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Volkswagen is run very differently than every other automaker. Actually, its corporate structure looks more like General Motors did from 1920 to...

Read the articles. After the reading, for each article, provide an additional example of another company using the topic advanced in the article stating what they did, and how it worked out. This can be accomplished with 2-3 pages for each article. State what the firm is doing, and how and why they are using this idea.

Volkswagen is run very differently than every other automaker. Actually, its corporate structure looks more like General Motors did from 1920 to 1970. In other words, VW now looks like the GM that was once the largest and most profitable corporation in the world. VW is not in any danger of having other automakers copying its corporate structure. Most are unaware of VW's modus operandi , and besides, by traditional business school metrics, VW looks like a productivity basket case. Any efficiency expert would tell you that VW is too vertically integrated, has too much overlap and duplication, and has way too many brands. VW, meanwhile, keeps growing bigger, stronger and more profitable. The give-away that Volkswagen Group is run differently from every other car company lies with the fact that it employs a staggering 549,300 people globally. Fortune magazine lists it as the eighth largest employer in the world, behind giants such as Walmart and the Chinese post office. VW has almost as many full-time employees as General Motors (213,000), Ford (164,000) and Fiat -Chrysler (197,000) put together. While those three behemoths collectively built 19 million vehicles last year, VW "only" built 8.5 million. John McElroy is host of the TV program "Autoline Detroit" and daily web video "Autoline Daily" . Every month he brings his unique insights as a Detroit insider to Autoblog readers. Efficiency experts will tell you that on an employee-per-vehicle basis, Volkswagen looks hopelessly inefficient. Financial analysts will tell you that the company woefully trails its competitors on a revenue-per-employee basis. But VW will tell you that it makes more money than any other automaker – by far. While VW's stated goal is to become the world's largest car company by 2018, it's already there if you measure it by revenue and profits. Its revenue of $200 billion is greater than every other OEM. Last year's operating profit of $14 billion is the kind of performance you expect from Big Oil companies, not automakers. Last year's operating profit of $14 billion is the kind of performance you expect from Big Oil companies, not automakers. How can this be possible? How can VW look so uncompetitive from a productivity standpoint, yet out-earn all of its competitors? Ah, that's the magic of VW's corporate structure. While business schools teach future MBAs that centralized operations can cut cost by eliminating overlapping work and duplication, VW
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maintains strongly decentralized operations with lots of overlap. While business schools preach the benefits of outsourcing to cut cost, VW is very vertically integrated. Anytime a car company buys a component from a supplier, that supplier has to charge a profit. If an automaker can make those components in-house, it gets to keep that profit. VW is building a lot of components in-house. To dominate you need multiple brands, and VW has more than anyone else. If an automaker truly wants to dominate the market, it has to accept a certain amount of overlap and duplication. It just goes with the territory. To dominate you need multiple brands, and VW has more than anyone else, which admittedly overlap at the edges. But to VW they are more than just brands. All of VW's brands (VW, Audi , Seat , Skoda , Bentley , Lamborghini , Ducati , Porsche , Bugatti , MAN, Scania, and VW Commercial) are treated as stand-alone companies. They have their own boards of directors, their own profit & loss statements, and their own annual reports. They even have their own separate design, engineering and manufacturing facilities. Yes, they do share some platforms and powertrains and purchasing, but other than that they're on their own. Back when GM was great, it too was a holding company that owned nine stand-alone car companies. Back when GM was great, it too was a holding company that owned nine stand-alone car companies ( Chevrolet , Pontiac , Buick , Cadillac , Oldsmobile, GMC , Opel , Vauxhall , Holden ). In the 1960s GM had over 700,000 employees, was very vertically integrated, and was the most profitable corporation in the world. GM's vaunted president and chairman, Alfred Sloan, who led the company from 1923 to 1956, always fought against centralized operations. He kept GM very decentralized until the day he retired. Then the MBAs got ahold of it. In the 1960s they started implementing "efficiencies" and "synergies" and it's been downhill ever since. Their top-down, command-and-control system of management simply choked the company. It still does. Meanwhile, VW is operating right out of the Sloan handbook. And its corporate structure gives it an enormous competitive advantage. No matter how much VW's competitors try to rationalize, cut cost, outsource, or partner up with one another, they're never going to overcome VW's advantage. I wonder how many of VW's competitors are even aware of what they're up against.
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Aligning product design with the supply chain: a case study Omera Khan Institute of Logistics, Hull University Business School, Hull, UK Martin Christopher Cranfield School of Management, Cranfield University, Cranfield, UK, and Alessandro Creazza Logistics Research Centre, Universita ` Carlo Cattaneo LIUC, Castellanza, Italy Abstract Purpose – The purpose of this paper is to investigate the alignment between product design and the supply chain and to identify how this alignment impacts on a firm’s supply chain responsiveness and resilience. Design/methodology/approach – An in-depth case study methodology was adopted to uncover the strategies undertaken by one of the UK’s fastest growing fashion retailers to create a competitive advantage through its management of the product design/supply chain alignment. Findings – The findings of this case illustrate that not only is the alignment of product design with the supply chain important in improving competitive advantage for the focal company, but it also has a significant impact in improving supply chain resilience and supply chain responsiveness. This case illustrates how fundamental shifts in the organisation, particularly in integrating product design and supply chain have enabled the repositioning of the company from a low priced fashion store to becoming a leading global fast fashion retailer. Practical Implications – The paper provides guidance for companies seeking to improve supply chain costs and performance by a higher alignment of product design and the supply chain. Originality/value – This case study highlights the importance of the product design/supply chain alignment and highlights the benefits of adopting a “design centric” approach. The findings from this paper also contribute to the growing debate on supply chain risk management. Keywords Product design, Supply chain, Supply chain risk management, Resilience and responsiveness, Fashion industry Paper type Case study 1. Introduction The fashion retail industry has seen an unprecedented shift in strategy from product-centric to customer centric over recent years and this has had a major impact on the changing risk profile and responsiveness of fashion retailers (Khan et al. , 2008). Product-centric strategy was oriented towards production being based on stable forecasts with long product lead times and were designed for efficiency to optimise on production savings. Customer-centric businesses are designed to close the gaps between supply chain planning and execution, enabling suppliers to match demand and reduce the risk inherent in supply chain execution. They have typically been concerned with the last mile of the supply chain, from distribution centre to store or consumer (Baired, 2008). However, the growing unpredictability of supply chains, shorter product lifecycles and increased product proliferation, make time-to-market critical to avoid obsolete inventories and this has meant that businesses have had to take a more co-ordinated approach to supply chain management and understand where they can remove the non-value adding activities in their total supply chain (Van Hoek and Chapman, 2006). This end-to-end perspective of the supply chain forces organisations to break down the traditional functional “silo’s” and to move towards a greater degree of cross-functional working. The aim is to speed up response times to the market as well as reduce risk - through better alignment and communication across functions and by increasing visibility of demand upstream in the supply chain (Khan and Creazza, 2009). This organisational change requires businesses to rethink both the processes of managing design, and the ways in which they communicate the strategic value of design to the success of their extended enterprise. The importance of such an approach is highlighted by reports that up to 80 per cent of the total costs are the supply chain is determined early on in the supply chain at the product design stage (Appelqvist et al. , 2004). The current issue and full text archive of this journal is available at www.emeraldinsight.com/1359-8546.htm Supply Chain Management: An International Journal 17/3 (2012) 323–336 q Emerald Group Publishing Limited [ISSN 1359-8546] [DOI 10.1108/13598541211227144] Received: 9 February 2011 Revised: 12 March 2011 25 August 2011 24 November 2011 25 January 2012 29 January 2012 Accepted: 30 January 2012 This case was made possible by the generous co-operation of FashionCo; the authors would like to thank all the individuals who took part in this study for their time and invaluable support. 323
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Nevertheless there is a growing realization that the supply chain “begins on the drawing board” (Krishnan and Ulrich, 2001). This suggests the need to factor in supply chain issues early at the design stage, in order to consider product design implications for the total supply chain in terms of component or material availability or capacity constraints. For the fashion retail industry, in particular, the basis of an effective response to the market place is not just having the design competence to identify what the customer wants but the ability to work with suppliers to ensure that they can deliver it at the right time, to the right quality and at the right cost. Therefore, design is not just concerned with the appearance and functionality of products, it also has an important impact on the supply chain performance and risk. Given the issues highlighted above it is not surprising that the relationship between product design or development and the supply chain is increasingly attracting academic interest (Pero et al. , 2010; Lo and Power, 2010; Stavrulaki and Davis, 2010). These studies provide a good overview of the extant literature on the s u b j e c ta n dp r o p o s ef r am e w o r k sb a s e do nem p i r i c a l investigation, but are limited in their detail of how a specific company from a specific industry manages the alignment between product design and supply chain and how this alignment impacts the resilience and responsiveness of the firm. Although a practitioner insight into these issues has been previously provided (Khan et al. , 2009) more detailed research is required to further our knowledge of this fast emerging topic and increase our understanding of how companies are managing the alignment of product design and supply chain. With the exception of a multiple case study conducted by Khan and Creazza (2009) there are no in-depth cases revealing insights from industry about the impact, the alignment between product design and the supply chain has on supply chain responsiveness and resilience. In aiming to fill the gap this study utilises a single in-depth case study approach to uncover the strategies adopted by a fashion retailer in re-aligning its supply chain. The case company has been selected specifically as it has undertaken several supply chain transformations in order to sustain a competitive advantage in a formidable market place. Specifically, the aim of this paper is to investigate the following research questions: RQ1. How does the focal company align product design with the supply chain and what is the impact of product design/supply chain alignment? RQ2. How does the alignment between product design and supply chain impact on improving a firm’s supply chain responsiveness? RQ3. How does the alignment between product design and the supply chain impact on improving a firm’s supply chain resilience? To address the issues highlighted above a literature review based on techniques adapted from the Systematic Literature Review (SLR; see Table I) framework developed by Tranfield et al. (2003) which enables an evidence-informed approach to identifying, selecting and analysing secondary data was used. The main goal of the review was to uncover papers which related to product design, supply chain, supply chain responsiveness and supply chain risk. Two electronic databases; Global Proquest and Emerald were used to search for journal articles as both are among the largest and most comprehensive databases currently available. Figure 1 illustrates the conceptual framework developed to focus the literature review search. The figure shows the core subject areas: product design and supply chain. The shaded area linking these two is the interface which we can refer to as PD- SC. The arrows from PD-SC indicate the impact of the alignment on supply chain resilience (SCResil) and supply chain responsiveness (SCRespo). The remainder of this paper is structured as follows. Section two analyses the current literature in key areas presented in the conceptual framework (Figure 1). Section three explains the methodological approach used to investigate the research questions Section four provides a detailed analysis of the case study and proceeds with an analysis of the key themes which have emerged from the case study. The paper concludes by summarizing the key lessons from the case study and describes the theoretical and practical implications for supply chain management. 2. Literature review This section describes the outcomes of the literature review, which was based, as abovementioned, on the theoretical framework presented in section one. Several keyword strings for each link (i.e. product design and supply chain) were selected to conduct the literature search. The main research strings can be summarized as follows: . PD-SC. . PD-SC £ SCResil. . PD-SC £ SCRespo. . PD-SC £ SCResil £ SCRespo. The selection of keywords and search strings was selected to yield the most appropriate data and information from the electronic databases. This was a crucial process since the efficiency of examining the available data was dependent on the very screening and selecting the right data. The map field was the initiating point of keywords and related keywords from which the final search strings were eventually constructed. These have been recapitulated in Table II. Table I enlists the numbers of articles selected through the SLR process, while in the following pages we report the outcomes of the performed search, subdivided according to the different main themes of the literature review conceptual framework 2.1 Aligning product design with the supply chain An important supply chain consideration is whether or not products can be manufactured to the desired specifications and with the right materials in adequate supply and whether that final product is packaged and transported in the most efficient manner, which makes design an important pre-cursor to supply chain decisions and highlights the need for better design/supply chain co-ordination. Sharifi et al. (2006) suggest the need for “design for supply chain” and define this as part of the new product design (NPD) process, which is concerned with designing the product while taking into account the impact on the performance and success of the supply chain. Good supply chain management practice will require businesses to integrate processes such as procurement and logistics along with design to fully reap the benefits of a design driven supply chain. However in a study investigating the relationship between product nature and supply chain strategy, Lo and Power (2010) argue that there is no Aligning product design with the supply chain: a case study Omera Khan, Martin Christopher and Alessandro Creazza Supply Chain Management: An International Journal Volume 17 · Number 3 · 2012 · 323–336 324
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1 Transforming an Indian manufacturing company: The Rane Brake Linings Case Ananth. V. Iyer and Sridhar Seshadri What does it take to be a global supplier ? How does a manufacturing company in India, that believes it can compete globally, transform itself? We believe, as do many others, that attaining global competence requires significant changes “back at the ranch” which can lead to a significant improvement in the domestic cost/quality frontier. In other words, thinking global is good for the local market. We illustrate this point by focusing on one company in India, Rane Brake Linings (RBL). We use RBL as an example to show the significant transformation in business processes and thus outcomes in one organization and the top to bottom impact of such changes on the company. The examples from this company can serve as a template for managing change that is mission driven in many developing countries. In 2002, RBL won the prestigious Deming prize and joined an elite group of 13 Indian companies that have won the Deming prize (see Table 1 for the entire list as of 2004). The Deming prize, awarded by the Japan Union of Scientists and Engineers (JUSE), was the culmination of a three year journey for RBL, which began with a visit by Prof Tsuda from Japan. The prize and its citation are proudly displayed in the front lobby of RBL’s offices in the outskirts of Chennai. But what was the three year transformation that culminated in the Deming prize? The company won the Deming award in 2002, has
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2 ISO 9001 and 14001 certification and has accumulated over 200 man years of R&D experience. Table 1: Indian Deming Award winners list (1998-2004) DEMING APPLICATION PRIZE Sundaram-Clayton Limited, Brakes Division (India) 1998 Sundaram Brake Linings Ltd. (India) 2001 TVS Motor Company Ltd. (India) 2002 Brakes India Ltd., Foundry Division (India) 2003 Mahindra and Mahindra Ltd., Farm Equipment Sector (India) 2003 Rane Brake Linings Ltd. (India) 2003 Sona Koyo Steering Systems Ltd. (India) 2003 SRF Limited, Industrial Synthetics Business 2004 Lucas-TVS Limited 2004 Indo Gulf Fertilisers Limited 2004 QUALITY CONTROL AWARD FOR OPERATIONS BUSINESS UNITS Hi-Tech Carbon GMPD (India) 2002 Birla Cellousic, Kharach-A Unit of Grasim Industries Ltd. (India) 2003 JAPAN QUALITY MEDAL Sundaram-Clayton Ltd., Brakes Division (India) 2002 Source: JUSE website: www.juse.or.jp New Goals Mr. Sundarram, President of RBL, explains it as a transformation that begins with changing the goal of the company. He describes the purpose of RBL is to “create a customer”. He explains that while there are many possible objectives to be met, there is only one that needs to be maximized and that is to “maximize customer satisfaction”. He believes that TQM provides a philosophy that aims to define a methodology that creates Quality that delights the customer while satisfying all other stakeholders. He views this as a competitive imperative because he thinks that for a business to succeed, it must
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INVENTORY MANAGEMENT AND THE BULLWHIP EFFECT DURING THE 2007–2009 RECESSION: EVIDENCE FROM THE MANUFACTURING SECTOR à KEVIN J. DOOLEY, TINGTING YAN, SRIMATHY MOHAN, AND MOHAN GOPALAKRISHNAN Arizona State University The 2007–2009 recession led to a signifcant decrease in consumer demand. We use monthly inventory and sales data to study the impact o± the recession on manu±acturers, wholesalers and retailers in the U.S. manu±acturing sector. We fnd wholesalers responded late and drastically, indicative o± a bullwhip e±±ect, while retailers responded quickly and more conservatively, indicative o± environmental smoothing. Smoothing o± demand and inventory is demon- strated as an alternative response to a signifcant change in demand. Keywords: supply chain management; inventory management; bullwhip effect; sales; demand variation; manufacturing sector; manufacturer; wholesaler; retailer; recession; economic crisis; consumer behavior INTRODUCTION The economic recession of 2007–2009 has brought about signiFcant turmoil in the business world. U.S. gross domestic product (GDP) has been in retraction since the third quarter of 2008 (Bureau of Economic Affairs 2009a), capital investment has slumped and jobless rates have doubled in less than a 2-year period. As of the second quarter of 2009, consumer demand in the United States had declined for Fve straight quarters. The impact on the manufacturing sector has been particularly acute. Between 2007 and 2008, consumer demand for manufactured products decreased 3.2 per- cent. In particular sectors, the decrease was more dra- matic; for example, demand for automobiles and auto parts declined by 12.5 percent, and demand for building material and garden supplies dropped by 5.7 percent. The declining demand, coupled with reduced availability of credit and over-leveraged assets, led many companies to bankruptcy. According to Bankruptcydata.com, 136 U.S. publicly traded companies Fled for bankruptcy in 2008, up 74 percent from 2007 (Associated Press 2009). Within the Frst 6 months of 2009, bankruptcy an- nouncements came from General Motors, Chrysler, Nortel Networks and Lear Corporation. Economic downturns have drastic effects up and down the supply chain, slowing ±ows of materials and prod- ucts. A Wall Street Journal article from May 18, 2009 (Dvorak 2009) provided anecdotal evidence that the electronics manufacturing sector had experienced some- thing akin to the bullwhip effect (Lee, Padmanabhan and Whang 1997), not in terms of demand variance ampli- Fcation, but in terms of larger sales declines occurring further upstream. The article cites Taiwan Semiconductor Manufacturing Company CEO Rick Tsai saying that in the last quarter of 2008, consumer demand had declined 8 percent, while product shipments fell 10 percent and chip sales fell 20 percent. These data, while inconclusive, suggest that electronics retailers, wholesalers and manu- facturers responded differently to the decline in con- sumer demand. The purpose of this article is to empirically examine whether there was a bullwhip effect in the U.S. manu- facturing sector’s response to the current economic re- cession. More speciFcally, we shall compare how the mean and variance of sales and inventory levels across the sector varied before and after the recession, in three different supply chain tiers: manufacturers, wholesalers and retailers. Our study contributes to the supply chain strategy and inventory management literatures by using recent data to see how different supply chain members react to an economic downturn. THEORY AND METHODS The ampliFcation of demand variation through a sup- ply chain is called the bullwhip effect (BWE), a phe- nomenon that makes matching supply with demand more difFcult (Burbidge 1961, 1984; ²orrester 1961). The à Like all invited papers and invited notes, the original version of this manuscript underwent a double-blind review process. Volume 46, Number 1 12
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BWE says that as variation in consumer demand in- creases, demand variation will increase at each subse- quent upstream supply echelon, from retailers to wholesalers, manufacturers and their suppliers. The presence of a BWE causes increased uncertainty for managers, thus often leading to increased cost and re- duced inventory management performance (Metters 1997). Numerous causes of the BWE have been hy- pothesized, including demand signaling, order batching, price Fuctuations, rationing and shortage gaming (Lee et al. 1997), replenishment delay (Warburton 2004), cog- nitive issues involving the decision makers (Sterman 1989; Croson and Donohue 2006), reliability (Taylor 1999), forecast quality (Chen, Drezner, Ryan and Simchi- Levi 2000) and measurement errors (Miragliotta 2006). External, demand-based remedies could focus on reduc- ing demand variation by adjusting customer ordering strategies (Cachon 1999; Dejonckheere, Disney, Lamb- recht and Towill 2003), improving forecast accuracy (Wright and Yuan 2008) and using information systems (Lee, Ku and Tang 2000). Although these tactics will re- duce the size of the BWE de facto, decision makers often have little or no control over the environmental uncer- tainties that surround them. Managers adopt operation- based remedies, such as vendor-managed inventory (Disney and Towill 2003), in order to increase opera- tional capability and responsiveness (Pereira, Takahashi, Ahumada and Paredes 2009). While the BWE posits increased upstream demand variance within a particular closed supply chain, there is reason to believe that the BWE may be a general trait of complex systems, exhibiting itself at varying scales and across multiple characteristics of such systems, re- sulting from positive feedback (±orrester 1961). Thus just as increased uncertainty may induce increased over-reaction at the level of the individual ²rm, so too we might expect the same over-reaction when we ex- amine the behavior at the more aggregate level of an economic sector. Likewise, if we assume that members of the same supply chain tier (e.g., retailers vs. manu- facturers) experience similar levels of bullwhip effect ‘‘drivers’’ (e.g., information uncertainty and gaming), then we should expect companies within a tier to react somewhat similarly. Thus, we posit that the increased demand variation due to the recession will be greatest from wholesalers to manufacturers, second most from retailers to wholesalers and least from consumers to retailers. Because inventory levels will also be subject to the same forces of variation, we posit that inventories will vary most within manufacturers, second most with wholesalers, and least with retailers. In order to empirically test for the presence of a BWE, we ideally should have access to demand (and inventory) data from a single channel, closed supply chain. As that does not exist, we use data from the U.S. Bureau of Economic Affairs (BEA 2009b, 2009c) on real inventories and sales amounts from the U.S. manufacturing sector to approximate this ideal. The manufacturing sector data is useful because it provides insight into three different supply chain tiers — manufacturers, wholesalers and retailers. Additionally, the manufacturing sector was particularly impacted by the recession, especially the U.S. automotive industry. Because we have sales and not de- mand data, we must make the assumption that during a downturn in demand, sales to a given tier and demand from that tier are roughly equivalent. The data are part of BEA’s national income and product accounts, or NIPA, used to estimate and analyze GDP (Bureau of Economic Affairs 2007). NIPA uses an input– output model of the economy to allocate economic be- havior, and uses the NAICS codes for classi²cation of industry types (Bureau of Economic Affairs 2008). Dollar values for sales and inventory are normalized to 2005 values and ‘‘chained’’ so that meaningful comparisons can be made about different points in time, and inven- tory data are stated in dollar values rather than physical units. Actual estimates are created by a U.S. Census Bu- reau survey of ²rms, carried out on a monthly basis. Two types of BWE may exist within these supply chains, a systemic component that is always present and a tran- sient component that represents the reaction to the re- cession. As we are interested in the recession-induced reaction, our metrics shall compare the magnitude of change, before and after the onset of the recession, in sales and inventory across the echelons, rather than compare the echelon-level data within any particular year. The National Bureau of Economic Research (2008) used data on payroll employment, real GDP, gross do- mestic income, real personal income, real wholesale and retail trade sales, industrial production and employment estimates to pinpoint the beginning of the economic recession as December 2007. They note that all indicators suggest a start date of somewhere between November 2007 and July 2008. Because of potential periodicities within the data, it is useful to compare one set of 12 months before the recession and a successive set of 12 months after the recession. Given the start date of De- cember, we chose to compare 2007–2008. T -tests (as- suming unequal variances) were used to test whether the change in mean sales or inventory levels for a particular sector was statistically signi²cant, and F -tests were used to test whether the change in variance of sales or inventory for a particular sector was statistically signi²cant. ±or comparative purposes, changes were also examined be- tween 2006 and 2007, and time series data were exam- ined between January 2005 and May 2009. MANUFACTURING SECTOR RESULTS Sales across the entire sector declined 3.2 percent from 2007 to 2008, as compared with a 0.4 percent increase in Inventory Management and the Bullwhip Effect During the 2007–2009 Recession January 2010 13
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