Operations, Logistics, and Supply Chain Management in Audi

Desklib provides solved assignments and past papers to help students understand complex topics.

Understanding Operations, Logistics and Supply Chain
Management
1

Table of Contents
1. Introduction..................................................................................................................................3
2. Company overview......................................................................................................................4
3. Topic 1.........................................................................................................................................4
4. Topic 2.........................................................................................................................................6
5. Triple Bottom Line......................................................................................................................8
6. Conclusion.................................................................................................................................10
Reference list.................................................................................................................................11
2

1. Introduction
Logistics operations are the method, which delivers products from a location to another location.
In business, developing a new product consists of brining a new product in market. This requires
implementing new design and it may involve changing specification of the product. This is very
important to stay in a competitive position in market, as new products can attract more
customers. Quality management is a process for overseeing activities, which maintains
excellence of a product according to it s desired level. This includes creating a quality policy and
implementing it during product development of service process designing. Quality ensures high
level of customer’s satisfaction, which is the core criterion for success of any business (Nanda,
2016).
Audi is chosen in this study and few topics will be discussed in relation with this automotive
organisation. Product development method of Audi and their way of delivering services will be
analysed. Then analysis will be performed on the way company manages their quality for their
cars and methods they especially use. It will try to understand the reason behind their cars having
great quality by understanding factors from within. Recommendation on Audi for improving
their business performance will be given. A justification on the validity of this recommendation
for Audi will be provided.
2. Company overview
Audi is an automotive company and they are a German company, which makes luxury cars.
Volkswagen group owns Audi and they have nine production units in worldwide locations.
August Horch founded Horch and Audiweke initially. This company was found in 1899 in
Cologne. In 1932, DKW, Horch, Audi and Wanderer merged. In 1971, Audi made a car named
NSU RO 80, which was advanced when it compared with it time of invention. In 1960s,
Volkswagen took Audi from Daiemler-benz. Subsidiaries include Lamborghini, Ducati and
various other companies. Audi has 91674 employees at this moment, who are working for them
in various locations. In 2018, they have sold 724168 number of car units. Audi earned 60.1
billion pounds in 2017, which exceeded their revenue of previous year by 5.1 billion pounds.
3

Volkswagen AG owns the highest amount of shares and Fidelity Management GMBH owns the
second highest amount of share (audi.com, 2019).
3. Topic 1
New product/ Service development and process
Audi uses NPD theory for developing their cars, which is described below-
According to Tukker and Tischner (2017), design process of cars in Audi starts five years prior
to launching new model. Designers first create primal design language. In this idea generation
stage, designers, colleagues belonging from sales and technical staffs involve in strategic
planning of their product. They use joint technology matrix during portfolio. They bring ideas
within their company and often refer to other experts, who contribute forming new ideas.
Designers get to produce concept designs from outset, as technical requirements are specified
prior to design. In contrary, Fatfouta et al. (2019), say that Audi generates idea by considering
factors, which can make a car crash. Ciriello et al. (2016), say that they draft their ideas during
idea screening. In design briefing, designers and employees of sales develop joint leitmotif by
using words and image. They fine tune package information as well as basic knowledge, which
is acquired until this stage. This phase usually lasts about two months they analyse market and
sees that if these ideas are sufficient for giving customers what they need.
In contrary, Ottosson (2019) says that Audi first defines their entire process of innovation to
employees and they use five stage process to develop new cars. In the words of Crilly (2015),
concept development comes after ideas are screened. Audi now focuses on digital design. There
are three components in it and these are CAD, clay milling and concept, which is known as C3
process. Every material for these phases is available due to proper management of supply chain.
Wowak et al. (2016) contradict this, and according to it, Audi involves supply chain unit in every
stage of NPD. This helps in ensuring that parts manufacturers are ready to supply raw material.
Therefore, they get external resources and this design phase does not only rely on internal
resources. After concept development, they test these concepts according to the standard they set
prior to design.
4

According to Kotler et al. (2015), Audi develops their marketing strategy according to their
target markets. They study patterns of colours usually people chooses in a particular area and
prepares their distributors accordingly to distribute cars of those colours. They do it by involving
supply chain and they use statistics to predict number of cars, which can be sold in a particular
market. In support of this concept Filiatrault and Chebat (2015) further, say that Audi prepares a
budget for their marketing and fixes their price for the new car. They do it by analysing cost,
which will be unavoidable in supply chain. Fredendall and Hill (2016) clear out business
analysis phase of Audi and says that the company gives responsibility to supply chain to find out
funds they need to purchase raw materials for developing the new car. However Boone et al.
(2018), believes that Audi at this stage, considers every expense and forecasts their sales too.
Audi takes notice of their previous sales in different locations, considers expenses in R&D,
production and marketing.
Audi according to Oulasvirta and Abowd (2016) at development phase now compares their data
and clay model. Manufacturing unit now refer to this model and incorporates it in their physical
models. Supply chain ensures that raw materials needed for interior design, GUI design and
adding Virtual reality in every car model is present at required amount. In contrary, Bai et al.
(2019), says that Audi uses lean manufacturing method for their development phase. They
minimise waste in supply chain by this method during manufacturing every car part. According
to Armstrong et al. (2018), Audi now goes through test marketing of their car. They test if their
car is suitable for the market they are targeting and tries to find shortcomings in their marketing
strategies. They do it before giving it a full exposure to market. In contrary, Buchacz et al.
(2016), say that Audi is quite confident about their products and they only focus on vibration,
climatic, emission, pressure impulse testing of their new car. Gossling (2017) says that Audi now
approaches to celebrities or public figures in commercialisation stage. Inzamul (2016) agrees
this and this author says that Audi further uses BTL and ATL method of advertising.
4. Topic 2
Managing quality
According to Tricker (2016), Audi manages their quality of cars by ensuring that supply chain is
bringing in great raw materials for their automobile parts. Audi uses Total quality management
5

for this. Audi maintains ISO 9001:2015 standard in their every car. By using agile supply chain,
they are able to adapt to sudden economic change, technological changes and customer demands.
In contrary, Dabholkar (2015) says level of quality inside Audi is set according to demands of
their customers. They start to find suppliers of raw materials by the help of supply chain
employees. The company involves every employee during car development. Employees work
with supply chain unit and clear their requirements regarding materials for designing. Chang
(2016) believe that Audi keeps their process centred. They create teams for every process, which
contributes to product development. These people are differently skilled and that is why due to
their expertise, quality is managed. In contrary, Brenner and Uebernickel (2016) says that Audi
motivates their employees to become process thinkers, rather than being just a follower in
process centred unit.
Additionally, de Matos (2016) says that Audi integrates their process in their system by
considering quality standard of ISO 9001:2015. Supply chain is included in this process and this
unit contacts with suppliers and ensures good relationship with them. They have good work
culture, which focuses on maintaining quality. In contrary, Ross (2017) highlights that, Audi
adds up micro process and makes it a larger process. They clear vision and mission of Audi to
employees. They define, quantify and identify problems, which can cause degradation in quality.
Then they take steps as precaution to control their process.
From concept given by Cooper (2017) Audi makes a plan for their strategic management. They
define steps, which are necessary for employees to take for maintaining quality. In any case, a
part is not functioning properly and manufacturing process is hampered, Supply chain staffs are
given order to find replacement as soon as possible. On the other hand, Ahmad et al. (2018),
says that Audi primarily focuses on lean SCM for managing quality. In this, they use Poka Yoke
system for making defects less in cars. They use some regulatory functions for this. If any
defects are found in a car, then machines, which are producing it instantly stopped. They have
machines, which can detect faulty installation, wrong colour.
Decision making according to Rousseau and Olivas‐Luján (2015) in Audi happens on basis of
facts. These facts are not driven by any personal opinions. Audi uses data from their previous
sales only to take decisions regarding quality. They see if previous quality has been sufficient to
satisfy customers or not. Then according to it, they make adjustment. In contrary, Dale and
6

Plunkett (2017) says that Audi does not rely on previous data. They try to improve quality by
setting new standard of quality and they consider quality costing. If any new materials are found,
which can improve quality of cars from their previous models, and then Audi goes for
purchasing them through supply chain.
Audi for improving communication uses David Berlo’s theory of SMCR communication
according to Turaga (2016). They have source, from where message about methods for quality
improvement is given and then the message is passed to receivers. This process includes encoder,
message, channel and decoder. This process in implemented on supply chain, to improve
communication within it. In addition, Scholten and Schilder (2015) points out that Audi uses
high-end communication methods inside their supply chain. Every employee has communication
tools like walkie-talkies, which enables them to communicate with production unit. They can
understand requirement for qualities of their raw materials by this. Therefore, SCM become
easier, this improves overall quality.
According to Kiran (2016), Deming cycle is used inside Audi for continuous improvement.
They understand their desired outcome for their new car and through planning set goals for
employees. Then they implement these plans and takes measurements during execution. They
measure improvement and checks if and checks results. If outcome is not according to their
desire, then they act on it to make adjustments. Boersma et al. (2019), give a contradicting
concept. It says that Audi uses DMAIC process for continuous improvement. They define their
customers first. Then they analyse the plan for measurement and tests it. Then they bring
innovative ideas and improve this process. Mangers monitor this process and control it and this
way continuous process prevails.
5. Triple Bottom Line
Triple bottom line can be defined as a framework for accounting, which considers three parts,
such as, social, financial and environmental. On adoption of this, organisations can evaluate
performance of the firm by having broader perspective. This creates bigger value for an
organisation. It tells to give importance to people, environment and profit.
McWilliams et al. (2016) says that people are essential for implementing triple bottom line
approach. Audi should take care of employees and labours involved in their work. They should
7

consider society for this. For example, producers of raw materials for Audi should be given extra
benefits. They should give them a nominal amount of share. This will make them happy and
inspire them to work harder. It can ensure more flow of raw materials through supply chain. It is
important to give employees extra benefits. They are main strength to Audi and by their hard
work; they can improve quality and develop new products better. Therefore, Audi should give
promotions and use unbiased appraisal methods to evaluate performance of employees. They
should see that exploitation of labours is banned and every employee is getting proper wages
according to national standard. They should contribute for growth of automobile industry, which
will additionally benefit them.
In contrary, Fahimnia et al. (2015), believes that focusing on planet is more important for Audi,
as they are an automotive company. Quality is directly related to their impact on environment
according to them. They should design their engines in a way, which can decrease carbon
emission from engines. Fuel has become scarce resource and Audi should develop new car by
considering this factor. Their manufacturing factories should manage waste properly. They can
do it by implementing green supply chain method. They should prevent pollution by recycling
raw materials, disposing toxic elements properly. Audi can minimise their use of hazardous
material, which can cause damage to environment. Trucks they use for transportation of raw
materials should have lower emissions. They can use alternative fuels for this such as bio fuels.
Designers should chalk out designs, which use reusable materials for manufacturing cars. Due to
better control of products, quality can be improved.
The concept of Azevedo and Barros (2017) defines that profit is not a factor, which stands alone.
Audi should understand that profit is not diametrically opposite to environment and people. Audi
should focus on eliminating unnecessary costs in their supply chain. There is often wastage,
which incurs greater costs on them. Therefore, Audi should find out ways to decrease their costs.
They can find new suppliers, who can give them raw materials at lower cost. They should
improve their warehousing method to minimise waste. The organisation can use materials, which
they can use to decrease production cost. They should improve their machines for manufacturing
cars, which will decrease production errors. Due to lack of production error, cost of a producing
a car will be decreased. Therefore, this increases quality of it. Chances of customer complaint on
a car having high quality are low.
8

6. Conclusion
Audi adapts NPD theory and they generate ideas by including employees from technical
department and designers. Another author pointed out that Audi considers factors, which can
cause car crashes and generates idea according to it. Two concepts are found for concept
development. One says that Audi uses C3 process and another says Audi relies solely on supply
chain during this. Audi prepares their strategy for marketing by considering target market.
Furthermore, Audi fixes car price and cost for marketing. Audi forecasts their expenses. Audi
uses data and clay model during development phase. They design GUI and VR at this phase and
incorporate in their physical models. During test phase, Audi checks vibration and emission of
their car. They use endorsees such as celebrities to make their product popular in
commercialisation phase. Audi manages their quality according to ISO 9001:2015 and another
contradictory statement said that they define quality according to needs of their customers. They
try to increase quality by identifying factors for hindering quality. They then eliminate it from
the system of car. The contribution of supply chain for managing quality has been identified.
Audi is found to use Poka Yoke system, which helps in maintaining quality through SCM.
Audi uses SMCR (Sender-Message-Channel-Receiver) method for improving communication.
They follow this theory by David Berlo and this is applied inside supply chain. It is
recommended that Audi should consider using green SCM for reducing cost and improving
quality. Further suggestion on considering three P’s of this theory was given. This will help Audi
to improve quality at maximum level.
9

Reference list
Ahmad, A.A., Rashid, A.A., Wong, F.R., Iqbal, M., Mekanikal, F.K. and MARA, S.A., 2017.
Worker Safety Improvement at Paper Pleating Production Line Using Poka-Yoke Concept-A
Case Study in Automotive Industry.
Armstrong, G.M., Kotler, P., Harker, M.J. and Brennan, R., 2018. Marketing: an introduction.
Pearson UK.
audi.com. (2019). History | audi.com. [online] Available at:
https://www.audi.com/en/company/history.html [Accessed 2 Aug. 2019].
Azevedo, S.G. and Barros, M., 2017. The application of the triple bottom line approach to
sustainability assessment: The case study of the UK automotive supply chain. Journal of
Industrial Engineering and Management (JIEM), 10(2), pp.286-322.
Bai, C., Satir, A. and Sarkis, J., 2019. Investing in lean manufacturing practices: an
environmental and operational perspective. International Journal of Production Research, 57(4),
pp.1037-1051.
Boersma, H.J., Leung, T.I., Vanwersch, R., Heeren, E. and van Merode, G.G., 2019. Optimizing
Care Processes with Operational Excellence & Process Mining. In Fundamentals of Clinical
Data Science (pp. 181-192). Springer, Cham.
Boone, T., Ganeshan, R., Jain, A. and Sanders, N.R., 2018. Forecasting sales in the supply chain:
Consumer analytics in the big data era. International Journal of Forecasting.
Brenner, W. and Uebernickel, F., 2016. Design thinking for innovation. Research and Practice.
Buchacz, A., Baier, A., Płaczek, M., Herbuś, K., Ociepka, P. and Majzner, M., 2016. A concept
of technology for non-destructive testing of modernized freight cars based on analysis of their
vibration. Vibroengineering Procedia, 10, pp.333-338.
Chang, J.F., 2016. Business process management systems: strategy and implementation.
Auerbach Publications.
10

Ciriello, R.F., Richter, A. and Schwabe, G., 2016, January. Designing an idea screening
framework for employee-driven innovation. In 2016 49th Hawaii International Conference on
System Sciences (HICSS) (pp. 4262-4271). IEEE.
Cooper, R., 2017. Supply chain development for the lean enterprise: interorganizational cost
management. Routledge.
Crilly, N., 2015. Fixation and creativity in concept development: The attitudes and practices of
expert designers. Design Studies, 38, pp.54-91.
Dabholkar, P.A., 2015. How to improve perceived service quality by increasing customer
participation. In Proceedings of the 1990 academy of marketing science (AMS) annual
conference (pp. 483-487). Springer, Cham.
Dale, B.G. and Plunkett, J.J., 2017. Quality costing. Routledge.
de Matos, J.D.C.R., 2016. Implementing a Quality Management System in a car fleet
management Road to the certification by the Standard NP EN ISO 9001: 2015.
Fahimnia, B., Bell GH, M., Hensher A, D. and Sarkis, J., 2015. Green Logistics &
Transportation: A Sustainable Supply Chain Perspective.
Fatfouta, N., Stal-Le Cardinal, J. and Royer, C., 2019, July. Empirical Study of Car Crash
Simulation Analysis within the Development Phase. In Proceedings of the Design Society:
International Conference on Engineering Design (Vol. 1, No. 1, pp. 2843-2852). Cambridge
University Press.
Filiatrault, P. and Chebat, J.C., 2015. Marketing Budgeting Practices: An Empirical Study.
In Proceedings of the 1987 Academy of Marketing Science (AMS) Annual Conference(pp. 278-
282). Springer, Cham.
Fredendall, L.D. and Hill, E., 2016. Basics of supply chain management. CRC Press.
Gossling, S., 2017. The psychology of the car: automobile admiration, attachment, and addiction.
Elsevier.
Inzamul, H., 2016. Advancement in BTL marketing communication.
11

Kiran, D.R., 2016. Total quality management: Key concepts and case studies. Butterworth-
Heinemann.
Kotler, P., Burton, S., Deans, K., Brown, L. and Armstrong, G., 2015. Marketing. Pearson
Higher Education AU.
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.
Nanda, V., 2016. Quality management system handbook for product development companies.
CRC press.
Ottosson, S., 2019. Innovation Theory. In Developing and Managing Innovation in a Fast
Changing and Complex World(pp. 11-39). Springer, Cham.
Oulasvirta, A. and Abowd, G.D., 2016. User Interface Design in the 21st
Century. Computer, 49(7), pp.11-13.
Ross, J.E., 2017. Total quality management: Text, cases, and readings. Routledge.
Rousseau, D.M. and Olivas‐Luján, M.R., 2015. Evidence‐Based Management. Wiley
Encyclopedia of Management, pp.1-3.
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.
Tricker, R., 2016. ISO 9001: 2015 in Brief. Routledge.
Tukker, A. and Tischner, U. eds., 2017. New business for old Europe: product-service
development, competitiveness and sustainability. Routledge.
Turaga, R., 2016. Organizational models of effective communication. IUP Journal of Soft
Skills, 10(2), p.56.
12