Benefits of ERP Implementation on VW Group
-
Upload
muntazir-haider -
Category
Documents
-
view
2.562 -
download
8
description
Transcript of Benefits of ERP Implementation on VW Group
Benefits of ERP on the VW Group
<Student Name>
<Name and Section # of course>
<Instructor Name>
<Date>
Table of Contents
Introduction..........................................................................................................................3
Features of ERP available for The VW Group....................................................................4
Benefits of Implementing ERP............................................................................................7
Reduce Time-To-Market Cycle Of New Product:.........................................................12
Challenge: Higher Outputs, Lower Stocks and Reduction in Waste.............................13
Solution..........................................................................................................................14
Challenge: Globalization and Competition...................................................................14
Solution..........................................................................................................................15
Increased use of technology...........................................................................................15
Solution..........................................................................................................................16
CONCLUSION..................................................................................................................16
Introduction
Europe’s largest car maker and one of the world’s leading manufacturers of automobile is
none other than the Volkswagen Group and has headquarters in Wolfsburg. In 2008, the
number of vehicle being delivered to customer has increased to 6.257 million which
almost equal to the 10.3 percent of the total share of passenger car market in the world.
The largest car market in the world is in Western Europe and has every fifth new car
from Volkswagen Group which makes 20.3 percent of the new cars total. In 2008, the
sales of group were increased to 113.8 billion euros and total profit of the year after tax
was calculated to be 4.69 billion euros1.
There are nine brands which make up the Group and out of these nine seven are from
Europe which is: Scania, Audi, Bugatti, Lamborghini, Volkswagen,
SEAT, Bentley, Skoda and Volkswagen Commercial Vehicles2. Theses cars are sold in
more than 150 countries around the world. Each brand is present in the market as an
independent entity and has it own identity. The variety of products is available to cater
the needs and demands of each sector ranging from low-consumption small cars to luxury
class and pick ups, busses and heavy trucks for the commercial sectors.
In fifteen European countries, there are 61 production plants operates by the Group.
Further it has plants in Asia, America and Africa. Everyday, more than 26,600 vehicle
1 Monk, E. F. & Wagner B J. (2006). Concepts in Enterprise Resource Planning. Thomson Course Technology.
2 O'Leary, D. E. (2000). Enterprise Resource Planning Systems, Life Cycle, Electronic Commerce, and Risk. CUP.
and other vehicle-related services are produced by 370,000 employees around the globe.
The goal of the group is to attract customers in this competitive market by offering
vehicles which are striking, safe and environmentally sound and should help them setting
up world class standard of their products in their respective classes3.
The Volkswagen Group is more than a carmaker and offers a variety of mobility-related
services. Combining under one umbrella all the companies having their own portfolios,
brands, missions, visions and market standing is a big challenge ahead for The
Volkswagen Group. This challenge is more important because the Volkswagen Group
does not want to compromise the individual identity of these brands and this approach is
also important as this is the only way that contributions can be made by all the brands and
companies so as to add value to the common stream of interest and help the Group
achieve some significant milestones. In this paper we will in detail discuss the benefits
that the VW Group can achieve from the implementation of an ERP solution4.
Furthermore, we will also analyze the challenges that the Group is expected to face and
how can these challenges be mitigated.
Features of ERP available for The VW Group
Let first discuss what feature do the ERP solution offers to the VW Group. An ERP
solution can deliver a set business processes which are comprehensive, integrated and 3 Monk, E. F. & Wagner B J. (2006). Concepts in Enterprise Resource Planning. Thomson Course Technology.
4 Wallace, T. F., & Krezmar, M.H. (2001). ERP- Making it Happen. Wiley.
cross functional in nature. The vision of combining all the contributions from each Group
entity so as to increase the value of the services and of the Group ultimately enhances the
need to develop a system providing an integrated view of all the operation. This
integrated view can be provided by an ERP solution. Enterprise resource planning
redefines an organization’s resource planning strategy5. The general features of ERP that
enable you to efficiently deal with business challenges of The VW Group include:
Service delivery to end-user: These services will make sure that the critical data,
analytical tools and applications are readily available and accessible to the employees so
that they can perform their job tasks effectively and efficiently and shall also support
organization’s model for different processes of shared services6. Different portals for
employees and managers can be maintained and will offer them role based access.
Furthermore, services can be provided to the employees on field like the sales
representative of The VW Group to report offline the critical information.
Business Performance: In order to predict the business performance through compliance
so that deep insight of the business financials across the organization and will tighten the
control of finance. The financial supply chain management, management and financial
5 Langenwalter, G. A., (2000). Enterprise Resources Planning and Beyond. St. Lucie Press.
6 Schneider, G. (2001). Enterprise Resource Planning: An Introduction for Financial Managers - NOT YET
PUBLISHED - DUE 2011. Thomson
accounting of The VW Group can be automated by ERP as it rigorously supports the
corporate governance mandates like Sarbene-Oxly etc7.
Human Resource Management: The processes of Human Resource can be optimized with
help of solution which is completely integrated with the global human resource
management. Every efficient ERP solution takes in to consideration this very aspect with
great consideration. And hence maps to the value system of the Group. The potential of
the workforce can be maximized but supporting flexibility, growth and innovation. ERP
solution can provide and hence can increase the compliance in order to pace up with the
regulations around the globe.
Business Cycle: Complete end to end cycle of business processes for procurement and
logistics can be managed with the ERP module available for care business operations.
These processes may range from generating self-service request to simple payments and
invoices. Furthermore, in context of The VW Group, the entire life cycle processes of
product manufacturing and development in real time can be effectively managed by
delivering high quality products hence increasing customer satisfaction8.
7 Schneider, G. (2001). Enterprise Resource Planning: An Introduction for Financial Managers - NOT YET
PUBLISHED - DUE 2011. Thomson
8 Langenwalter, G. A., (2000). Enterprise Resources Planning and Beyond. St. Lucie Press.
Company’s most expensive corporate functions can be very well managed by ERP. ERP
will help support and streamline such functions which may include enterprise assets,
project portfolios, environment, corporate travel, health and safety compliance, quality,
and global trade services. Corporate services provided by ERP solution helps maximize
transparency on the other hand will reduce risks associated with environment and risks
and enhancements of employee’s safety.
Performance Management: Another important feature of ERP is tat it provides the
support for the complete performance management lifecycle. It delivers measurements
and metrics personalized for the improvements in business insight and decision making.
ERP provides analysis tolls for finance, operations and human resource and in addition to
this it also supports combined reporting of financials and statutory; risk management,
planning, and forecasting, scorecards and strategy management, and budgeting.
Benefits of Implementing ERP
In this section we will in detail discuss the benefits expected to be achieved and
improvements to be made in the business processes of the VW Group by implementing
the ERP Solution.
In order to globally revolutionize its processes of engineering, manufacturing and after
sales, Volkswagen Group should consider ERP for automotive portfolio of solutions. An
ERP solution together with system used in the company for electronic billing of material
can help and support company for achieving considerable saving from cost from
operations of engineering and production9. A seamless integration can be achieved by an
ERP solution by integrating different processes of production, logistics and financials.
This integration will result in enhanced, efficient, effective and most importantly
transparent operations of motor assembly. Furthermore, an important aspect of ERP is
Customer relationship management. Volkswagen Group can benefit a lot from it by
streamlining the fulfillment of spare parts and their collaboration throughout its
dealership network in Europe.
ERP also offers functionalities that are suited best for The VW Group and will help it
achieve their goal of efficiency enhancements. This enhancement can be achieved by
globally standardizing all the processes in their operations10. As per the need of The VW
Group, ERP will provide them with a system giving uniform and consistent material bills
so that the workflows involved in production and engineering are streamlined. ERP will
allow The VW Group to tailor a system that is comprehensive and will always be
working without any glitch.
ERP solution is penetrative, along with many other technologies helping The VW Group
in an effort for production costs reduction and increase in margins of profit, it will help
the Group to meet the customer demands in better ways and will make the after sales
business much more productive and as per their priority competitive advantage will be
given significantly to their global brands11. If The VW Group chooses to implement an
9 Carroll. B. J. (2008) Lean Performance ERP Project Management. St. Lucie Press
10 11
ERP solution then it will be communicated globally as the greatest achievement towards
the strategic vision of this leading carmaker.
One of the greatest pain areas to which ERP solution can provide relief to is the
accessibility and reliability of material bills. Each car model individually consists of
thousand of components and many other varieties which are comprised in these material
bills hence becomes the centre of the data structure for all the processes involved in
service, production and engineering and has the capability to replace more than 10 of the
company’s legacy system. Furthermore, ERP can also help The VW Group to cut costs
incurred in engineering and production by reducing errors, reducing the need of data
entry, time taken for retrieval and processing of information and by efficiently identifying
the areas which may need improvements in future. In order to span the complete product
range of brands of Volkswagen Group ultimately, successive step implementation of ERP
will be required globally. All variants, sub variants components and other different
components can be mapped by using an ERP solution to the variant structured electronic
material bill12. This mapping will provide easier reading and analysis of technical
information so as to avoid parts missing and any other redundancy at the same time it will
streamline change management and will result in process reliability enhancements.
An interrelation among process of manufacturing can easily be shown with the help of an
ERP solution. This interrelation will help The VW Group to find out that are
dependencies maintained correctly in the structure of the products or not and further will
12 Harwood, S. (2003). Implementing ERP: strategies, planning and solutions. Butterworth Heinemann.
help the Group to divulge any change implication for instance determining which type of
battery is required by an air-conditioned car13.
Furthermore, more efficient development and production of new models can take place
with help of ERP as the design and approval process will be simplified due to the easy
identification of proven parts and hence can be implemented immediately rather than
recreating the wheel. This easy identification of similar parts that are to be used for
different models will result in higher volume production and eventually will reduce cost.
Consistent high level services throughout the network of the Group dealerships can be
achieved by an ERP solution. This consistency will improve services provided to its
European customers14. These powerful capabilities of channel management of ERP can
help The VW Group to develop an online portal that can help independent dealer to look
for authorized dealers of The VW Group so as to conveniently order accessories and
different spare parts.
The inventory data from the network of all authorized dealership of The VW Group can
be integrated with the help of a single order management system provided by an ERP
solution. Dealers can use their own stock to fulfill their order with the help of this
integrated data or can conveniently and automatically process order with The VW Group.
Hence, ERP can help them to streamline their collaboration with partners and reduce
costs of supply chain significantly. This will provide all partners the complete and
transparent process of order fulfillment and will increase customer satisfaction.
ERP can help The VW Group to replace different manuals, legacy systems and processes
13
14
which are spread sheet based. The processes of finance, production and logistics of any
VW motor plant will be linked in single system hence will increase operations’
transparency and efficiency15.
From this, The VW Group can effectively reduce the errors drastically. This reduction is
by the elimination of redundant and manual entry of data between the processes of
finance, production, customs and procurement. Throughout the life cycle, the product is
seamlessly track-able, flow of material at the plant will be smoother and the automatic
delivery of information to the databases of production and finance will enhance the speed
and quality of data flow.
Hence to conclude we can say the ER will help the VW group achieve competitive edge
from all aspects. It will help it improve its business process by integrating all the business
processes of the VW Group around the globe. This process will be integrated across the
departments in to a single one unit enterprise wide information system.
Challenges of Implementing ERP Solution.
Let us now discuss in detail what challenges will the VW Group will face by the
implementation of an ERP solution.
Today, The VW Group has to face a lot of competition in order to take up the larger share
of this automobile industry. This consolidation and completion has altered the business
strategy from profit-centric to consumer centric and provide incentives to the customer in
order to maintain a competitive edge in this era of badly shaken economy. However, in
15 Harwood, S. (2003). Implementing ERP: strategies, planning and solutions. Butterworth Heinemann.
order to expand and grow, there is a need for The VW Group to stay away from ort term
weak demands like offering cars on zero percent financing rate and offering rebates. The
company however should focus on adopting technologies which will benefit them in log
run and shall support the processes and innovative product development16.
From here onwards, we will discuss the challenges and issues which The VW Group in
particular is expected face from the implementation ERP solution. These challenges are
more from industry rather then internal due to the global nature of the business, however
to cope up with these challenges measures need to be taken within organization.
Furthermore, the key challenges that are expected to be faced by The VW Group are as
follows:
1. It is very important that product variety if managed efficiently. It is also important
to increase the reliability and transparency of data shared and the processes should
be effectively scheduled.
2. In case of the unavailability of real time and transparent financial data and lack of
IT infrastructure, VG Group may have to face a lot of problems.
3. Another challenge is to synchronize the product panning with supplier processing
of orders. Without which successful order fulfillment will not be possible.
4. In case of the portal development as suggested above, providing only information
and no transaction can also be big challenge.
5. Creation of collaborative environment for suppliers and achieve quick ROI from
the implementation.
16 Musaji, M. (2002) .Integrated Auditing of ERP Systems. Wiley
6. Providing single data source with tool and application for analysis and deign,
improve back office efficiency by providing self services to reduce costs.
7. To implement the system in routine working hours.
8. Integration with other automobile vendors systems.
9. Increase production flexibility through accurate forecasting and improving
production management.
10. To maintain compliance with SOX Act, scalability of the solution and vigilant
monitoring of complex.
11. Support innovative programs offered by HR.
12. Lack of visibility of material bills and interdependencies of different parts.
13. To change behavior of customer and internal structure of departments i.e. to
decentralize.
14. To develop disparate stand alone solution as the processes are paper based.
Moving ahead, keeping view the global organization structure the challenges faced would
be:
Reduce Time-To-Market Cycle Of New Product:
In the early processes of product development, collaborative environment is required to
bring on platform all the key stakeholders so that the time to market cycle of designing
and development of innovative products is reduced and shall produce the cars more in
accordance with the customer’s need and demand. Thus the key barriers for The VW
Group in order to achieve an effective and efficient value chain are performance goals,
consumer preferences, and alternatives for possible cost savings which does not allow the
easy incorporation of value chain in the overall design. It is required that all the
information should become transparent so that each stakeholder can have transparent
view of the processes17.
Solution
The solution to this issue is also provided by ERP itself. ERP allows collaborative work
environment so that idea and suggestion can be shared and exchanged. This is achieved
with help of ERP by using its collaborative project management aspect and by enabling
this solution to be web-based i.e. people can work online in a virtual workplace hence
globally scattered team members can work together and can get issues resolved.
Therefore, the activity control of the product lifecycle execution can be effectively done.
Challenge: Higher Outputs, Lower Stocks and Reduction in Waste
The VW Group is well known for adopting lean approaches for manufacturing so that
significant improvements can be achieved in services like operational customer related.
Agile practices of manufacturing are opted by The VW Group in order to cope with the
cope with the increasing rate of fluctuation18. Unfortunately agile manufacturing is not
supported by most of the ERP systems and hence companies are forced to develop
17 Nah, F. F. (2002). Enterprise Resource Planning Solutions and Management. Idea Group
18 Nah, F. F. (2003 ). Enterprise Resource Planning: Management, Social and Organizational Issues. Lawrence
Erlbaum
processes in their operations, extensive workarounds or may disable significantly their
manufacturing portions of applications to control agile manufacturing effectively.
Solution
Solution to this problem is the selection of such product which supports full agile
manufacturing so The VW Group can effectively operate their manufacturing operations.
It is important to choose an ERP solution that will help The VW Group to identify
blockages in the line of production and may help simulate the assembly line on the
demand of different models. Similarly in an agile environment, it should further provide
replenishments and work order completions together with flushing back the operation. It
should further provide The VW Group with make-to-stock, assemble-to-order, engineer-
to- order, or other similar environment and all these environment offering should be
independent of functionality sacrifices that are necessary for methods of manufacturing19.
It is important for The VW Group support an environment with dynamic flow however
should also maintain control over its operations.
Challenge: Globalization and Competition
Since the numbers of automobile vendors are limited, therefore there exists a furious
competition among them. As we know that missed compenet deliveries are a challenge
that VW may face and it could cost them hearty and vehicle production may face serious
disruption hence for every minute production is down due to missing parts a loss of
thousands of dollars will be faced by the company. Therefore, it is important for The VW
19 Musaji, M. (2002) .Integrated Auditing of ERP Systems. Wiley
Group that they should focus on the practices like lean manufacturing and just in time.
These practices will force suppliers to stick to their schedule of delivery till the order of
customer is fully complied only with hours and minutes instead of days.
Solution
The solution for The VW Group of this challenge is that again selection of solution
should be such supports cross organizational functions and activities that provides
process flow which are completely integrated with each other which may range from
taking order till the release of cash. The business process that can ideally execute this
release to cash tasks will have to optimize process between operational and financial
departments of an organization20. These processes will include release management, order
management, warehouse management, and accounts receivables.
Increased use of technology
Another challenge from industry is the increase in the use of technologies which are
internet based. These technologies are expected soon to get established as an enormous
and new communication channel providing immediate interactions with customers. And
this will provide a huge opportunity to The VW Group for maintaining a better customer
relationship. Here customer relationship will be different from that of typical and will
provide numerous opportunities to strengthen brand loyalty. A few of the services
promised by these channels to introduce are automatic crash notification, vehicle
supervision, electronic logbook navigation with dynamic re-routing, and vehicle
20 Musaji, M. (2002) .Integrated Auditing of ERP Systems. Wiley
interaction. This technological trend demand ERP systems to help manage and store data
of the customer details and hence should be consistent throughout. However, there are
great chances of risk of customers’ dissatisfaction in case if accurate information is not
maintained. This may case repeated messages to be received by different parties having
no interest in the offering. Potential sales opportunities related to services can be hit
effectively if The VW Group is provided with timely and accurate information and will
eventually result in enhanced customer loyalty and satisfaction.
Solution
The solution for this challenge do exists. These technologies like telematics will provide
The VW Group with information building opportunities so as to allow it to better
understand customers need and demands more closely. The technological services and
tools like personal productivity and telediagnostics will require storage of data, data
access and provisioning of application that are local to the car. Consequently, the
successful launching of telematics infrastructure will require data synchronization
capability having servers at back end. ERP solution will provide important software
components to thee infrastructure needed for telematics21. The most comprehensive
information is of the vehicle and will be catered by an efficient ERP solution taken and
chosen by telematics infrastructure of the VW Group.
21 Nah, F. F. (2003 ). Enterprise Resource Planning: Management, Social and Organizational Issues. Lawrence
Erlbaum
Conclusion
In order to meet its customers need The VW Group and other vendors in automobile
industry have to position themselves uniquely so as to improve their ability to better
understand and meet the customer’s need and to remain profitable by having competitive
edge in the market. Furthermore, although majority of the companies in this industry are
following back to basic approach, the VW Group needs to focus on a strategy that will
incorporate emerging technologies and will lead it towards the core competency
improvements. This emerging technology should come from strategic solution like an
ERP. ERP will help the VW Group understand their issues and can provide it with best
solution it can go with. Such solution will be specifically designed for the VW Group.
As matter of fact, ERP will help the VW Group and its dealerships around the globe to
transform their process in business ranging from designing to production and all other
important aspects of business so that a big strategic objective can be met. Furthermore,
ERP solution is uniquely stands in the market to help automotive organizations help
understand their current need in order to determine the market and most importantly
customer’s needs and requirements22. In particular ERP can help the VW Group to enable
the development of products collaboratively, increase sensitivity towards customer
demands, try to obtain and provide for the better value, assist in adopting manufacturing
environment which is lean and agile, to have an effective and efficient change
management, enablement of automotive lifestyle. The key benefits of an ERP solution to
the Group are improved coordination across various departments having core processes
22 Sheldon, D.H. (2005). Class AN ERP Implementation: Integrating Lean and Six Sigma. J. Ross
of the business and increased efficiencies of doing business. The immediate and
instantaneous benefit for the VW from implementing ERP solution is that they can expect
drastic reductions in operating costs. Such reductions may include lowering cost of
maintaining control of inventory, lower costs of production, reduction in costs for
marketing and much reduces costs of help desk support.
ER will also facilitate the VW Group in Day-to-Day activity Management. This is the
other benefits of implementing ERP solution i.e. facilitating of day-to-day activity
management. The implementations of ERP solution will help development establishment
of data warehouses which are the backbone of any information system. ERP solution
offer will offer the VW Group better data accessibility so that management can have up-
to-the-minute accessibility of the business critical information to help them in decision
making and controlling management activities. ERP will also help the VE Group with
actual costs of activities tracking and/or controlling and will perform costing based on
activity.
Finally the most important aspect of ERP benefit is assisting in Strategic Planning for the
VW Group.
Strategic Planning is said to a premeditated set of steps23. These aspects carefully assess
requirements and resources, help define and identify audience to be targeted and a set of
objectives plan, goals and design. And well synchronized strategies with the assurance of
23 Sheldon, D.H. (2005). Class AN ERP Implementation: Integrating Lean and Six Sigma. J. Ross
success which will connect these strategies logically to required and desired outputs and
will help measurement and evaluation of the process and their expected outputs.
Some specific features of ERP will help the VW Group in designing resource planning
which is an integral part of strategic planning. However, the real picture says that the
weakest link in ERP has always been the resource planning. This assumed so due to the
complexities involved in strategic planning and adequate integration lack with Decision
Support Systems and other system integral for decision making. .
Hence an ERP solution will provide the VW group with a competitive edge which only
the global leaders can have.
References
Sheldon, D.H. (2005). Class AN ERP Implementation: Integrating Lean and Six Sigma.
J. Ross
Monk, E. F. & Wagner B J. (2006). Concepts in Enterprise Resource Planning. Thomson
Course Technology.
O'Leary, D. E (2000). Enterprise Resource Planning Systems, Life Cycle, Electronic
Commerce, and Risk. CUP.
Schneider, G. (2001). Enterprise Resource Planning: An Introduction for Financial
Managers - NOT YET PUBLISHED - DUE 2011. Thomson.
Wallace, T. F. & Krezmar, M.H. (2001). ERP- Making it Happen. Wiley.
Langenwalter, G. A. (2000). Enterprise Resources Planning and Beyond. St. Lucie Press.
Nah, F. F. (2003). Enterprise Resource Planning: Management, Social and Organizational
Issues. Lawrence Erlbaum.
Carroll. B. J. (2008) Lean Performance ERP Project Management. St. Lucie Press
Musaji, M. (2002) .Integrated Auditing of ERP Systems. Wiley.
Harwood, S. (2003). Implementing ERP: strategies, planning and solutions. Butterworth
Heinemann.
Nah, F. F. (2002). Enterprise Resource Planning Solutions and Management. Idea Group