Volkswagen Group, a manufacturer of automobiles with its headquarters in Wolfsburg, is one of the largest and most superior car plants in the world and it was operated by German Labour Front in year 1934. Volkswagen have operated 120 production factories in 22 European countries and 11 countries in the Asia, Africa and Americas (Volkswagen 2017). Volkswagen have created one Strategy 2025 by launching its future program ‘TOGETHER’– For tomorrow’s growth. To become a world leading provider of sustainable mobility is the overall vision of Volkswagen want to achieve. The mission of Volkswagen can separate into 4 sector which is excited customers, excellent employer, role model for the environment, safety and integrity, and competitive profitability (VolkswagenAG 2017). For the excited customer, Volkswagen focus on various needs of customer and come out the mobility solution to fulfil customer satisfaction. Excellent employer means that Volkswagen take employee seriously by motivate them with equal opportunities and provide an attractive working environment in order to become main components of corporate strategies for company. Next, Volkswagen group exercise responsibility regarding to the environment, safety and society to provide customers maximum product. Lastly, for the competitive profitability, Volkswagen always ensure themselves remains in an attractive options (VolkswagenAG 2017).
2.0 Literature Review
Definition of Supply Chain Management (SCM)
SCM has been defined as the coordinate and integrate the firm’s processes with its external supply chain partners such as suppliers, retailers and customers to achieve the flow of materials, services and information with demand. (Larson and Rogers 2010; Cooper et al. 2010; Mentzer et al. 2011) This statement was supported by Lambert and Cooper (2010) as they stated that SCM is the integration of main business processes begins from suppliers to customers that provides products, services and information to achieve value adding for customers and other stakeholders.
Next, few researches have been carried out and describe SCM as a method to connect supply chain partners such as suppliers, manufacturers, retailers to provide the right things, to the right location or place, in right quantity, at the right time with right cost to meet the customer satisfactions and expectations. (Simchi-Levi & Simchi-Levi 2011) However, the statement mentioned above is to build on the foundation of controlled supply chain activities in order to be fast and trustworthy, cost-effective and flexible to meet customers’ requirements. (Wei and Wu 2013)
Objective of SCM
Few authors have reviewed that one of the objectives of SCM is to improve customer service. (Larson and Halldorsson 2010; Al-Mudimigh et al. 2014) Customer Service refers to the ability of a company to accomplish the needs, requirements and requests from customers. (Hassan 2013) The fundamental characteristics of basic customer service have to be availability, operation performance and customer satisfaction. Availability means the ability to have the product when it is wanted by a customer. (Bhagwan et al. 2013) Next, operation performance refers to the time needed to deliver a customer order. Lastly, customer satisfaction considers customer perception, expectations and opinions based on the customer’s knowledge and experience. (Guterman 2015)
Elements of SCM
According to the Council of Supply Chain Management Professionals, the four main elements of SCM are purchasing, operations, distribution and integration processes. These four fundamental yet essential elements are the keys to ensure the efficient production and delivery of goods and services to end users. Barney (2012) has claimed that purchasing is significant for an organisation in order to achieve competitive advantages. Next, operation includes demand planning, forecasting, production and inventory management as all of these component are to result in closer relationship between supply chain partners in a supply chain. (Li et al. 2011) Moreover, distribution refers to how does the products are being distribution to customers. Thus, distribution emphasized on transport management and customer relationship management (CRM) which are the cores concept that support distribution function of SCM. Last but not least, integration is the concept of coordinate processes all along the supply chain internally and externally to create a seamless flow of products, services, finance and so on. (Huo 2012; Danese and Romano 2011)
Latest Development of Supply Chain Management
Li (2015) has mentioned that due to the globalisation and the popularise of Internet as well Information Technology, E-SCM has been latest trend lately in SCM that attracts a lot of attention of scholars and practitioners (Heon and Kim 2011; Chi et al. 2010; Hua and Cong 2011; Sadeghi 2012, Barutçu and Tunca 2012) as it was believed to be the solution to overcome some of the downsides of traditional SCM. E-SCM refers to a series of Internet-enabled value-adding activities to ensure products created by a manufacturing process can eventually meet customer requirements and realize returns on investment. (Li 2015) It has been pointed out by Mehrotra (2010) the main factor of practicing E-SCM is to remain competitiveness in the market. This statement are supported by Pulevska-Ivanovska and Kaleshovska (2013), they claimed that due to the explosive expansion of global commerce, organisations are required to minimise the costs to offer competitive price to end-user and improve the efficiency as well as agility to respond to high demand market.
3.0 Supply Chain Strategies
3.1 Supply Management
Supply management process need a wide range of standard operating procedures to manage huge number of SKUs and huge amount of money flows involved. The supply management process actually is a communication process. It basically for supply professionals to determine how they can add value and how they can extricate themselves from process step that are best left to other people or to technology. (Michiel R. Leenders, D. B. A 2006) Those involved supplier management, supplier evaluation, supplier certification and partnerships.
Supply chain partnership defined as a strategic coordination of two or more firms in a supply chain to coordinate joint effort and collaboration in one or more to create value such as product development, purchasing management, marketing research, distribution and manufacturer. (Agusa and Hassan 2008) Purchasing management is a decisive part of all company operations with the aim of achieving maximum customer satisfaction in terms of quality and price. (Michiel R. Leenders, D. B. A, 2006) As a part of an integration supply chain management, suppliers successfully involved in the purchasing process which rises the access to innovation. Volkswagen tries to combine their own innovation strength with suppliers to looking forward best results in the market. (VolkswagenAG 2006) In addition, the corporation of the suppliers is significant for the sustainability management. Suppliers also have to ensure the sub-suppliers can guarantee suitable to company and the product supply standard and required. So, Volkswagen has set up a corresponding measurement in its ‘Volkswagen Group requirements concerning sustainability in the relationships to the suppliers’. According to the supplier requirements for sustainable development, it content the environmental protection and the employee’s rights. The environmental policy results the objectives and environmental specifications, the occupational safety policy as well as the declaration on the social rights and the industrial relationships. On behalf of Volkswagen, the supplier requirements for the sustainable develop stand on an important basis for the coordination with Volkswagen’s suppliers. For Volkswagen, the integration of sustainability in supplier relation and partnership is a challenge to meet future aims. (Volkswagen Group 2017) Combine with those improvements of their standard quality and production systems, Volkswagen keep exploring their supply chain through learn the supply processes in order to achieve a sustained competition by exploring more new suppliers, knowing supply base, know transport solutions, benchmarking best practices and improve actual concept. (Volkswagen Autoeuropa 2012)
Besides, Ford Motor Company’s (Ford) supply chain lead the way in partnership with suppliers for sustainability. Ford’s supply chain rolling out a magnified partnership with the suppliers. Ford release a cleaner environment (PACE) program, with the membership that more than 40 suppliers in 40 countries to join in, PACE is potentially positively affect almost 1,100 supplier sites. The PACE program is a useful tool to help suppliers try to reduce carbon-dioxide emissions and waste. It will improve the efficiency of water usage and energy consumption. PACE enable suppliers to track and achieve sustainability goals of their own. (McKevitt 2017)
Thus, supply chains are frequently analysed for waste and efficiency improvement due to supply chain required wide range of operating procedures to deal with the daily task including suppliers in a move to increase sustainability is a growing effort likely to yield success. Large corporations such as Volkswagen and Ford purchase in great enough bulk to burst up the loyalty and cooperation of their suppliers.
Operation management is a continuous improvement to meet the customer satisfaction by drive the management to value adding in quality, quantity and delivery. The most obvious evidence to prove the operation management from the inventory reduction and shortened lead time. (Chopra and Meindl 2007) Operations management is concerned about how to make them operate better in order to increase efficiency at a higher level of quality and reduce cost. The operations function in a supply chain includes demand planning, forecasting, production and in some types of business, inventory management.(Olson and Xie 2010) Thus, to manage the inventory, few methods used to improve the inventory management such as Material Requirements Planning (MRP), Just-in-time (JIT) and Total Quality Management (TQM).
Just-in-time (JIT) is an inventory management strategy to increase efficiency and reduce waste by receiving goods as they need in production process in order to reducing inventory costs. JIT manufacturing tries to smooth the flow of materials from the suppliers to the customers, the operations planning control system is an information system running throughout the manufacturing environment. (Talib and Garai 2011) JIT being implemented in many organization and Volkswagen is one of the company who using JIT to manage their inventories. Volkswagen has 60 manufacturing plants in 15 countries. In these manufacturing plants there are 370,000 employees which contributes to produce cars or to keep relationships between customers, suppliers and partnership in 153 countries. (Koplin et al. 2007) First of all, Volkswagen’s suppliers deliver all those spare parts into the manufacturing plant and all materials sent are stored in a bug hub. The internal logistic are under JIT and penalized if delivers are not in time. Next, Volkswagen production line also run under JIT that the internal transport moves all parts needed in the production lines. Finished gods will send to the quality department for testing car when the finished goods are ready. The components that go into the final assembly are likely to produce in many separate locations and involve a range of assembly and sub-assembly activities. (Csizmazia 2014)
Total Quantity Management (TQM) simple defined as a management approach an organization, concern on quality based on the participation of all its members and targeting at long-term success through customer satisfaction and benefits to all members of the organization and to the society.(From and Gurus 2000; Benz 2015) Volkswagen’s competitor Ford have used TQM started in 1980s and their slogan is ‘Quality come first’. Through the partnership with suppliers, inventory management process was developed to ensure the quality of material. (Scheid 2011) According to an insider press release, TQM was forefront in their inventory management design as the process of preparation was implemented successfully between supplier and Ford management. (Bayou and de Korvin 2008) TQM prevent waste and lack of quantity on many level reflect on the far superior Ford warranty claim system. A year 2008, the warranty repair rate for Ford decreased by 60%. The successful of ford is definitely influenced by practice of TQM. TQM helped a lot in marketing fulfilling by customer demand. (Miah 2015)
In the nutshell, inventory management is important to fulfill customer satisfaction by understanding the demand of market. The continuous improvement important to ensure the customer satisfied on overall we provide to them.
In the supply chain management, distribution can be defined as in terms of the transportation of the product and product storing from supplier stage to customer stage (SerdariS, 2014). There are many trends in distribution, but Volkswagen is did well in transportation management. Why we say so is because Volkswagen is relies on the standardized to manage the shipments. This can be proven by the data, Volkswagen has transport out of 1.6 million shipment each year in 36 locations (VolkswagenAG 2017). Volkswagen has implemented AEB’s ASSIST4 as a shipping and transport system to evaluate their performance in air freight, road, rail, and parcel services (AEB 2017). Volkswagen’s employee have use this ASSIST4 to connect shipping order data, it will creates all the required data – load securing papers, hazardous items documents and the waybill. Therefore, by implemented ASSIST4 Volkswagen may strengthen their transportation system in order to fulfil customer needs. Legal protection also one of the important section in transportation of goods (Meyer and Institute of Transportation Engineers, 2016). ASSIST4 able to check all ship-to address against the limited party in worldwide because the company may not know the recipients going to order the items. Besides that, self-billing procedure with the support of ASSIST4 is one the tools that used by Volkswagen. With self-billing, it streamlined the freight cost management because Volkswagen can calculate the freight costs and issues a credit to carrier which is much lower administrative overhead for freight billing (AEB 2017). “We merely have little errors appreciate to these automated system and it successfully increase the shipments from 100 to 6000 per days” says Hanitsch, the project manager in Volkswagen. Meanwhile, an effective transportation system have increase the performance of Volkswagen because they are able to ship more products and indirectly increase the profitability of Volkswagen.
Customer Relationship Management
The other strategy used by Volkswagen in distribution is customer relationship management (CRM). In this customer-driven market, Volkswagen is put the customer in the front seat and drives the customer satisfaction with MySAP CRM solution (AG, 2006). According to Jens Wieland , chief process manager of Volkswagen said that “Volkswagen has to collaborate and share information through an integrated application to achieve quality customer service. MySAP CRM suits delicately in to this concept.” Therefore, MySAP could boosting customer loyalty and improving rates of customer acquisition by delivering an integrated view of current and prospective customer (Schwartz, 2005). Furthermore, MySAP enable Volkswagen identify family and personal links between customers. This is because MySAP is able to provide information including how much potential of the customer have and should them remain in loyalty program and Volkswagen can put more effort in order to satisfy the customer (Dickersbach, 2007). Obviously, all this high-quality service and personalized are necessary to improve customer relationship. On the other hand, MySAP CRM improve the quality of information available about each customer by integrate with Volkswagen’s vehicle database. The customer details, vehicle purchase and dealer will be recorded and these information is available to track the customer order to ensure the deliveries is successful (AG, 2006). Volkswagen improve the communications with customer through the CRM complaints management system to understand customer feedback. Information, positive feedback and suggestion improvement will capture by the customer service agents and they can quickly understand customer’s needs and come out the solution in order to respond knowledgeably. This action may bring to identify up-selling and evaluate the cross-selling opportunities.
Contrast with competitor
As a comparison, Ford motor company has developed a new communication channel with car owner to improve customer relationship. In this strategy, Ford has using the latest internet technology with web and mobile application. Ford motor company create a user friendly website to let the visitor easier to get the information about their products. Ford motor company also create a blogs and chat rooms to let customer provide feedback instead of waiting for customer to contact them. Ford can directly transfer the feedback to the manufacturer about features, service experience and suggestion improvement (Challenges, 2007). While in transportation management, Ford has using strategy of centralize transportation planning. It is one of the method can improve time-consuming shipments. Ford practice this strategy by move the transportation nearer to the point of order picking. Other than this, ford also has applied the transportation management system to improve the flow coordination and information sharing in order to reduce costs of transportation. Thus, with efficient transportation management system will achieve the Just In Time concept (Taylor 2012).
Personnel integration is a crucial step towards making sure all employees, workers, management team, executives in a company are aligned in terms of vision and mission of the company. When everyone in a company has common goals and targets to strive for, the company can be much more effective and efficient in their operation handling. Pearce (2011) states that in his recent journal that a group of people who have the same aligned goal will have identical expectation of what are expected of them. Thus, the group will be able to carry out operation and procedure in a swift manner to avoid disappointing the other members in the company. Volkswagen Group used internal implementation within their company to their employees and management team to make sure that everyone is well informed of the company’s mission, task and are updated with the latest information of their operation. Volkswagen achieved this by providing trainings, seminars and development programmes to their internal member groups across the globe to pull everyone into the same direction. (Raju and Adlakha 2012) For example, the company created an academy named VWP Academy to train Volkswagen Poznan employees in multiple areas such as lean manufacturing, efficient environmental engineering and development of process operations (Volkswagen Poznan 2009). Furthermore, Volkswagen also created another academy named The Volkswagen Group Academy to train and improve their employees’ profession in multiple vocations such as setting up an Educational Lab aimed to transfer educational researches and findings into technologies to benefit their own staff and employees’ operation process (Volkswagen 2016).
Furthermore, Volkswagen Group introduced The Group Business Platform to integrate suppliers into their business operations and procedures. The Group Business Platform is a platform made to inform all suppliers related to Volkswagen Group of their involvement in manufacturing of automobiles by providing information such as terms and condition of quotations, useful system and software for straight forward collaboration and cooperation in the aspect of quality assurance, research and development, and logistics. (Raju and Adlakha 2012) All suppliers working together with Volkswagen Group will also be able to access guidelines from the UN Global Compact and sensitive information of the company. UN Global Compact is an organization aimed to align strategy and operation to tackle the topics of human rights, labour, environment and corruption (UNGlobalCompact 2017). Thus, companies complied to the rules of UN Global Compact will be qualified and accepted by Volkswagen for collaboration. Also, The Group Business Platform has continuously enhanced the efficiency of communication and interaction, improve the degree of transparency in exchange of ideas and information between suppliers and Volkswagen Group (VWGroupSupply n.d.).
In addition, Volkswagen Group used Quality Assurance Process with all of existing suppliers to make sure that each supplier are not in a position to adversely affect the business relationship (VolkswagenAG 2006). All potential suppliers and business partners are subject to Supplier Scorecard Process as this process is used to identify and integrate suitable suppliers as their business partners before allowing them to enter the stage of The Group Business Platform. The purpose of Supplier Scorecard is to summarizes each potential supplier’s experience, expertise and the space for continuously improvement in procurement, technical development, quality assurance and logistics. (Trent 2010)
In contrast, Ford Motor Company emphasises on the importance of employee’s value by focusing on employee’s satisfaction as its strategy in personnel integration. Ford Motor Company engages with employees as individual and invite them to provide honest feedback through survey understand what’s working and what’s lacking in the company. (Yang and Street 2014) Ford Motor Company gives survey to its employees such as the Employee Satisfaction Index (ESI) which includes question such as how worthy and valued each individuals felt in work and whether they are rewarded accordingly to their performance at work. (Seligman 2005) With these steps, better understanding between Ford Motor Company and its employees can be achieved when each talented individual is listened, rewarded and encouraged to stay committed to the company’s course. Thus, the company will be able to strive forward and create massive customer satisfaction with close collaboration with its employees.