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Case Study: Operations, Logistics, and Supply Chain at Mercedes

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This report provides an in-depth analysis of operations, logistics, and supply chain management strategies employed by Mercedes, a German automobile brand owned by Daimler AG. It explores the application of operation management (OM) principles to enhance efficiency and profitability, focusing on quality, maintenance, and inventory management within the automotive industry. The study addresses challenges related to quality and safety that have impacted Mercedes' credibility, proposing solutions based on Six Sigma and Total Quality Management (TQM). Specific issues, such as insufficient electric grounding in steering components and violations of emission rules, are examined, with recommendations for improvement. The report details how TQM can ensure vehicle quality and customer satisfaction through factors like appeal, service, and reliability, while Six Sigma strategies aim to reduce errors, improve product quality, and lower emission levels. The analysis includes pillars of the Six Sigma approach such as Voice of Customer, Critical to Quality Characteristics, and Value Marketing, emphasizing continuous improvement and customer-centric strategies to maintain competitiveness and environmental responsibility.
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List of Figures
Figure 1: Operation Management.................................................................................................2
Figure 2: Mercedes Logo................................................................................................................ 4
Figure 3: Total Quality Management.............................................................................................6
Figure 4: Six Sigma Strategy........................................................................................................... 9
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Figure 1: Operation Management
Source: [Boakye, et al. 2017]
Operation management (OM) could be defined as business practices for achieving efficiency at
the higher level within an organization. It involves the conversion of the raw goods into the
desired goods or the services which would help in maximizing the profit for a company. In order
to achieve a high level of profit, OM insures to provide a balance between revenue and cost. It
helps in gathering resources from various sources such as technology, staff and managers and
utilizes it to bring improvement in the equipment and materials required to provide finished
goods (Annarelli and Nonino, 2016).
In the automobile industry, the concept of OM is significantly important as it helps in identifying
and then mitigating various issues associated with manufacturing plant and tries to provide
new strategies which would be essential and eventually beneficial for managing the project in
an effective manner. Besides, it also has a look into the issues such as quality, maintenance and
inventory of the materials associated with the manufacturing plant of an automobile industry
(Ruparathna, et al. 2017).
Logistics is a process of managing the goods and resources which are acquired, stored and
transported for their consumption in an effective manner. It includes various resources which
would help in managing important logistic factors especially in a manufacturing company such
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as production, integration, inventory, warehousing, packaging and many more (Tatham, et al.
2017).
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Figure 2: Mercedes Logo
Source: [Yao and Schwarz, 2017]
Mercedes is a German automobile brand owned by the company Daimler AG and situated at its
headquarters at Stuggart. The brand is known for manufacturing buses, luxury vehicles, coaches
and lorries. The brand slogan of the company is-“the best or nothing” (Michelli, 2016). It comes
under top 10 automobile companies and aims to deliver value, premium and services quality to
its consumers. It is a global company which has been spread over 200 countries worldwide with
more than two hundred thousand employees working with it (Gong, et al. 2017).
The strategy of the company is to manufacture high-quality automobiles to meet the
requirements of the customers. To fulfil its aim, the company uses a global quality management
system which ensures that the manufactured automobiles are able to meet the standards and
help in increasing the brand loyalty among its customers. Recently, it has added various
environmentally friendly features so as to save the global environment and promote eco-
friendly vehicles (Herrmann, et al. 2016). However, certain issues related to quality and safety
has affected the credibility of the Mercedes. In order to cope up with this factor, the given
study has been conducted by applying six-sigma and total quality management (TQM) so as to
mitigate such issues.
The focus of the study is on issues related to the supply chain as well as operation management
with respect to the two factors which are managing quality as well as a new product along with
the service development process with reference to the Mercedes. All the above factors have
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been analysed with respect to OM, logistic and supply chain management in the respective
company.
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In 2014, the model of the company, Mercedes-Benz B-Class had been diagnosed with an
insufficient electric grounding in certain steering components. If these insufficiently grounded
components come into the contact with electrostatic discharge, they are liable to give a serious
injury to the people driving the vehicle. Due to such an instance, the company has to recall
thousands of vehicles back to their manufacturing units and had to suffer heavy losses
(Carbayo, et al. 2017).
Figure 3: Total Quality Management
Source: [Ross, 2017]
To ensure the vehicle's quality and to increase the satisfaction among the customers, it would
be easy to adopt a total quality management strategy. The quality is determined by the three
factors namely the appeal, service, and the reliability. The objective of the Mercedes is to
provide the quality assurance through exciting and surprise package in the form of best quality
vehicles for their customers. The quality management at the Mercedes is conducted by using
the ISO 9001 standard which identifies the requirements of the company so as to build a brand
image with the help of the guidelines and some recommendations from the consultants so as to
support the company’s initiative (Shende, 2014). The software security is enabled with the help
of mutual support as well as the control principle which involves various department of the
company. The quality assurance factor then fulfils all the legal complications and requirements.
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As per this strategy, more preference must be given to the needs of the people and Mercedes
should prepare the automobile so as to provide all quality and safety features. Various factors
must be taken into consideration to manufacture good quality vehicles and they include road
condition, good quality fuel, traffic density and the legislation governing the rules. The quality is
also maintained with the help of the suppliers which helps in building the sustainable nature
within the business (Johnson, 2014).
Using quality management, Mercedes has been able to smoothly integrate innovative
technologies into the newly built vehicles so as to provide great satisfaction to the customers.
The reliability is considered with respect to the consumer on their needs and demands. Using
this strategy, it has been easy to identify the flaws in the vehicle which could then be removed
in a suitable manner. In addition to this, the warranty for the vehicles of Mercedes has been
provided which includes the direct involvement of the interface with the customers. There is a
good description of the feedback which would help the supervisor of the company to inspect
the vehicle before delivering to the customers effectively (Neugärtner, et al. 2017).
Besides this, Mercedes has also developed a group strategy for the quality management which
involves the creation of the different process followed by their effective testing so as to ensure
proper maintenance of the vehicle in the organization’s manufacturing unit before its delivery.
The strategy would emphasis on various methods and the standards utilised in the company for
manufacturing the vehicles in Mercedes (Gong, et al. 2017). The strategy will help in bringing
the excellent quality of the products which includes the robust processes by testing it.
Verification would be conducted at various levels so as to ensure close monitoring of the
vehicles in the company. Furthermore, a personal development plan would be created for the
welfare of the employees working for the company. There would also be a creation of audit
facility for assessing the requirement for the workers working in the company (Andersen, et al.
2018).
The TQM focuses on describing the attitude, organization, and the culture of the company so as
to produce high-quality products for the consumers. The main focus is on customers whose
needs are analysed by studying the market scenarios and gathering the information which
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could be used in manufacturing the vehicles as per their needs. This would not only increase
the revenue of the company but would also help to retain and increase the customer's loyalty.
This approach is based on continuous improvement in the manufacturing units so as to match
the varying needs of the customers and to minimize the defects (Neugärtner, et al. 2017).
The TQM would help the Mercedes in evaluating the various processes which are currently
used so that they could be utilized in minimizing certain issues associated with them.
Furthermore, the collected data and information could be provided to the evaluation team
where the data is studied continuously so as to achieve the company’s target. The last step
consists of the introduction of the procedures through the involvement of the communication
process. Here, full authority is provided to the employees so as to take part in decision making
by participating in it so that there would be a development of a sense of feeling among them
which would increase the chances of getting accurate results for the company. The training is
also provided to them for developing their capabilities (Jung and Park, 2017).
Beside this, a Quality Function Deployment team helps in listing the requirement of the
customers by assessing the scores from the employees which are then converted into the
necessities via communication and utilized in manufacturing plant. The needs must be fulfilled
by the suppliers with respect to the provision of the raw materials by meeting up the standards
of the product (Shende, 2014).
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In 2015, it was found by an NGO that diesel engines of various German automobile companies
have been cheating on customers by violating the emission rules in their diesel vehicles. This
issue also had a disastrous impact on the Mercedes, which is also owned by a German
company. It had also been found that diesel cars of Mercedes also violated some rules which
resulted in the generated of a lot of health hazards problems due to their emission of pollutions
such as bronchitis, emphysema, asthma, disability, and other air-borne diseases (Jung and Park,
2017).
Figure 4: Six Sigma Strategy
Source: [Antony, et al. 2018]
In order to mitigate such an issue, the company has focused on the Six Sigma strategy so as to
bring improvement in its quality. This strategy helps in proper analysis of the errors so that
flaws found during the analysis could be corrected and removed. There has been a tremendous
increase in the competition among automobile industry which has been built in respect to the
requirements of the regulations which needs to maintain the safety levels so as to provide
satisfaction to the customers, and maintaining the quality of the products (Kumar, et al. 2016).
To fulfil this Six Sigma approach has been utilized which is based on three important pillars
described below:
The First Pillar is the Voice of Customer which analyses the reviews and feedback provided by
the customers so as to bring improvement in their services.
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The second pillar is the Critical to Quality Characteristics that determine the results obtained
from the given processes so that there would be an increase in faith among the customers and
results in the growth of the company.
The third pillar is the Value Marketing which helps in determining the superior quality products,
as well as the services of the Mercedes, which helps the company to capture the automobile
market efficiently (Cherrafi, et al. 2016).
Besides this, the six sigma goals will be set by the Mercedes by using the tools which are
reliable in nature and thus helps the company in surviving high competition prevailing in the
market. This approach would ensure that the company is able to ensure competition level by
successfully modifying its strategy in the automobile market. In order to meet the demand of
the consumers, the company should avail the services of discounts and offers to them (Michelli,
2016).
If the tools of Six Sigma are properly applied in the Mercedes, then there would be a surge in
the satisfaction level among its consumers. In addition to this, using six stigma strategies would
help the company to lower the emission level which would help in protecting the environment
and thus create awareness among the people. To fulfil this aim, the company has adopted a
green culture which would provide vehicles for the customers at an affordable price.
Furthermore, this approach also helped the company in the reduction of the waste produces
from its manufacturing units (Youssouf, et al. 2016).
Some of the given factors which cause an increase in wastages; is analysed which includes the
thickness of the paint film, and the technical equipment’s, which are then measured in a
convenient manner. This strategy further helped in increasing the commitment of the
employees towards the work. There are various areas where improvement has been suggested
for the company and it comprises; bringing a reduction in the recovery process of the solvent,
weekly checking of the valves and its recovery system and utilization of electrostatic paints
forgiving design to the manufactured vehicles (Cherrafi, et al. 2016).
Furthermore, this approach persuades the employees to utilize more creative and new ideas in
the designing of eco-friendly vehicles and also invest their time by applying the creative way of
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handling related issues. The cross functions would be created in the company so as to measure
the accountability for the management and employees. This would result in a reduction of the
inventory which would then enhance the quality in the processes (Albliwi, et al. 2015).
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