Challenges in Operations Management - Case Study Example

CHALLENGES FACING GM HOLDEN AUTOMOBILE FIRM by Student’s Name Code + Name of Course Institution City/State Professor Date Table of Contents Introduction 3 Chapter 1: Key Challenges Likely To Impact GM Holden In The Future 4 Changing Technology Impacts 4 Globalisation Impacts 6 Changing Customer’s Expectations 7 Changing Job Designs 9 Quality Management 10 Chapter 2: Operations Management Impacts on GM Holden’s Future 10 Goods and Service Design 11 Supply Chain Designs 12 Capacity Management 13 Resource Management 14 Conclusion 15 World Environment Center 2008, GM Holden To 'Green' Its Supply Chain, Viewed May 25 2013 16 WardsAuto 2012, GM Holden Setting Up for Volt Charging, Viewed May 25 2013 16 News.com 2012, Holden rescue deal 'likely soon' to secure future of GM Holden in Australia, Viewed May 25 2013 16 Introduction Manufacturing of automobiles is an important aspect of the Australian economy. The Australian automotive Industry has been a major business venture that has provided employment to many citizens in the past years. The industry was very lucrative until just recently when various market players recently faced challenges in doing businesses within the sector. These challenges are similar to those faced by automotive industries worldwide and thus creating changes within the sector on a constant basis (PWC 2013. The automotive industry in Australia has faced challenges including raw materials, which have grown to be volatile, increased costs for raw materials, high fuel prices, increased competition, and tighter regulations. Stakeholders within the industry in Australiaare being forced to comply with the growing concerns for the environment and at the same time satisfy their customer’s demands for greener and cleaner (PWC 2013). The Australian automotive industry challenges in Australia have recently affected automobile industries like the GM Holden, which is aGeneral Motors subsidiary. In early April this year, the industry axed more than 500 workers from its plants within Australia (Industry Week 2013). The rising strength of their local dollar is the likely cause of the squeezing sale of automobiles. Four hundred job reductions are expected in Adelaide whereby production of cars has greatly reduced whereas a hundred more jobs will accommodate the expenses for developing their products for the company to cope with the challenging situations. The company faces challenges due to primary reduction in the local demand for the small cruze car and a strong Australian dollar that makes it expensive to purchase local vehicles. These factors combined with a competitive and open worldwide car markets favoring importers and a shift in the Australian market structure create more challenges (Industry Week 2013). As much as Australia avoided getting into the financial crisis in the global scene, domestic confidence in returning to the pre-crisis levels has failed hence hittinga low incur sales. Chapter 1: Key Challenges Likely To Impact GM Holden In The Future Changing Technology Impacts Changing technologies might impact the Australian automobile industry in a number of ways. The fuel prices for petrol affect the driving habits of Australians influencing the vehicle types they buy. In the last five years, fuel prices have been chaotic to the Australian motorists. Due to the worldwide environmental concerns, Australia is likely to adopt new automobile technologies, which are considered to be more environmentally friendly. Consumers are likely to the switch to new cars produced under new technology due to skyrocketing fuel prices and environmental concerns .These technologies will likely switch the production of automobiles in the near future from the challenging petrol run automobiles. This is proving to be a thorn in the flesh for manufacturers in the domestic market, and most especially for Ford and GM Holden because their automobile range consists of large vehicles which are fuel-inefficient. The Australian consumers have shown a willingness to adopt automobiles which are more fuel efficient. GM Holden in the coming five years has planned to raise the hybrid local content of the Cruze and Camry which run on electricity (Ibis World 2013). Production of cars is poised to pick up in the coming years as domestic manufacturers will shift attention to producing smaller vehicles which are fuel-efficient.The infrastructure provider Charge Point and GM Holden andrecently unveiled the charging station for the first ever electric powered vehicle in Australia just outside of the GM’s subsidiary headquarters situated at Port Melbourne, Victoria (Wards Auto 2012). A rise in fuel prices has increased pressure on the costs of production. Thetruck manufacturers witnessed the change which resulted throughacquisition of cleaner trucks. However, their worries lie in the slow demand freight as opposed to environmental factors. The shift towards petroleum-efficient cars by domestic manufacturers’ will assist the industry in remaining competitive in the market. The coming few years are likely to be a challenge to the local automobile manufacturers. The revenue in the Industryis forecast to dwindle at0.2% to 11 billion dollars by2017 to 2018 (Ibis World 2013). Whereas the domestic demand will expectedly improve, imports from outside will quench a large chunk of the demand in the domestic market. So as to maintaincompetitiveness, the localmanufacturers of cars will have to adopt new technology by investing in production of greener cars. The rising demand for environmentally-friendly cars offers opportunities forthe manufacturing industry components. This is common especially in the regenerative braking, automatic and semi-automatic transmissions. Globalisation Impacts Globalisation can be referred to as an increasing financial and economic integration of world economies. In the automotive challenge context, the term basically refers to the global changes taking placewhich removethe boundaries in the nations trading from the sale, production, financing as well as the distribution of goods and services (The Financial Times 2013). This affects the Australian Automobile Industry. Transnational corporations perceive the world as a global market and as a process it is responsible for the global value chain and supply. Automobile brands are designed and produced in Sydney with some brands sent to outside markets. At the same time there are some competitive brands especially from Japan competing with these brands in the global sphere. It should be known that imported vehicles are appreciated more by the Australians than their own local brands like Ford or Cruze. The global chains of supply of automobiles and their spare parts are globalisation aspects in action. Trade liberalization means that countries take advantage of this liberalization of trade. Australia has over the past years lowered its rates of average tariff to very low world levels. The country’s commitment to increasing the openness of trade is as well reflected in its trade policies, which often support strong, multilateral trading system based on rules. Regardless of this openness, the small Australian domestic market results in overreliance in international trade. The government of Australia has for a long time protected domestic manufacturers through subsidies, import tariffs, export duty exemptions and tax concessions. Thus globalization of the markets has led to the economic costs of measures to protect industries leadingtoloss in the welfare of consumers and deadweight losses which arise from various distortions in the market. These pressures affect the Australian vehicle industry in illustration of challenges likely to be impacted in the coming few years. The GM Holden’s operation’s management being part of the Australian motor industry is affected in the same manner in this scenario. The globalization process has led to an open market for first and second world entrants into the Australian market thus affecting the purchase of local brands. For example, most cars in Australia come from Japan’s Toyota industry (Social Science Research Network 2009). Changing Customer’s Expectations Customer benefit package can be regarded as the perceived or real value which are experienced by automobile consumers or a belief that they are getting whatever they need through interacting with the company (Serguei & Christopher 2009).The local customers demand for their local vehicle brands has dwindled because they have not acquired direct benefits including resolutionof their fuel costs and the outcome of the achievement desired through the purchase of their brands. As the domestic carmanufacturers have continued their production of cars which are not needed byconsumers due to satisfaction and economic reasons, most potential car buyers have turned to importation of vehicles. Thus, the penetrationof imports has gone up in the last five years. Japan’s Toyota brand leads in the pack of imported cars.Ford and GM Holden firms particularly lack a variety of vehicle ranges demanded by the local consumers. This has worsened this situation. Toyota is leading in the segment of small cars and this includes hybrid brands. These have largely benefited the customer’spreference and thus shifting to motor vehicles that are more fuel-efficient. Key automobile industry players GM Holden and Ford haveexperienced losses in their operations over the last five years due to their persistent manufacture of huge engine fuel guzzlers, which consumers try to avoid. In the year 2008, Mitsubishi exited the Australianmarket after trying for many years to erect efficient production. Global Manufacturing of cars has challenged the Australian Industry in the recent past and is likely to influence negatively the market operators in the Holden’s near future. The importation of automotive imports hasrisen fromthe year 2002 at about 60% of demandin the domestic market to about 79.2% in 2009. Most of these come from Thailand and Japan alone. Sale of new cars imported from other countries will likely increase following this trend due to the free trading agreement between Australia and countries like Thailand where there has been elimination of tariff imports. Importation ofvehicle components has increased rapidly because the domestic manufacturers have continuously faced costpressure, which has been on the increase making them to source parts from the suppliers manufacturing these parts globally. These challenges are likely to cause a reduced sales volume for the vehicles, which are locally produced with the content of vehicles manufactured locallyincreasingly sourcing their components from suppliers in the global supply chains. This situation has been the reason for job cuts for the GM Holden’s in its operations management resulting to job losses in the Australian industry (Wards Auto 2012). Changing Job Designs Changing job designs has been a challenge for Holden, which has been continuously forces to be flexible in its working arrangements for its employees within the specialised and highlystructured manufacturing environment, while sustaining global competitiveness. Holden’s workforce demography is likely to be changed in the future considering the challenges it has faced in doing business. The Australianlaborforce rates, design, productivity andparticipation have to be improved so that Australia’s automobile future will grow to be wealthier Achievements in the automotive industry is dependent on utilization of a variety of skills from those which engineering professionals and those possessed by the expertise. Recently there has been an increased demand of appropriate human resources in the industry. Additionally, the upsurge in job design and development of product capacity has led to sophistication of manufacturing practices by demanding qualified and professional automotive engineers and other technical personnel who are specialists in the field (Biesebroeck 2009). Quality Management Quality Management is a wide approach by an organization in precisely understandingcustomer needs and delivering accurate solutions accurately within their budget, on time and with minimum loss to the Community (Chartered Institute Quality 2013).Quality production and management has been a challenge for the Australian motor industry. The key players in the industry have manufactured vehicles whose quality has not been consistent with the customers’ demands. The Australian consumers have shown a preference for automobiles from overseas which they regard as more quality brands. This has brought a lot of competition to the local Ford and Cruze designs.In the future, Holden plans to progress with two of their own individual models in its production line in Australia. It also seeks to continue in its portfolio design as well as engineering working in the General Motors worldto produce more quality vehicles which will secure the company’s position in the global industry (News.com 2012). Chapter 2: Operations Management Impacts on GM Holden’s Future Operations management is a management process that is concerned with designing, overseeing, and controlling the production process and at the same time redesigning the operations of a business in its line of production(Institute of Operations Management 2007). The Holden car assembly line is a classical system of production in operations management. Goods and Service Design Operations management in GM Holden deals with designsof products and service management. The goods and service design considers acquiring, development and use of resources needed by GM Holden in delivering goods and services to their clients. This designon the Operations Management of GM Holden is likely impact its success in the car industry. Here the goods referred to are the car designs which will lead to the industry being a success. All Holden cars are manufacturedin Elizabeth (South Australia), while the engine production takes place inPort Melbourne (Victoria). Holden has controlled GM’s car operations in Australia and holding a part of GM Daewooownership in South Korea. The company has produced a vast variety of car designs that have been produced locally andGM models imported have supplemented these. Holden has designs like Nissan, Chevrolet, Suzuki, and is responsible for Opel brand distribution in Australia. The improved car designs by GMHolden surged the markets upwards in the past years beforedwindling in the recent past when it lost market to Toyota. The company in early 2001based its designs on the architecture of the VT Commodore . Revival of the Monaco coupe led to an attraction of worldwide attention when this car was shown as an Australian auto show concept. A comeback plan by the company seeks to introduce ahigh feature engine and with an output that would result in more engines production. Recently, the GM Holden has researched widelyand therefore has knowledge of its capabilities of designing and developing classic top-of-the-world generation of electric car designs as well as hybrid technology components. Through this, Australia will likely export car designs which are of high value in their components in the global automobile industry leading to success in the industry. This was revealed by the GM Holden chairman Mike Devereux upon receiving the government’s support in reviving the car industry to making it more successful (Adelaide now 2013). Supply Chain Designs Supply Chains in operations Management deal with ways in which GM Holden acquires its resources and how it distributes them to its clients. The supply chain of GM Holden is distributed in the globe with China,Korea, Sweden, Germany, Thailand, South Africa and Mexico forming the major market line in the demand for Chevrolet, Buick, Vauxhall, Cadillac, Saab and Opel vehicles.The tough environmental situations require that quality cars are produced with strong supplier networks and designs with their trading partners being maintained. Through the years 2009 to 2010 the company tried to restructure its supply chains to reach wider markets and to also appeal to the local citizens. This was coupled with a revolutionizedBase of manufacturing the vehicles. GM Holden in partnership with the World Environment Center joined forces in launching a program to enable GM Holden together with its suppliers towards improving the environmental performance dubbed the "Greening the Supply Chain" . This program aims at ensuring sustainable development in all links in the supply chain within the Australian automotive industry. The program is regarded as a good opportunity, which will improve the manufacturing processes leading to sustainability within the chains of supply. From this, real benefits will improve the suppliers’ efficiency in seeking for cleaner markets for their vehicles. The supply chain Design process is important as suppliers seek to attain specific results that are measurable and in a way improve the supply chain’s competitiveness in the wider markets (World Environment Center 2008). Capacity Management Capacity Management is an operations management process used in management of information technology (Aria Networks 2013). The process is concerned with management operations of the human resource and entails an analysis of performance, data measurement, and tuning actsin ensuringthat there is an efficient use of the infrastructure in existence especially by the human resources. The operations management process is necessary in producing the best products to the market by the GM Holden’s employees to enable success of their firm. Capacity management entails operations management in the production control, inventory management, inspection, quality control and materials handling by the GM staff. This will enable GM Holden as it seeks to further train and develop its staff so as to operate at the highest possible levels of production. In 2010, the company invested in Capacity development and management of its staff and infrastructure by investing money and time towards cost effective staff development. This sought to increase education availability and the knowledge of employees at different times. The Holden’s learning site is a global Learning Management System, which offers e-learning courses in its library in a variety of topics. Some of the benefits of capacity management which are likely to improve success of the business include intranet access by the employees who can utilize this particularwebsite (Biesebroeck 2009). This site is accessible 24 hours in a day whereby course started can later be bookmarked for future reference. The capacity management here is such that the employees can take their own initiative in developing themselves. Resource Management The GM Holden seeks to manage environmental and its own resources effectively and efficiently as corporate social responsibility measures. With proper use of resources, the company will reduce on the expenses associated with obtaining resources which are actually dwindling and limited in essence. Manufacturing of cars is an industrial process which entails use of technologies that impact negatively on the environment.These pose a challenge to the company in looking for a balance between the environmental and the economic needs. Resource consumption and production of wastes strongly affect the vehicle manufacturing activity. It is essential that the use of resources should be very optimal so as to save on the costs of obtaining others. The environmental concerns posed by resource use would likely affect the appeal of the vehicles by consumers who are concerned with environmental conservation. Among the resources which are to be well managed so as to increase the success of the GM Holden are Water which is an essential resource element in the manufacturing processes. It is essential for the company to continually identify opportunities aimed at reusing and recycling or the capture of water. Holden has implemented a third-party audit for water conservation at its manufacturing sites which consume water significantly. The company has invested in technologies which scale down water usage and this has demonstrated to be effective in managing costs. The engine manufacturing plants situated at Port Melbournealso constitutes substantial harvestingsites for rainwaterwhich is essential in the car manufacturing industry. In an attempt to conserve fuel and petrol consumption, the company has tried improving its production to manufacture cars which are energy efficient. With this energy resource management, the company is likely to attract more local customers who prefer energy efficient automobiles. In the long run, the company will be successful in its profits. In 2009, Holden introduced the Commodore V6 Engines. This is a direct injection technology of manufacturing the Spark Ignition, which is efficient in fuel consumptions while at the same time lowers emissions to the environment. Electric cars recently adopted by the automobile industry will be significant in preparations for the plug in electric as well as electric hybrid vehicles. This will be done through a working group by the Electric Vehicle. This groupidentifies potential types of vehicles, which are easier to manufacture and efficient in their resource use in the production process. Such cars are likely to increase revenue for the company based on the premise that they are resource efficient in their production. This is based on the fact that they use new technologies (Holden Business Report 2010). Conclusion The Australian automotive industry has been a major business venture that has provided employment to many citizens in the past years. The industry has been lucrative until just recently when various market players faced challenges in doing businesses within the sector.The challenges include credit markets that are tight within the capital-intensive sector as well as government involvement. These are the main challenges experienced in the global automobile markets. changing job designs, global manufacturing, quality management, changing technologies, continued globalization of markets, changing customer expectations are the major challenges which might affect the GM Holden in its future. The factors, which influence the success of the GM Holden, are car/ vehicle designs, capacity management, supply chain designs and resource management. Reference GM Holden 2010,Holden Business Report, Salmon Street, Melbourne. World Environment Center 2008, GM Holden To 'Green' Its Supply Chain, Viewed May 25 2013 WardsAuto 2012, GM Holden Setting Up for Volt Charging, Viewed May 25 2013 News.com 2012, Holden rescue deal 'likely soon' to secure future of GM Holden in Australia, Viewed May 25 2013 Adelide Now 2013, Holden pleads for help as Ford closes shop in Australia, Viewed May 25 2013 Australian Government Treasury 2004, Australia’s Demographic Challenges, Viewed May 25 2013 < http://demographics.treasury.gov.au/content/discussion.asp> Industry Week 2013, GM Holden Cuts 500 Jobs in Australia, Viewed May 25 2013 PricewaterhouseCoopers 2013, Australia’s Automotive Industry, Viewed May 25 2013 Biesebroeck, G 2009, ‘Globalisation of the automotiveindustry: main features and trends’, Int. J. Technological Learning, Innovation and Development, Vol. 2, pp. 7-24. 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