The Design of Volvos Uddevalla Plant - Assignment Example

Operations Management Module Topic: Volvo Productive Model By What were the main design principles affecting process design at Volvo’s Uddevalla plant? The design of Volvo’s Uddevalla plant can be expressed as a process with an “interior logic” whereby design options were purged through permanent design choices until only a single option was left. The unorthodox alternative comprised, for instance, lengthy cycle time work that had never been used previously for all-out assembly of automobiles. Many of the innovative aspects of the Uddevalla plant such as the comprehensive layout in the assembly workshops and the subsequent unorthodox design principles employed, were in most aspects an unforeseen result of the design process. The gross layout of the plant was previously in place including the relations between the materials feeding methods used and the function of the computerized guided vehicle system. These design principles came to the realization of Volvo managers at a later time when the design process was way past the point of no return, since the investments made and insufficient time stopped regression to more conventional production principles and layouts. At the time of establishment of the Volvo Uddevalla, no one knew how to organize the material flow in a manner that suits an assembly process whereby the car’s body is not moved (remains in the work place) all the way through the assembly process. This was selected by grouping the materials in terms of assembly function associations so that components that belong together in terms of assembly were organized into groups based on their characteristics-weight, size, shape, fragility and color. This enabled the viewing of cars passing along the assembly process from the components to the complete assembled car. Therefore the process could be seen as an organic process rather than a mechanistic assembly of parts. The mechanistic description is arranged in order to visualize the product from within the presented work organization or from a sales perspective whereby the car is the total sum of all component parts (Freyssenet 2009). However, from the workers’ perspective, the mechanistic depiction is unfeasible because it is impossible to review the work and get support describing the context in the time and space orientation. Workers also need access to descriptions which enable them to obtain information regarding various precision levels. The mechanistic process’s applications were too limited. 2) What is the relationship between process design at Volvo’s Uddevalla plant and the emergence of customer-oriented and built-to-order approaches to car manufacturing? Volvo launched the COP system in a bid to increase customer responsiveness. Process design approaches that are still highly dependent on mass production design or are becoming progressively less competitive in the modern market. The "stock push" process design in which most of the cars are sourced from current inventory of finished goods in the marketplace, needs stock holding at the most costly end of the supply chain. In addition, the sales incentives required transforming this inventory invite a great cost price in current vehicle supply, which could be saved by getting rid of the finished vehicle stocks. The main challenge faced by these approaches is that companies are in most cases unable to deliver customized vehicles within timelines that are acceptable to the customer. Volvo operational loss was partially because of its joint venture approach; as the company attempted to raise its joint web of business functions with an increasing demand and decrease its spider web as the demand drops, with the aim of increasing efficiency. This implies that despite the company’s initial success at following the strategy, failure to coordinate and evaluate its value chain functions has presented a risk Volvo since it has promoted attrition of cost advantage point leading to loss of its customer royalty. 3) What were the differences between the Volvo and Ford volume/variety strategies? Volvo Cars uses and open strategy where the views of workers are highly regarded by the company while Ford is a hierarchical organization. The main values of Volvo cars which ford strive to incorporate include quality, safety and environmental sustainability. These values are incorporated in Volvo Cars and comprise a key element of the interior culture. Volvo Cars is viewed as a decentralized and joint effort oriented firm with a prevailing participatory approach to management in its corporate culture. The decision making practice occurs at lower stages of the organizational model. The Swedish culture of Volvo Cars is so powerful that it most instances it supersedes the values of the host national. On the other hand, Ford is a hierarchical and structured company (Freyssenet 2009). The companies are also different in terms of their approach to cooperation with labor unions. The employees and management of Volvo Cars work in close cooperation with union representatives to attain better business outcomes; Ford does not hold the same degree of co-operation. Volvo’s overall production volumes have exhibited a high degree of stability, and a drastic increase after acquisition by ford. The capacity to leverage value added services in business operations is a crucial differentiator for Volvo that has helped it maintain its competitiveness. Also, accurate prediction of customer behaviors good customer profiling has facilitated target marketing, up-selling and cross-selling into the current customer base. Volvo’s customer car vehicle dossier is a unique manifestation set to accomplish the company’s primary objectives, thus maintaining the database of customer’s vehicle among other decisive operations strategy aimed at retention of customer loyalty. It also has other advantages; for instance a potential buyer of a used Volvo car at a reasonable cost can used data available on the history of the car to decide on whether to pay for the service. This sets Volvo apart from other car manufacturers due to the value added intangible services used as differentiated operative strategies. In addition, Volvo’s flexible strategy includes towing service that provides full time customer care for any damages, free towing and recovery service, focused on meeting the needs of regular Volvo clients. This considerable operational strategy has enabled Volvo to gain reputation as a well-recognized company among its competitors. Also, other services such as help-desk form part of the operation strategy, helping the company attend to customers inquiry concerning issues with their vehicles. The help desk support employees record the issues in detail, categorize them appropriately, retrieve related prior cases from the case file and create solutions by consulting or reviewing previous case solutions. 4) Which operation strategy should Geely pursue to valorize Volvo’s production technology and brand? In terms of workforce strategy, Volvo should strengthen responsibility and group identity by establishing coherent group-level tasks instead of focusing on individual efforts. Volvo is lagging behind in the global vehicle production front due to a huge identity crisis witnessed in the conflict of strategy between Volvo’s BTO model and ford’s wholesale mentality. This has led to increase in production volumes as well as stock levels. Fords strategy to increase volume by increasing sales and model range has led to drastic division of the production volume. Geely should focus on innovation that will help Volvo cars gain greater recognition than the company’s performance has earned it. Sales have declined due to the company’s poor management performance which has previously negatively impacted on the company’s financial status. Therefore a proper strategy will assist the business both to raise its sales and actively take part in the global market and exploit its competitive gain. In order to uphold its competitive advantage, Geely should invest and develop new hybrid technology incorporating electric motor and diesel engine to: save the environment by decreasing carbon emissions and save fuel consumption. By continuously investing in this technology, Volvo will establish barriers of entry against its rivals, since it will be difficult to imitate because of cost and time required for research and testing. This will give the company the advantage of full participation in the global market, grabbing the market and overcoming entry regulations obstacles while benefitting from local government subsidies. The Asian market is a great opportunity for business development. Volvo being acquired by Geely, will benefit from the local knowledge of the market and established manufacturing facilities in Asia. If Volvo plans to enter the Asian-Chinese market, market research should be carried out in order to find out exactly what consumers want and need at the best price strategy. They might require high investments to increase production capacity at Volvos existing plants and in advertising and brand-building. Volvo and Geely should both portray great flexibility due to the many differences in their corporate cultures. This is a major challenge for both parties since Geely is not highly experienced on acquisitions and volvo has crucial issues. As a result of the new acquisition, Volvo should focus not only on raising sales in North America and Europe, but should also concentrate on increasing its market share in asian Emerging Markets and china. Powerful bands such as Chrysler, general motors and ford raise the competitive bar, particularly in established like USA and Europe. With the increasing Chinese buying power, Geely should strive to make Volvo be among the top-selling brands in China. The potential market size for volvo is greater than that of expensive luxury brands such as BMW and Mercedes-Benz. Thus being the premier old and well-recognized brand owned entirely by a Chinese company, Geely should be capable of pushing Volvos sales, marketing and distribution much easily in Asia in comparison to his foreign counterparts. Volvo should concentrate on their distribution channels, since this will enable them to target them without difficulty, particularly the Indian market, which has great potential as shown by the latest upward results. Volvo will need to change its centralized activities and its distribution channel in order to transform that advantage into a global strategy creating new plants in new overseas markets, transforming their complex export strategy into a global strategy. Volvo’s new competitive advantage with global focus includes cost reduction based on terms of inventories and developing a Just in Time strategy and a Constant Research development in order to achieve its main objective and satisfy their customers’ needs. (Sandberg 1995; Berggren 1992; Freyssenet 2009; Tomka 2013; Clarke 2005). Reference list Berggren, C. (1992). Alternatives to lean production: work organization in the Swedish auto industry. Ithaca, N.Y., ILR Press. Clarke, C. (2005). Automotive production systems and standardisation from Ford to the case of Mercedes-Benz. Heidelberg [etc.], Physica-Verlag. Freyssenet, M. (2009). The second automobile revolution: trajectories of the world carmakers in the 21st century. Basingstoke, Palgrave Macmillan. Sandberg, A. (1995). Enriching production: perspectives on Volvos Uddevalla plant as an alternative to lean production. Aldershot, Avebury. Tomka, B. (2013). A social history of twentieth- century Europe. New York: Routlegde. Read More