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....................................................................5 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 services. 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.....................5 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 accounting of The VW Group can be automated by ERP as it rigorously supports the corporate governance mandates like Sarbene-Oxly etc..........6 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. ..........................................................6 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 satisfaction........................6 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..........................................................................................................................7 Benefits of Implementing ERP............................................................................................7 Reduce Time-To-Market Cycle Of New Product:.........................................................13 Challenge: Higher Outputs, Lower Stocks and Reduction in Waste.............................14 Solution..........................................................................................................................15 Challenge: Globalization and Competition....................................................................15 Solution..........................................................................................................................16 Increased use of technology...........................................................................................16 Solution..........................................................................................................................17 Conclusion.........................................................................................................................18

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 and
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.

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.

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.

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 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.

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

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 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

7

Schneider, G. (2001). Enterprise Resource Planning: An Introduction for Financial Managers - NOT YET

PUBLISHED - DUE 2011. Thomson

product manufacturing and development in real time can be effectively managed by delivering high quality products hence increasing customer satisfaction8. 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.
8

Langenwalter, G. A., (2000). Enterprise Resources Planning and Beyond. St. Lucie Press.

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.

9

Carroll. B. J. (2008) Lean Performance ERP Project Management. St. Lucie Press

10

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 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

11

12

Harwood, S. (2003). Implementing ERP: strategies, planning and solutions. Butterworth Heinemann.

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 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

13 14

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 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.
15

Harwood, S. (2003). Implementing ERP: strategies, planning and solutions. Butterworth Heinemann.

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 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.
16

Musaji, M. (2002) .Integrated Auditing of ERP Systems. Wiley

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. 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.
17

Nah, F. F. (2002). Enterprise Resource Planning Solutions and Management. Idea Group

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 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, engineerto- 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

18

Nah, F. F. (2003 ). Enterprise Resource Planning: Management, Social and Organizational Issues. Lawrence Erlbaum

19

Musaji, M. (2002) .Integrated Auditing of ERP Systems. Wiley

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 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
20

Musaji, M. (2002) .Integrated Auditing of ERP Systems. Wiley

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 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
21

Nah, F. F. (2003 ). Enterprise Resource Planning: Management, Social and Organizational Issues. Lawrence Erlbaum

information is of the vehicle and will be catered by an efficient ERP solution taken and chosen by telematics infrastructure of the VW Group.

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
22

Sheldon, D.H. (2005). Class AN ERP Implementation: Integrating Lean and Six Sigma. J. Ross

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 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 upto-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 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.

23

Sheldon, D.H. (2005). Class AN ERP Implementation: Integrating Lean and Six Sigma. J. Ross

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