This essay explores the importance of operations management in the context of Mercedes-Benz, including quality management and plant location and layout.
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Operations Management of Mercedes Operations management is an important discipline or management function which includes redesigning and controlling the business activities and operations involved in manufacturing or production of goods and services to improve the overall operational productivity and efficiency (Reid and Sanders, 2019). In simpler terms, operations management is primarily concerned with ensuring that raw materials are converted into goods and services with the maximum possible level of efficiency and optimum utilisation of resources to reduce cost and maximise the profitability of operations. Managing the operations is an important activity for every business organisation that assist the business managers to make the best possible use of limited resources of the company and administer the routine activities in a seamless horizon. Implementation of change that is primarily influenced by external environment factors is also determined by the effectiveness of operations management of the company and the readiness of the organsiation to make changes in its operations without hampering the productivity and profitability (Fettermann and et. al., 2018). Operations management extends to supply-chain management, lean production concept, plant layout and design, quality management, management of inventory and logistics etcetera. In the following essay, an attempt is being made to determine the importance of operations management concept and theories with the help of its practical application in the organisational context of Mercedes. Mercedes-Benz is a subsidiary company of Daimler AG, a German automotive company involved in the production of buses, trucks and other automobiles which offer luxury. Mercedes- Benz is involved in the manufacturing and production of luxurious and premium cars which was founded in the year 1926 and the headquarters of the company are located at Stuttgart, Germany. The company is widely popular and famous for providing the customers a very premium and luxury driving experience in both sedan as well as sports cars segment (Corporate history, 2020). Customer satisfaction drives the efforts and operations at the company. In the year 2018, the company sold more than 2.3 million passenger cars and became the world’s largest seller of premium cars. It is a large-sized business organisation which has its operations spread over the globe and the company holds a very strong position in the automobile industry. The management of Mercedes-Benz responds to the dynamic and changing needs of customer and with the help of innovation and development, production system at the company is aligned with the market trends and demand. In the following essay, quality management at Mercedes-Benz is being evaluated 2
with the help of concepts and tools of quality management under operations management and the report also aims to determine the importance of plant location and layout which is another importance area of managing the operations of an organisation. Concepts of quality management and plant layout are being critically evaluated with the organisation context of Mercedes-Benz in the following parts of the essay. Managing Quality at Mercedes-Benz: Managing quality is a very significant dimension of operations management that involves monitoring and supervising the production and manufacturing activities of an organisation to achieve a pre-determined level of excellence (Pambreni and et. al., 2019). Quality of the product or service is an important determinant of the extent of customer satisfaction which drives future sales and making quality management a very important aspect of operations management. One of themostimportanttheoryorconaptofqualitymanagementinpracticeistotalquality managementorTQMwhichrequiresdevelopmentandfosteringofanatmosphereand organisational culture where every employee or member of the organsiation is committed to contribute to his best potential and deliver a very high standard of work completion is each and every dimension of company’s operation (van Kemenade and Hardjono, 2019). Total Quality Management is a very effective approach of improving the quality of operations with the help of organsiation wide-efforts to increase quality of work execution and attain high levels of customer satisfaction. However, management style and leadership has an important role in determining the organisation wide-efforts since employees must be motivated to improve quality of work which is being completed by them and it requires communicating the importance of improving quality and aligning it with the individual interest of the members. The management of Mercedes-Benz applies the tool of TQM in the organisation to improve and deliver the best quality of products and services as per the promise made the company to deliver ‘the best or nothing’. In the premium automotive industry, customers are usually people from high-income group and are usually insensitive to prices. Hence, the only approach or strategy for attracting more customers very effectively in this industry is to improve the quality of product and service offered to the customers and constantly innovate and launch new products which have high attractive element for the customers. With the help of delivering a high-quality to the customers, the management of Mercedes-Benz has established a strong brand image of premium and luxury cars that come with a superior quality and an excellence in customer service (Ng, 2012). Key provision of total 3
quality management being applied by the management of Mercedes-Benz is installation of a technical software with an automated process for screening of different components used in the manufacturing of a car during the production process and eliminating every part or component which is not meeting the standard or benchmark of quality. Involvement of human-eye and manual inspection is also provisional after the system detects a problem. Real-time scanning and analysisoftheimagesproducedbymachinerywith100%X-raytechnologyhelpsin identification of even the slightest problem that could affect the quality of the car (Top-quality as the basis for success, 2019). For example, using the scanning technology, wheels used in the production process are scanned to determine smallest pores or misalignment which could potentially affect the stability of the car. Hence, quality is being accorded as the topmost priority in the production process at Mercedes-Benz. Another important approach of TQM being applied at Mercedes-Benz is external collaboration with subject-matter specialists to guide and supervise the production process of its different range of products (Top-quality as the basis for success, 2019). With the help of guiding employees through experts and specialists, high-standard of quality can be assured by the management. The management of the company recognises the need to motivate employees and build a highly motivated and skilful workforce with an aim of improving the overall quality of operations. Along with the extensive inspection process and external help to establish high-quality standards, the topmost factor which determines the quality of operations is employee motivation and morale (Escrig-Tena and et. al., 2018). Human resourcemanagersof thecompanyadoptvariousstrategiessuchascareermanagement, incentives and rewards etcetera to motivate the workforce to attain high-level of quality and productivity. Product innovation is an important subset of quality management which is being stressed by the management of Mercedes-Benz and the company has shifter to blue-efficiency packages and batteries are being procured from the industry pioneer in battery equipment, Tesla Inc. Quality management at Mercedes-Benz extends beyond the production and manufacturing of goods to improve the quality of after-sales service being provided to the customers. With an aimofattaininghighestlevelofcustomersatisfactionandretention,freehome-service arrangements and telecall helpline assistance are being offered by the management of Mercedes- Benz to improve quality of customer service. However, increasing operational has been a problem linked with the application of TQM concept in an organisation context which needs to 4
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be monitored by the management of Mercedes-Benz to ensure that cost doesn’t exceed above the permissible levels. Location and layout of Mercedes-Benz: Plant location and layout is another important dimension of operations management that determines the effectiveness of production and manufacturing activities. Establishment of a plant where production and manufacturing process of the company are executed requires a huge amount of investment and hence, every decision with respect to plant location and layout has to be critically evaluated (Domschke and Drexl, 2013). Plant location can be termed as the selection of a region for establishing the plant and production units of an organisation after strategic analysis. Plant layout refers to the arrangement of machinery and equipment inside a production unit with an objective of attaining maximum productivity and minimising wastage of time. Few important considerations must be made by a business organisation while selecting the region of plant such as connectivity with the market as close connectivity with market will decrease the cost of transportation, availability of raw materials and suppliers, availability of labour and powergenerationresources,legalguidelinesandrulesetceteratoimprovethestrategic advantage derived with the help of plant location (De Meirleir, 2012). In a similar manner, layout of the plant determines if the equipment can be used for multiple production activities and the waiting time if multiple activities are performed with the help of one machinery. It also determines the stoppage and wastage of time in the production activities. The management of Mercedes-Benz understands the significance of selecting the most suitable location for plant and planning the plant layout for operations management and improving the productivity and plant production capacity with minimising the costs. Over the years, the management of the company has made investments into opening plants at different parts of the world to gain strategic advantage and improve the production capacity and quality. Production and assembly units for different components used in different cars manufactured by the company are located at distinct places to get the advantage of location and reduce the operations and production cost. For example, assembly of E-class and C-class range of cars being offered by the company is being done in plant located at Asia in Vietnam and Thailand and on the other hand, production and manufacturing of components for E-class and C-class range of cars is being done at plants located in Mexico, North-America. Fuel-cell plant has been established by the company in Canada,NorthAmerica(McDermott,2013).Intheyear2018,thecompanyannounced 5
investments worth 1 Billion Euros in a new car manufacturing plant in Hungary, Budapest. Full- flex plant investment made by the company is based on application of ‘Factory 56’ principles to an entire production plant which were announced earlier in February (Ground-breaking for first Full-flex plant, 2018). The investment is being considered as the road to smart production technology. The plant is primarily based on efficient energy consumption to derive sustainable production with constant digitisation and putting the human element at the core of every production activity. ‘Factory 56’ principles of plant layout are based on high-integration of automation and technology based on mobile networking which also provides a great flexibility to the existing assembly and production lines. One of the important element of the ‘Factory 56’ concept is provision of a driverless transportation system which helps in redefining the tracks to change the production cycle to operations cycle and make necessary adjustments without having the need to change the complete arrangement and design in the unit (Factory 56, 2018). The plant is also based on 360 degrees networking channel with consumers and suppliers to gain insights into the production and manufacturing process and improve the prospect of innovating and developing the production process with effective research and development. In the plant based on ‘Factory 56’ principles, stress is laid on green production energy and number of measures have been taken to reduce the consumption of energy in the plant such as extensive plantation on the roofs and addition of rainwater retention provisions (Factory 56, 2018). An attempt is made to provide the employees a suitable working climate using blue-sky infrastructure to work in daylight. Using PV system on the roof has helped the management to power the hall and production unit by self-generated electricity. Tesla Inc., a competitor of Mercedes-Benz, has also made significant changes in the plant layout by removing complete automation modules and implementing U-shaped design to make the most out of available spaces in plant units and increase the number of people which can work on same equipment and machinery with an ease which has reduced the operations and capital investment cost (Talluri and et. al., 2018). Hence, plant layout and location is a very important aspect of operations management which can help to foster productivity and efficiency of production and manufacturing units of an organsiation. Triple-bottom line: According to the framework of triple-bottom line theory, an organisation should not only consider profit as the only criteria for evaluating the business performance and integration of social and environmental evaluation is also very crucial. It suggests that instead on one-bottom 6
line, an organisation should have three bottom-lines that are people, planet and profit (Hammer and Pivo, 2017). Application of this approach for the management of Mercedes-Benz is being described as follows: Profit:Profit is the most important motive which encourages an individual to engage into business activities and take calculated risks. The management of Mercedes-Benz should consider the maximisation of shareholder’s investment and the profitability in the operations should be increased in a sustainable manner. The company operates in a luxury and premium car segment which has huge opportunity for earning profits and revenue and despite of efforts of the management, Mercedes has a low amount of profit margins as compared to the other competitors in the industry. Hence, the managers should aim to increase profit-margins by strategic planning in a sustainable manner. People:It determines the positive and the negative impact created on the community and the people in the society within which a company or an organisation operates. Mercedes-Benz is popular and has been known for the high quality of service and products which are being offered to the customers. Hence, customer satisfaction should be the main priority of the business organisation and the company should also contribute in community and society development by generation of employment opportunities, increasing local production and hiking the pace of infrastructure development in the community. Planet:Increasing environmental concerns and challenges such as global warming and climate change have put the onus on companies like Mercedes-Benz to reduce the amount of carbon footprints and emission of greenhouse gases for improving sustainability standing (McWilliams and et. al., 2016). The management of Mercedes-Benz has taken very effective steps in minimisation of adverse effects of its operations on environment and the company should continue in the same direction for actively engaging in fighting against elimination of adverse environmental impacts of rapid economic development and production activities all over the world. It can be suggested that the management of Mercedes-Benz should increase active engagement of employees in the operational decision-making to improve the quality of work being performed by them and implement the principle of TQM in a much more effective manner. It can also be recommended that by implementing single plant units for both assembly as well as the production of car components, the management of Mercedes-Benz can reduce the time and 7
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cost involved in transpiration and the effectiveness of operations management can be increased in the organsiation. U-shaped plant layout can be implemented by the management to reduce the amount invested in various machinery of similar nature and specification and the collaborative use of equipment can be made more accessible in the plant units. It can be concluded from the above essay that operations management is a very important concept of managerial function which has different dimensions such as quality management, plant location and layout, lean production or inventory management. It can also be concluded that effective operations management with the help of quality management and plant location has helped the managers of Mercedes-Benz to increase the effectiveness of the company’s operations and improve the competitiveness in the industry. Reflective Summary During the course of this project work which consisted of reviewing and resubmitting my work which I had submitted initially, I was able to determine the shortcomings of my project and initial work as highlighted by the feedback provided by the teacher. Although, I was able to submit my project work on time and I thought I was able to attempt all the learning outcomes and the task requirements, analysis of the feedback provided by the tutor helped me to understand how to critically evaluate a concept or a theory and understand its application in an organisational context. I was not able to use proper source of information and I think my referencing was not adequate to form a rationale conclusion or derive any outcomes. Initially, I was not able to apply the theory and models of operation management in an organisational context and my evaluation lacked rational thinking and logical approach to form a conclusion. I didn’t critique the positive and negative aspects of applying different theory of operations management in the context of Mercedes-Benz. In this review work based on the feedback of teacher, I have followed an approach which involved understanding the concept that I am going to apply, determine its importance and shortcomings and based on this, evaluate how effectively the organisation has applied these concepts to derive positive outcomes and eliminate the negative aspects. I believe this resit and review of work has helped me to develop critical- thinking skills and I have learnt how to practically apply different concepts and approaches to evaluate the outcomes. I also learned how to use online sources of information and use relevant information for conducting research out of the pool of information available on the internet. I have also gained the knowledge about different concepts of operations management and this 8
review work has helped to develop an interest in understanding how multinational companies with worldwide operations undertake effective administration and management of the business operations. I was also able to determine how effective operations management helps a business organisation to reduce the cost of production and operations and improve profitability which is connected with the business performance and growth. I can summarise by mentioning that this review and resit work has been a great learning experience for me which has helped me to understand the shortcomings of my work and ensure that I don’t repeat similar mistakes or errors in future. I would love to get a chance or an opportunity to conduct similar project works in future as well where I would emphasize on effective time-management and evaluating my outcomes and results to determine the implementation of critical thinking and reliable use of information. 9
REFERENCES Books and Journals De Meirleir, M. ed., 2012.Location, location, location: a plant location and site selection guide. Routledge. Domschke,W.andDrexl,A.,2013.Locationandlayoutplanning:Aninternational bibliography(Vol. 238). Springer Science & Business Media. Escrig-Tena, A.B., Segarra-Ciprés, M., García-Juan, B. and Beltrán-Martín, I., 2018. The impact of hard and soft quality management and proactive behaviour in determining innovation performance.International Journal of Production Economics.200. pp.1-14. Fettermann, D.C., Cavalcante, C.G.S., Almeida, T.D.D. and Tortorella, G.L., 2018. How does Industry 4.0 contribute to operations management?.Journal of Industrial and Production Engineering.35(4). pp.255-268. Hammer, J. and Pivo, G., 2017. The triple bottom line and sustainable economic development theory and practice.Economic Development Quarterly.31(1). pp.25-36. McDermott, M.C., 2013. Mercedes-Benz, Tuscaloosa, Alabama: Drivers and Processes in the International Plant Location Decision.Southern Business & Economic Journal.36(1). McWilliams, A., Parhankangas, A., Coupet, J., Welch, E. and Barnum, D.T., 2016. Strategic decision making for the triple bottom line.Business Strategy and the Environment.25(3). pp.193-204. Ng, K.S. ed., 2012.Quality management and practices. BoD–Books on Demand. Pambreni, Y., Khatibi, A., Azam, S. and Tham, J., 2019. The influence of total quality managementtowardorganizationperformance.ManagementScienceLetters.9(9). pp.1397-1406. Reid, R.D. and Sanders, N.R., 2019.Operations management: an integrated approach. John Wiley & Sons. Talluri, L., Fiaschi, D., Neri, G. and Ciappi, L., 2018. Design and optimization of a Tesla turbine for ORC applications.Applied energy.226. pp.300-319. van Kemenade, E. and Hardjono, T.W., 2019. Twenty-first century total quality management: the emergence paradigm.The TQM Journal. Online Top-qualityasthebasisforsuccess.2019.[Online].Available thru<https://media.daimler.com/marsMediaSite/en/instance/ko/Top-quality-as-the-basis- for-success-production-of-Mercedes-Benz-minibuses.xhtml?oid=9903644> Factory56.2018.[Online].Available thru<https://www.daimler.com/innovation/production/factory-56.html#:~:text=In%20the %20%22Factory%2056%22%2C,beginning%20of%20the%20trim%20line.> Ground-breakingforfirstFull-flexplant.2018.[Online].Available thru<https://www.daimler.com/innovation/case/connectivity/full-flex-plant.html> Corporatehistory.2020.[Online].Available thru<https://www.mercedes-benz.com/en/classic/history/corporate-history/> 10
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