SCM 303 Introduction to Supply Chain Management: Volkswagen: Das Supply Chain

By: Alex VanCamp and Kaleigh O'Brien

Volkswagen is an automobile manufacturer based in Wolfburg, Germany. Their cars are widespread across the world, especially popular in the United States. Three of their most popular cars are the Passat, the Golf, and the Beetle (Slugbug). They were founded in 1937 and are the second largest car manufacturer in the world. Volkswagen offers cars that are relatively cheap but are also quality, durable products. They also offer a wide variety of different models of cars and SUV’s. Many of their models have won World Car of the Year and European Car of the Year.

Volkswagen’s supply chain is what allows them to make such quality automobiles at a reasonable price for the customers. This is Volkswagen’s first procurement goal. Their second is to “meet cost targets and ensure profitability of their products of their entire lifespan” (Volkswagen 2012 annual report). In order to do that, they need to have order winners to keep customers buying Volkswagen’s instead of switching over to another of the large car manufacturers. Their third procurement goal is to consistently have high quality components in their automobiles. This means that their relationship with suppliers needs to be strong in order to have small variance in components. Their fourth is “to continue to raise employee satisfaction and the attractiveness of the procurement function”. (2012 annual report) Employee satisfaction is a major factor of supply chain success. If employees are satisfied, they will continue to work towards becoming as efficient as possible. These four procurement goals help Volkswagen achieve supply chain success.

The factories that Volkswagen uses also help them achieve success. They have factories in 19 different European countries, and 8 different countries in the Americas, Asia, and Africa. (Volkswagen Group Production Plants). This variability helps them dominate different parts of the globe for production. Cars can be produced and delivered at with short lead times due to factories near major Volkswagen markets. This causes their delivery costs to be competitive with American automobile manufacturers producing and selling cars in America. This also gives them an advantage if there are extenuating circumstances. Sometimes war or natural disasters can make it impossible to produce products for a certain amount of time. If a company is only producing in one area it could completely stop production opposed to at Volkswagen it would only cause minor damage in production.

In 2008, Volkswagen implemented its Cost-Competitive Country Sourcing program. This program, nicknamed C3, aims at developing new and affordable procurement markets. By implementing this plan, Volkswagen has been able to open new production facilities in Russia, the United States, India and Southeast Asia. These new factories provide cost effective production for both local projects, and act as a supply source for projects worldwide. This program is especially important to Volkswagen’s supply chain because it allows them to continue to deliver quality products, while cutting down on manufacturing costs.

Another unique aspect of Volkswagen’s supply chain model is the concept of “sustainability in supplier relationships” (2008 annual report) that has been in place since 2006. This model ensures that anyone who partners with Volkswagen follows the same social and environmental standards as they do. There are four foundational pillars to this program: “sustainability standards for suppliers, an early-warning system to minimize risk, acknowledgement of our standards by the suppliers together with self-assessment, and finally a monitoring and supplier development process.” (VW 2008 annual report). This program has pushed Volkswagen and its business partners to improve their sustainability programs, and work to protect the environment.

For more information about Volkswagen click here.

Here is a video to learn more about Volkswagen's supply chain