Operations, Logistics and Supply Chain Management

This report explores the theories of operations, logistics, and supply chain management, using Volkswagen Group as a case study. It examines key concepts like managing quality, JIT, Lean, and Agile manufacturing, analyzing their application within the company. The report also identifies operational challenges faced by Volkswagen and proposes solutions based on established management approaches.

Understanding
Operations, Logistics
and Supply Chain
Management

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Define theories of operations, logistic and supply chain management..................................1
Analytic discussion with relevant and similar example(s) and applying appropriate solutions
of Operations Management....................................................................................................5
CONCLUSION AND RECOMMENDATIONS ...........................................................................7
REFERENCES................................................................................................................................9

INTRODUCTION
Operation management refers an administration of business activities and practices aimed
at assuring highest efficiency within a company that turns out to improve profitability. It
encompasses with obtaining maximum from firm's resources, i.e. employees, technology, finance
and equipment’s (Bichou, 2015). Operational managers of manufacturing companies are focused
to develop and deliver goods to clients as per their needs and wants. In addition to this, supply
chain and logistics are the important functions of operation management as it is responsible for
finding vendors that supply the appropriate goods at reasonable prices and have the ability to
deliver the product when needed. In which, logistics refers to managing the flow of goods
between point of consumption and point of origin thus meet customers and corporations'
requirements. Beside this, supply chain management entails with wide range of activities needed
to plan, control and implement related with acquiring raw materials, production and distribution
to final customers in most cost effective as well as streamlined way.
The present assignment is based upon Volkswagen Group which is known as one of the
largest auto mobile manufacturer which was founded in 1937 to mass-produce a low-priced
“people’s car.” which headquarters is in Germany. The overall production output of the company
is 6.073 million units approximately whereas its net income is € 4.353 billion. There are almost
120000 employees currently working with Volkswagen worldwide. a large international
corporation in charge of multiple car and truck brands, including Audi, SEAT, Porsche,
Lamborghini, Bentley, Bugatti, Scania, MAN, and Škoda by having approximately 20% global
market share.
This report is going to describe various approaches or theories of operations, logistics and
supply chain management. There will a discussion upon two areas of operations, such as –
managing quality, JIT, Lean and Agility manufacturing. At last, appropirate solutions will be
provided regarding problems occurred in operation management. There will also discuss
appropriate solution of problems occurred in operation management.
MAIN BODY
Define theories of operations, logistic and supply chain management
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According to (Hugos, 2018) operations management is linked with controlling the
manufacturing process and activities in most effective manner. It ensures that business operate
efficiently by using least amount of resources and fulfil customers' needs to maximum standards
economically viable. The two main areas of operations, logistic and supply chain management
are – managing quality and JIT, Lean and agility. In which, managing quality is one of the
critical aspect of operation management which can be done through proper availability of
resources, i.e. raw materials, employees, technology, finance etc. Managing quality requires high
costs, proper management and efficient workforce that is quite difficult task to implement.
Apart from this, another area of concern is JIT, Lean and Agility. Just in time is designed
to ensure that a part would arrive just in time to be used, eliminating the need to keep it in
inventory. Just in time can reduce lead time on orders by one third as well as cut down
production cost. Lean examine the real value of product for customer; the concept is based upon
every step in the production process must add something of value that the customer actually
wants. In operations management, agility is the management of labour, personnel capacity and
capability for organizations facing unpredictable change is a complex. Adequate management all
these is difficult and may affect production process and sales revenues of a business
organisation. Thus, to get over with that issue,managers of Volkswagen can acquire different
approaches and theories.
There are four main theories of operation management, such as – business process
redesign, six sigma, reconfigurable manufacturing system, lean manufacturing and six sigma.
In which, Business process redesign was founded in 1993 as a business management
strategy which emphasis on assessing and planning workflow as well as business processes at
workplace. Additionally, the prime goal of BPR is to restructure an organisation through
designing different processes from the ground up. As the prime goal of Volkswagen is to obtain
global consistency and for this purpose the firm is focusing on redesigning its business processes
and managing their quality; it may contribute to increase financial efficiency and ability to
optimize client satisfaction.
Another approach is Reconfigurable manufacturing system which was incorporated to
accelerate modifications in organisational structure as well as hardware and software.
Volkswagen is trying to reconfigure its production processes by applying different tools and
techniques; it results to produce new and innovative products, i.e. electronic cars. (McCormack
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and Johnson, 2016) revealed that Reconfigurable manufacturing system allows system to
increase their capacity thus they can continue production and function efficiently in respond to
intrinsic system changes.
Furthermore, Six Sigma theory is designed with an aim to improve quality of process
outputs. In auto mobile companies, i.e. Volkswagen Six sigma programmes determine and
removes defects or errors occur in production by reducing variability. The theory acquire
strategic quality management tools, i.e. statistical analysis and train workforce thus to become
expertise in specific area of concern. In addition to this, Six sigma process follows a specific
sequence, such as – process mapping, trending charts, evaluation of upcoming defects, ratios and
statistics to achieve defined goals. Volkswagen subsequently made a series of changes to its
business operations and manufacturing activities; it provides classroom, on-site, online, webinar
and blended training in six sigma programs thus to reduce errors or deficits in production
process.
According to Monczka, and et. al., (2015), Lean manufacturing theory consists with
production theory which involves expenditure occurred in utilisation of resources for any
specific goal instead of creating value of customers, and thus identify wasteful and eliminate
them. Lean begins with creating value for clients to which they will pay. In this process, all
components of production are analysed in order to identify wastage, i.e. excess inventory, excess
motion and even overproduction. The chosen manufacturing industry, Volkswagen has acquired
Lean processes at their manufacturing plants, streamlining and eliminating unnecessary steps in
their production process; it leads saving hundreds of thousands of dollars in just a few months
(Prajogo, Oke and Olhager, 2016).
Theories of Logistic and Supply chain management -
According to (Ptak and Schragenheim, 2016) logistics is a way of managing the supply
chain and controlling the flow of goods, information and further resources, i.e. technology,
people, finance etc. In manufacturing companies, the purpose of logistic is to ensure that each
production process is fed with right quantity, quality as well as the right point of time. Apart
from this, supply chain management relates with coping up upstream and downstream
relationship with suppliers and customers thus to provide excellent customers' value at lowest
possible cost to supply chain as a whole. In context of Volkswagen, the brand is going to expand
its digital supply chain by having global supplier network of 40000 partners. The supply chain
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management platform of the company relies upon redesigning digital procurement framework,
taking feedback from users, classified suppliers with their related divisions, like – finance,
logistics, production, technical development and quality assurance. Logistic management is one
of the important part of supply chain management as their theories are also interrelated with each
other. In which one of the major approach is Just in time, JIT an attempt which match demand
with supply; its a Japanese manufacturing management system which was evolved in 1970. Just
in Time is an approach which is acquired in order to manufacture and deliver finished goods in a
team to be sold. It eliminates wastage, like out dated or expired products. Just in Time
encourages the right 'first time concept' thus to minimize inspection and rework. In context of
Volkswagen, modern cars is an example of containing research of global products and design
features which includes collaboration of people from several nations. Another theory of logistic
and supply chain management is total quality management. With the viewpoint of Ravindran and
Warsing, (2016).
TQM seeks to maximise the value of an organisation by increasing the customer
satisfaction at lowest cost and it can be gained by regularly booming up all processes at company
and collaborate with employees. It is something that parameters a business from the moment of
its raw materials into finished goods. In Volkswagen, cars are firstly send to Quality department
for testing and then send to dealers to sell them. Along with this, quality management system of
Volkswagen relies upon ISO standards 9001; the needs of the standard is to take approval before
selling products or services. In addition to this, quality assurance now checks products of the
company more intensively then sent them to sell in market. Apart from this. Agile manufacturing
is a term applied within organisation to create processes and training that enable company to
respond quickly to consumer needs and market trends by controlling quality and costs. Agile
manufacturing is a next step after lean manufacturing and known as an evolution in production
technology. In this modern era, several technologies has been come in auto mobile industry
which aids companies, like Volkswagen to maintain high standards of quality as well as
controlling production costs. For example Volkswagen can adopt the concept of agile
manufacturing so as to take advantage of consultants who are specialise in providing guidance to
improve or convert existing production system; it leads the brand will stay ahead in market
competition.
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Furthermore, customer relation management is an approach which is used to manage
company's relation with its customers. The approach of CRM uses data analysis thus to recognise
customers' opinion about the firm and improve business relationship with them. Specifically, it
emphasis to attain and retention of customers which ultimately driven up sales. Due to fierce
global competition and increased market transparency has given more leverages and choices to
buyers. In order to respond these challenges, Volkswagen has acquired different applications and
software thus to reach large extent of population in a certain time period and convince them to
purchase products or services of the company. At last, resource based view is a managerial
framework which is acquired to identify strategic resources with a potential to deliver
competitive advantage to a company.
RBV is emphasised towards managerial attention on the firm's internal resources, i.e.
assets, competencies and capabilities so as to gain high competitive edge. Volkswagen is having
various tangible (Location of plants and supplier network) and intangible resources (Research
and development capabilities and perceptions of product quality, durability, reliability among
customers). Thus, it is essential for the company to manage all those resources in best possible
manner. Potential and required resources can be identified through VRIN criteria, such as -
Valuable (they enable a firm to implement strategies that improve its efficiency and
effectiveness), Rare (not available to other competitors), Imperfectly imitable (not easily
implemented by others) and Non-substitutable (not able to be replaced by some other non-rare
resource) (Schenkel, and et. al., 2015)..
Operational and logistic management in Volkswagen Group -
Volkswagen has the beginning coordinate as the medium term planning which is
scheduled once in a year which takes in consideration of coming Five years & forms a crucial
interior part of operations planning of the company (Scholten and Schilder, 2015). At
Volkswagen the company specifies systematically & looks for necessity of accomplishing
strategic projects designed in order to reach the set bar both at economic & technical fronts in
order to acquire liquidity effects. It is also used to correlate all business areas inline to strategic
creation. The sectors kept in mind while formulating this are product, process & markets.
Apart from this, the supply chain management process of the company relies upon
prioritize investments and make optimal utilisation of available resources in closer relationship
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with suppliers. Autonomous driving will make collaboration between Volkswagen’s logistics
management and its truck-manufacturing arm even more important.
Analytic discussion with relevant and similar example(s) and applying appropriate solutions of
Operations Management
The era of auto mobile industry is too broaden, various operations are carried out at there
with a combination of inputs and assembling the several factors, such as services of employees,
machines, equipment and power. At this time, different issues are faced by Volkswagen Group
while operations management, such as product quality, time management, lack of labour force
and availability of suppliers. All these issues may affect the process of managing business
operations and decision making process of the company. Below is defined operational
management issues, such as Designing the system which starts with product development, it
involves identifying the characteristics and features of the goods which will be sold.
Restructuring the whole system is a very lengthy process which requires high costs and time. For
example – product designing procedure generate too much wastage which may put negative
impact on operating profitability of a business. Designing, managing and planning the system
consists several challenges, i.e. facility designing encompasses to determine capacity, layout and
location for production process and also tend towards procurement, control, handling, storage,
and distribution of materials (Schönsleben, 2016). Another issue is Quality controlling issues as
quality plays a vast role in customer satisfaction level and aids a company to obtain its goals and
objectives in a certain time period. But, an excellent quality of product prohibitively expensive
and there is no point to make a product which cannot be affordable by customers. Thus,
managing high quality with low cost is quite difficult task for management (Wang, and et. al.,
2016). Quality control department of department of companies not ensure cost of quality but also
include for cost of bad workmanship, rework, wastage etc. all these aspects create several
problems. Furthermore, lack of production is also a major issue of operational management.
Sometimes, manufacturing firms get highly focused on quality due to which they forget quantity
of products. It creates lack of production issues in which firms cannot deliver their products and
services at the time whenever it is demanded or required in market. Lack of production may
affect sales revenues and profitability of business organisation. In past years, Volkswagen has
gone through with that issue when it was forced by customers to produce qualitative products.
Solutions of problems -
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One of the major issue occurred in operation management is Lack of production by which
sales revenues and profitability get cut down; it also affect brand image of companies is lack of
production Thus, in order to overcome with this problem, managers of Volkswagen can acquire
JIT (just in time) approach which avails products and services whenever it is required. As a
manufacturing company, Volkswagen requires effective production ,no machine breakdowns at
the plant, high-quality workmanship, reliable suppliers and quick ways in order to assemble
machines that put together vehicles. In this manner, the approach will be helpful for company to
resolve the problem of layout because JIT allows short production thus auto mobile
manufacturers can easily move from one to another product. Just in Time approach also reduces
warehouse needs.
Apart from this, quality controlling is also another important issue of operations
management as it needs high costs, time, skilled workforce, effective technology, equipment or
machinery. In order to resolve quality issues operation managers of Volkswagen can acquire
Total quality management approach which contribute to increase value of the company and its
offerings. The approach follows several quality standards thus to generate effective products and
services for Volkswagen.
In order to overcome with the problem of system designing, managers can acquire the
approach of Business process redesign; as it enable firm to attain global consistency in their
production process (Wang, and et. al., 2015). The approach systematically redesign various
processes, i.e. product, system, facility and process designing; it results enhancement of financial
capability of Volkswagen and help it in attaining higher customer satisfaction level.
CONCLUSION AND RECOMMENDATIONS
As per this discussion, it is recommended to company that they should maximise learning
experience and recognise financial position so as to get effective management of its operations.
As numerous changes has been occurred in managing business operations, thus managers should
focus on determining them and ensure the quality of their offerings thus to gain high competitive
edge. In addition to this, selection of effective operation and supply chain management theories
will be beneficial for manufacturing firms to ensure the quality of their goods.
Having a global supply chain, it becomes difficult to know what is happening at each
facility or supplier. In this relation, Volkswagen should utilize leading technologies, such as the
cloud or mobile devices, helps to connect the supply chain, making it possible for operators
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within a manufacturer’s facility or the relevant supplier to input data from anywhere, using any
mobile device. Business organisations should work with three aspects, i.e. Culture
(behavioural), Compliance (procedural) and Capital (technical) as it will support them to manage
their operations in best possible manner.
From the above mentioned report, it is comprehend that operational management is one
of the critical task for automotive companies as it supports managers to manage or redesign their
functions in systematic manner so companies can obtain high competitive edge. Along with this,
the report has stated different theories of operations, logistics and supply chain management in
order to manage quality of products and avail products when ever it is required. In order to
resolve these problems, there can be applied several solutions, i.e. implication of total quality
management approach, business redesign processes and Just in Time approach.
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REFERENCES
Books and Journal
Bichou, K., 2015. The ISPS code and the cost of port compliance: an initial logistics and supply
chain framework for port security assessment and management. In Port Management
(pp. 109-137). Palgrave Macmillan, London.
Hugos, M. H., 2018. Essentials of supply chain management. John Wiley & Sons.
McCormack, K P. and Johnson, W C., 2016. Supply chain networks and business process
orientation: advanced strategies and best practices. CRC Press.
Monczka, R. M. and et. al., 2015. Purchasing and supply chain management. Cengage Learning.
Prajogo, D., Oke, A. and Olhager, J., 2016. Supply chain processes: Linking supply logistics
integration, supply performance, lean processes and competitive performance.
International Journal of Operations & Production Management. 36(2). pp.220-238.
Ptak, C. A. and Schragenheim, E., 2016. ERP: tools, techniques, and applications for integrating
the supply chain. Crc Press.
Ravindran, A. R. and Warsing Jr, D. P., 2016. Supply chain engineering: Models and
applications. CRC Press.
Schenkel, M. and et. al., 2015. Understanding value creation in closed loop supply chains–Past
findings and future directions. Journal of Manufacturing Systems. 37. pp.729-745.
Scholten, K. and Schilder, S., 2015. The role of collaboration in supply chain resilience. Supply
Chain Management: An International Journal. 20(4). pp.471-484.
Schönsleben, P., 2016. Integral logistics management: operations and supply chain management
within and across companies. CRC Press.
Wang, G. and et. al., 2016. Big data analytics in logistics and supply chain management: Certain
investigations for research and applications. International Journal of Production
Economics. 176. pp.98-110.
Wang, Y. and et. al., 2015. Service supply chain management: A review of operational models.
European Journal of Operational Research. 247(3). pp.685-698.
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