GLOBAL SUPPLY CHAIN MANAGEMENT

Case Study: Analysis of Volkswagen Resende Modular Consortium

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Case Study: Analysis of Volkswagen Resende Modular Consortium

Introduction

Volkswagen in 1996 along with the opening of a new plant in Resende has adopted a new model of Modular Consortium, well known throughout the world. The main objective of employing this new model in the supply chain domain is to reduce the number of suppliers to minimum but to obtain the loyalty of suppliers in order to increase the co-operation with specific suppliers so that the company could have long term competitive advantage. This co-operation was to make partnership with suppliers stronger, so that each partner would assume more responsibility both in production and assembly and will concentrate more on co-operation with VW than conflict (Davies, 2009). The main object of this paper is to assess the contribution of VW's supply chain strategy to its overall company strategy and how the company has incorporated technology in its supply chain process to improve its production, but before that it is pertinent to provide a brief description of the company's new plant at Resende, Brazil so that it would be easy for the readers of this paper to understand the significance of this study.

New Plant at Resende

In Resende Volkswagen built one of the most modern manufacturing plants for manufacturing trucks and buses. The plant was built in only 153 days at a cost of $250 million. It is located on the World Centre for Development of Volkswagen Trucks and Buses. There is a space for research and development of new models, as well as for developing new technologies to be used in products. The results of the work of the center have divided area engineers of Volkswagen Commercial Vehicles, which apply their skills and knowledge to vehicles produced by the company in other regions. (Todd, 2007)

Supply Chain Strategy of Volkswagen at Resende

The supply chain strategy employed by Volkswagen at Resende plant is considered as the innovative approach in supply chain management as the company is confident that its Resende plant which is relatively small in context of potential market (that is 100 trucks per day) would reduce the cost of labor and will improve the efficiency and quality, whereas, each subcontractor would be responsible for their units and workers compensation. The production schedule is only 100 trucks a day with only 1,000 workers, however only 200 of the 1,000 workers are employed by Volkswagen, whereas remaining 800 people are the employees of the suppliers who are responsible for assembling (Alter, 2003). VW employees are responsible for all quality assurance, marketing, research and design. The remaining 800 workers, who work for suppliers such as Rockwell International, Cummins Engines, Automotive Delgadillo, Remon and VDO, perform the assembly tasks. With this strategy, Volkswagen's subcontractors accept a greater number of direct costs and risks (Phillips, 2000; Adelman, 2000; Davies, 2009).

As shown in the scheme (see appendix 1), the first stop of the assembly process workers Iochpe-Maxion mount the gas tank, the conduits and the address ...