Abstract
Volkswagen and General Motors source their raw materials from different sources. This calls for a systematic system through inventory management. The inventory management applied by the two companies is recording raw materials ordered and delivered, units of vehicles produced (finished and finished), and units sold at a given period in a region. The two companies integrate good and service design concept by integrating new technologies in order to design products as per customer specifications. Therefore, the importance of inventory management in the two companies entail: improving service to customers, product operations continuity, risk and loss reduction, and minimal administration work. The layouts employed in the two companies are also similar and they entail process, product, project, and cellular layouts. The layouts improve efficiency and effectiveness in their operations. The supply chain performance of the companies can be evaluated by on-time delivery and inventory turns metrics. However, the inventory systems depend on the companies’ management policies and personalized procedures. These recommendations are highlighted in this study.
Key Words: Volkswagen, General Motors, Inventory Management, Layouts, and Metrics
Inventory Management in General Motors and Volkswagen Group
Types of Inventory that General Motors and Volkswagen Manages
The main raw materials for these companies include aluminum, steel, tires, dashboards and seats among other automobile materials. They normally buy these raw materials from different suppliers who supply them upon their requests. These companies mainly deal with three major areas of manufacturing namely, manufacturing their original equipment, rubber fabrication and production, and distribution of spare parts (General Motors, 2013).
Own equipment manufacturing involves producing some of the parts they use in manufacturing new vehicles. These parts may include seats, doors, and windscreen among others. Production and distribution of spare parts include those parts that one can replace in a used vehicle and may include oil filters, air filters, and replacement lights among others (Volkswagen, 2013). Rubber fabrication may include manufacturing of tires, belts, hoses among other components.
The inventory management of these companies involves recording raw materials ordered and delivered, units of vehicles produced (finished and finished) and units sold at a given period in a region. These companies also sell their products through dealers who act as the link between the company and its customers. For instance, General Motors have about 7,000 dealers in the North America region (General Motors, 2013). Accordingly, inventory management of these companies aim to ensure that their dealers are well stocked with all their products in order to meet their customers demand.
For efficient inventory management, the companies choose the inventory management system that dealers should use to control their stocks. These companies have automated and centralized their systems to enable their managers to know the number of units that move in and out of the system daily. This has enabled these companies to reduced their inventory costs and at the same time increase their inventory turnover.
How the Companies Integrate Good and Service Design Concept
The two companies are committed to coming up with new techniques of manufacturing in order to maintain their positions in the automotive market. They have used service design integrated with the new technologies in the automobile industries, to design products as per their customers’ specifications (Ariel & David, 2011). The companies are committed to designing and selling the best car model at the present and in the future. These companies develop new car models through studying the customers’ need through market survey. They have experienced designers who work together with engineers and other experts, to design and develop a new car model that will meet the requirements of their customers. This is followed by the launch of the new model, which the sales department then distributes, to dealers in their divisions in order for their customers to buy them.
Importance of Inventory Management in These Companies
- Improving Services to Customers
Inventory management helps these companies to satisfy the needs of their customers. Unless the company supplies the products that their customers need promptly, the competitor may win their customers by efficiently meeting their needs at the right time. In General Motors, customers expect a “flawless quality” that is a perfected mode of painting and exterior fit. A vehicle that ignites quickly upon turning of the key, and easy to lock and open doors are what its customers need (General Motors, 2013). Once the company puts in place a proper inventory of raw material, it would finish its products on a timely basis. Similarly, if the finished products have an efficient inventory, they will adequately satisfy the additional customers’ demands.
- Production Operations Continuity
Companies increase their needs gradually, hence, increasing suppliers’ demands for raw materials. In most cases, customers prefer not to know how efficient the inventory is, but rather how the company meets their needs within a given duration. Proper maintenance of inventory levels is necessary as the business to succeed. Proper procedures must be enhanced to ensure that the inventory level in a company does not diminish to levels that will hinder the company from meeting the demands of its customers (Volkswagen, 2013). Therefore, an efficient inventory management has enabled the two companies to maintain a continuous flow in their operations. Through inventory control, the two companies have kept records of the proposed and actual production. In such a case, inventories will bridge the gap between the planned and actual production. . Inventory control ensures that the correct amount of stock is maintained, thereby, avoiding over-stocking.
- Reduction of the Risk And Loss
Efficient inventory control ensures that defects do not move from one level to another. The two companies have adopted a system that detects deformed products during the production process. All stations are error proofed, and this has reduced the occurrence of risk and factors. This has led to the reduction of their wastes; therefore, increased profit. Inventory control maintains a clear and responsive check on the loss of materials through either carelessness or pilferage. Consequently, without efficient inventory system, cases of carelessness and stealing will be frequent especially in the store-keeping department.
- Administrative Work is Minimal
Though the two companies operate in more than fifty countries, efficient inventory management systems help them to combine their functions (General Motors, 2013). Purchasing and inspection of raw material and finished goods is reduced, which in turn decreases the cost of labor.
Different Types of Layouts
General motors and Volkswagen operate in the automobile industry. The companies produce and market automobile products and services across different countries in the world. They have adopted different similar layouts in order to improve efficiency and effectiveness in their operations. The main reason for adoption of the layouts is that the industry structure and scope of operations dictate that almost similar layouts are necessary for the industry competitors. This enhances the competitiveness of the companies in the industry.
Notably, the layouts adopted by the companies include process layout, product layout, project layout and cellular layout. Process layout for the two companies involves the adoption of batch production. The production sites for the companies have similar process units. Within the similar process units, similar facilities operate as distinct groups (General Motors, 2013). However, they differ for companies, in that, the organizational cultures for the two companies differ in certain aspects. This result to implementation of changes regarding the processes conducted. The laws governing operational processes in each of the companies differ, as they are in different continents. This affects process layout in the companies. This layout is important in that it is flexible and offers an opportunity to a variety of processing requirements. The equipment used may be less costly, and this is an advantage to the companies.
Product layout adopted by the companies involves clear definition of plant layout site, size, and shape of building location and shape of storage yard. This layout enables the flow of materials in one direction at a steady rate (Volkswagen, 2013). Machines and equipment used by the two companies are of a special type. The difference occurs in the location and size of the production sites. General Motors is larger and headquartered in US while Volkswagen is smaller and headquartered in Germany. This layout is important because there can be increased production based on demand in a short time. Unit cost becomes low because of high volume. Project layout adopted by the two companies entails production of autos at fixed places. Machine, materials, and labor usually come to the sites. However, the difference occurs in moving of materials and labor to sites. General Motors has implemented the move of having materials produced within the sites whereby labor is readily available in different sites (General Motors, 2013). Volkswagen is in the process of implementing this in order to achieve efficiency in production. This layout is important for companies in that it enables proper management of costs especially fixed costs that the companies incur in their operations.
Cellular layout for the companies entails a reduction of the complexity prevalent in process layout. There is transformation of resources into smaller clusters that are able to act upon different product groups. The difference occurs in the level of reduction of complexity on process layout. General Motors level of reduction is considerably lower while it is high in Volkswagen. This is due to the level and scope of activity for each company. This layout is important in that it motivates the employees and thus their productivity increases (Volkswagen, 2013). The layout provides for flexibility when it comes to process requirements.
Metrics to Evaluate Supply Chain Performance
Metrics that applicable in evaluating supply chain performance for the two companies are on-time delivery and inventory turns. On-time delivery is a metric that measures the ability of the company to deliver products to the appropriate customers as timely as possible. This determines the efficiency of the supply processes adopted by the company. On-time delivery of products creates a good reputation for the company so that customers consider the company effective and reliable. Inventory turns are equally important in evaluating supply chain performance (Ariel & David, 2011). Plenty of materials ensure that there is continued and consistent production. As such, products will be readily available for distribution to the appropriate markets. Supply chain will only be effective if there are enough materials to produce consistently as per market demand. Proper control of inventory is crucial, and distinct measures ensure a steady supply. Improvements to design and operations on the supply chain for companies is possible by ensuring that materials are acquired from suppliers in advance once demand forecast indicate an increase in demand. This will ensure that there are enough products for supply once demand increases. The companies should have distribution and supply centers in different places across their market base. This will ensure that delivery occurs as timely as possible.
Ways to Improve the Inventory Management
In order to improve inventory management for general Motors, it is essential to maintain an up-to-date accounting record of the inventory account. This will enable effective control of inventory so that the company does not run short of production materials. Perpetual inventory system is good enough as it constantly checks the progress and available inventory balance. Physical count is equally beneficial in improving inventory management control. It gives the actual inventory balance for decision making in this regard. On the other hand, Volkswagen can improve inventory management by regular checking of inventory in order to ensure optimal level of inventory (Ariel & David, 2011). This will ensure that the company does not experience inventory shortage, which could affect its routine operations. The company should implement measures that ensure that there is supply of the right quality inventory. Otherwise, it is possible to the company to hold the wrong line of inventories because of inadequate inventory quality control. The company should ensure proper selection of suppliers so that they can provide the best quality inventory at the determined time. This will ensure that the products of the company are of the desired quality. Production processes need proper supervision in order to ensure effective use of materials as desirable, and not much goes into waste.
References
Ariel, M. & David, B. M. (2011). Why New Technologies Are Reinventing: Inventory Management. Strategic Finance, 93(5). 2-30.
General Motors. (2013). Quality & Safety: Quality Inside and Out. Retrieved from, http://www.gm.com/vision/quality_safety.html. (Accessed August 12, 2013).
Volkswagen. (2013). Brands and products. Retrieved from, http://www.volkswagenag.com/content/vwcorp/content/en/brands_and_products.html. (Accessed August 12, 2013).
