Warehousing Strategy At Volkswagen Group Canada Inc Harvard Case Solution & Analysis

Introduction

Volkswagen is a highly recognized global brand that operates from Germany and has expanded globally to compete with some renowned brands. The company ranks among the largest automobile makers in the world and has established a strong position for itself through strong segmentation and impressive technological strength. Due to the strong reputation and rich history, the company has acquired the number one position in the European market and the largest maker of automobile in the region.

The company has a strong brand portfolio that offers not just commercial vehicles, but also operates in low-income and luxury cars as well. The presence of the company is around 153 countries and production capacities in 15 countries are a strong proof of the global strength of the company. The company has a strong production ability that allows it to produce around 30,000 cars every day and meet the growing demand efficiently.

However, Volkswagen Group Canada has a parts distribution center that is located in Toronto, Ontario and holds the responsibility of delivering spare parts across the country. This PDC has the ability to carry around 60-80% of parts that are commonly ordered and holds the accrued amount of sales for both the Volkswagen and Audi.

The Volkswagen Group Canada is planning to initiate a growth plan and the nature of the plan is aggressive. According to this plan, the PDC will be introducing or launches around 4 new products and 4 new product facelifts every year for a span of three years. Besides that, the expansion plan includes a 10% annual growth rate that is set to be an estimated target.

The responsibility is assigned to the director of the warehousing and logistics of Volkswagen Group Canada, who will initiate this strategy after analyzing the capacity of the PDC in Toronto. Furthermore, she also has to determine which option is appropriate for expansion after viewing the operational and financial feasibility of each alternative.

Answer 1:

The expansion is essential and the need of the time as the industry is already facing a crucial period and the production needs uplift in order to meet the future demands. The Volkswagen Group, Canada’s warehousing demand is around 36000 within 5 years as projected by the company. This scenario indicates that the demand is expected to reach the amount of 36000 within 5 years due to aggressive growth plan.

The growth plan suggests that the company will produce around 4 new products every year and the same of a number of product face lifts every year. According to this target, the company is aiming to produce or launch 12 new products in a span of three years and in the same period the product face lifts will be launched that are also 12 in number. This entire projection estimates that around 12 new products and face lifts respectively will be produced in the span of three years and in the next two years no such objectives are set.

However, each new face lift will add around 1000 stock keeping units in the inventory for the company to manage. Similarly 3000 new stock keeping units for new products will be added to the inventory in this period. Furthermore, it has been identified that the number of SKUs that the Toronto PDC keeps is almost 75% of the total inventory.

Warehousing Strategy At Volkswagen Group Canada Inc Case Solution

Therefore, according to the calculations shown in the exhibit 1, it is clear that since the inventory capacity of Toronto PDC is 75%, which is why the PDC will have to keep around 36000 units in the inventory. According to the projected amount, around 36,000 new products will be inducted and around 12,000 face lifts will be added to the inventory. However, the 75% capacity determines that only 36,000 SKUs will have to be maintained in the inventory.

However, the total capacity of the Toronto PDC is around 64,000 which indicate that the PDC can manage around 64,000 SKUs that it currently maintains. On the other hand, the PDC has an additional capacity of managing around 16,000 SKUs. Nonetheless, according to the estimated calculations, the PDC will have to acknowledge or will have to manage additional 36,000 SKUs within five years. Thus, the total capacity is about managing 16,000 additional units, which clearly indicates that the current capacity is not able to accommodate the rest of the 20,000 SKUs................

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