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Operation Management Volkwagen Essay

4674 words - 19 pages

Introduction Volkswagen

Volkswagen is a member of the of the Volkswagen Group, where it is sharing the umbrella with other brands like Audi, Seat, Lamborghini, Skoda, Bentley and Bugatti (some of them sharing the platform). The Volkswagen plant in Mexico opened 1967 in Puebla, and is one of Mexico’s largest car plants and the thirds largest Volkswagen plant in the world. At the plant’s peak, the company in Puebla employed over 12.000 workers. With all the employees and its suppliers, it altogether employs 100.000 workers. The plant is the only one in the world producing the New Beetle, Bora and the Jetta A4 and Jetta A5 with a shared platform, which all are sold at the Mexican ...view middle of the document...

VW MX has decided to produce four particular models as mentioned earlier in Mexico, which are in line with the US demand. The US is the main target and receives 70% of the cars produced, although the firm is today experiencing some problems with the US market. The US citizens are showing tendencies to change their preferences towards larger vehicles such as SUVs and small trucks. This change in customer preferences is a large problem for VW MX as it does not produce similar vehicles and has therefore lost market share as its business has experienced a 2.5% decrease in sales. VW MX mentions Nissan and GM as the major competitors whom are taking market share as they are producing SUVs and other similar cars. The demand of the US customers differs very much from the European customer. In Europe, as an effect of the increase in the global oil and gasoline prices, VW MX predicts that the end customers will start commuting more frequently, which is already a fact in Germany where the increase in commuting last year was 6%. The firm further argues that there is an increasing demand for hybrid and small engine cars in Europe and the company believes this trend will continue in the US as well. To match this demand the firm will most likely start the production of hybrid and electric cars in 2009 in California. The purpose of starting the production in California is to be close to the end customer. VW MX believes that the market for this kind of cars, which are generally expensive, is almost non-existent in Mexico, due to the infrastructure in the cities and the low purchasing power of the majority of the Mexican population.
Interaction processes in the Mexican automotive industry
VW MX values relationships in the supply chain and emphasizes that one of the company’s major responsibilities is to keep a day-to-day business with its suppliers. This is considered to be very important for the firm’s profitability since a poor relation with a supplier can have a negative effect on the production process and the ability to avoid having products waiting in line. The company argues that a close relationship with its suppliers strengthens loyalty, increases the quality control and therefore improves the end product that is leaving the OEM plant. This signifies fewer defect products and thus lower costs. VW MX is trying to operate as a traditional company that keeps its current suppliers for new models, but the firm is at the same time putting pressure on its suppliers’ prices, quality and lead time. Unless the suppliers have not given them any significant problems, they will keep the suppliers and build a strong relationship. If the current supplier has higher price than other competitors, VW MX prioritizes the relationship, but if the price is reasonable to decrease the suppliers have to deal with it and do adjustments if they wish to stay as a supplier to VW MX. The firm divides its suppliers into A and B suppliers. If an A-listed supplier does not...

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