management: The basics and beyond. Routledge.
Ćurovac, A., Persia, L. and Campagna, A., 2015. Sustainable Supply Chain Management in
Automotive Industry, obstacles and challenges: The case of Volkswagen Sarajevo.
De Young, C., Charles, A. and Hjort, A., 2018. Human dimensions of the ecosystem approach to
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Seuring, S., 2013. A review of modeling approaches for sustainable supply chain
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