Executive Summary of Audi Supply Chain Management

The aim of this report is to provide deep insights regarding supply chain management of Audi organization. Audi is a German corporation that manufactures luxury vehicles for its customers. Audi headquarter is situated in the city of Ingolstadt Germany. Audi is a part of the Volkswagen Group. Audi has begun its operations in the early 20^th century. Audi is present at 18 locations in different countries around the world. Audi has two production facilities in Germany on Neckarsulm and Ingolstadt sites. The organization has production facilities in Belgium, Hungary, Mexico, Spain, and Russia as well. Audi has production facilities in Asian countries as well which includes China and India. Audi has partnered with the number of suppliers who deliver various components to the organization. It means that Audi is performing Multi sourcing instead of a single source. The organization supports the local institutions for providing the supplies for the production of the vehicle. Audi has showrooms in different countries around the world. The customers who want to purchase Audi vehicles can visit the Audi showrooms. The external environment factors have a huge impact on the supply chain activities of automotive companies. The global nature of the Audi business gets affected by the external environment factors which include political factors, economic factors, legal factors, and technological factors, etc. the trade deals, tariff, and cost of the export or import parts have a significant impact on the supply chain of Audi. It is recommended to the organization to ensure high-quality standards so that issues in its automobiles can be reduced up to a lot of extents.

Table of contents

Executive Summary. 1

1.    Introduction. 2

2.    Supply Chain Map. 3

2.1.     Facilities. 3

2.2.     Location of the Suppliers. 4

2.3.     Supplier Used (Multi source v/s Single source) 4

2.4.     Logistics/Mode of transportation. 5

2.5.     Customers. 5

3.    Current Issues in the Supply Chain Management of Audi 6

3.1.     Lack of visibility and routing of parts cause delay in production. 6

3.2.     Influence of external environment factors. 6

3.3.     High variable & Fixed Costs. 7

3.4.     Failure in product 7

4.    Expected Development in Supply Chain. 8

4.1.     Inventory management 8

4.2.     Risk management Strategies for external environment factors. 8

4.3.     Accurate Cost Control 8

4.4.     Enhancing Quality Control 9

5.    Conclusion & Recommendation. 9

6.    References

1.     Introduction of Audi Supply Chain Management

Audi is a German corporation that manufactures luxury vehicles for its customers. Audi headquarter is situated in the city of Ingolstadt Germany. Audi is a part of the Volkswagen Group. Audi has begun its operations in the early 20^th century. Over the years the organization has experienced a significant amount of growth. Audi has a presence in many parts of the world which include countries like Hungry, Belgium, China, and Brazil, etc. Audi is among the bestselling automobile brands in the world. According to the statistics of 2018, the organization has employed 91674 employees worldwide. Overall the corporation has created a brand image in the mind of the customers.

2.     Supply Chain Map of Audi Supply Chain Management
2.1. Facilities of Audi Supply Chain Management

Audi is present at 18 locations in different countries around the world. Audi has two production facilities in Germany on Neckarsulm and Ingolstadt sites. The organization has production facilities in Belgium, Hungary, Mexico, Spain, and Russia as well. Audi has production facilities in Asian countries as well which includes China and India. The expansion of the organization in different parts of the world allows the corporation to meet the need of its various customers who are looking for luxury vehicles (Audi, 2020).

Figure 1: Audi Facility (Audi Media Center 2020)

2.2. Location of the Suppliers of Audi Supply Chain Management

Audi has partnered with the number of suppliers who deliver various components to the organization. The organization supports the local institutions for providing the supplies for the production of the vehicle. In different countries, different suppliers provide the components to the organization. The organization guidelines allow the corporation to maintain a strong relationship with its suppliers (Audi, 2020).

2.3. Supplier Used (Multi-source v/s Single source) of Audi Supply Chain Management

As discussed earlier Audi has partnered with the number of suppliers who deliver various components to the organization. It means that Audi is performing Multi sourcing instead of a single source. The organization supports the local institutions for providing the supplies for the production of the vehicle. The organization pays special attention to sustainability and it has asked its suppliers to follows the sustainability requirements set by the organization.

Figure 2: Suppliers of Audi (Automotive News Europe 2020)

2.4. Logistics/Mode of transportation of Audi Supply Chain Management

From production to distribution various modes of transportation are utilized by the organization to deliver the product to its customers. The material to the factory is distributed through trucks. After production, the automobile is transported to the showroom via trucks. For exporting cars into different countries ships and rail transportation is utilized (Cordón, et al., 2013).

2.5. Customers of Audi Supply Chain Management

Audi has showrooms in different countries around the world. The customers who want to purchase Audi vehicles can visit the Audi showrooms. The Audi dealership and service centers provide services to customers who want to purchase the vehicle.

Figure: 3 Audi showroom (Group 1 Automotive)

3.     Current Issues in the Supply Chain Management of Audi
3.1.           Lack of visibility and routing of parts cause a delay in production

It is quite evident that the automobiles which Audi produces contain approximately 30,000 or more components. These components are sourced by the organization from its different suppliers. If only one part or components experienced delay than the whole production process comes to a halt. Therefore one of the major challenges which automotive manufacturers like Audi face today is the delay in the components which are used in the manufacturing of the vehicles. Therefore focusing on effective inventory management is necessary so that shortage of components can be mitigated because the shortage of inventory leads to shutting down production which will ultimately decline the revenue of the organization (BRZOZOWSKI, 2020).

3.2.           Influence of external environment factors

The external environment factors have a huge impact on the supply chain activities of automotive companies. The global nature of the Audi business gets affected by the external environment factors which include political factors, economic factors, legal factors, and technological factors, etc. the trade deals, tariff, and cost of the export or import parts have a significant impact on the supply chain of Audi. In addition, issues like natural disasters can also affect the supply chain of the organization. therefore the organization has to realize the external environment factors that can disrupt the supply chain activities so that such a strategy can be developed which will help the organization to counter such issues effectively (Spender, 2014).

3.3.           High variable & Fixed Costs of Audi Supply Chain Management

Automotive manufacturers like Audi have to face high variable and fixed costs in their entire supply chain activities. The costs which the organization has to face include high staff salaries. The salaries of the staff members are high because they possess technical skills. The research and development (R&D) cost is also quite high. Audi focuses on R&D, therefore, have to face a significant amount of R& cost. The costs related to logistics/transportation, suppliers, and producers cause a challenge for the organization. Therefore it can be said that it is important for the organization to analyze its costs to maintain effective supply chain activities (Kourdi, 2015).

3.4.           Failure in product of Audi Supply Chain Management

The failure in the products occurs which not only causes inconvenience to the customers but also declines customer loyalty and overall brand image. Audi ensures high-quality standards so that issues in its automobiles can be reduced up to a lot of extents. However, still, some failures occur in the product due to ineffective supply chain activities. The organization has set standards for its suppliers so that such issues can be mitigated. Over the years issues like problems in the control module of the cars have been immersed. In the future, the organization will have to maintain high-quality standards so that such issues won’t occur in the future (cerroneseuropean, 2018).

4.     Expected Development in Supply Chain
4.1.           Inventory management of Audi Supply Chain Management

Inventory management has huge significance in ineffective supply chain management. Without inventory management, automobile manufacturers like Audi cannot achieve success. In the automobile industry, inventory plays a key role in the production process. Different components have to be stored in the inventory so that at the production time they can be utilized. If the inventory is not managed appropriately than the delay in the production or total shutdown of the production unit can occur. The latest inventory management technologies and AI are now utilized for managing the inventory. The latest inventory optimization and scheduling software allow the organization to manage the inventory effectively (Beheshti, 2010).

4.2.           Risk management Strategies for external environment factors

The external environment factors have no doubt affect the supply chain activities heavily. For controlling or mitigating the impact of external environment factors risk management strategies are needed. The top management of the organization now creates such risk management strategies which allow them to mitigate the impact of external environment factor up to a lot of extents. Audi can take the help of various business analytics software or AI to predict future changes in the external environmental factors. Through such initiatives, the organization can create effective risk mitigating strategies (Gupta, 2016).

4.3.           Accurate Cost Control

The management of cost is necessary for the Audi Corporation so that not only the profit of the company can be maximized but also the organization supply chain activities can become more effective. If the cost of the organization is not going to be managed than the cost of the supply chain activities will increase which will bring various challenges for the company. The cost of the organization can be mitigated through effective budgeting and resource allocation. The organization can utilize the latest technology to identify the tasks where most of the costs are occurring. By doing this the organization can reduce costs up to a lot of extents (Campbel, et al., 2011).

4.4.           Enhancing Quality Control

Enhancing quality is necessary because the customers want a high-quality product with zero errors. As Audi creates luxury goods the customers pay a premium price for the vehicles. It means that the customers expecting high quality from the company. The errors or faults in the product not only reduce customer loyalty built also declines the reputation of the organization. The solution to this problem is to enhance the quality control mechanism in the organization. The quality control mechanism at Audi is quite effective. the various standards which Audi has implemented have allowed Audi to create high-quality vehicles.

5.     Conclusion & Recommendation of Audi Supply Chain Management

It is concluded that Audi has partnered with the number of suppliers who deliver various components to the organization. It means that Audi is performing Multi sourcing instead of a single source. The organization supports the local institutions for providing the supplies for the production of the vehicle. The organization pays special attention to sustainability and it has asked its suppliers to follows the sustainability requirements set by the organization. The external environment factors have a huge impact on the supply chain activities of automotive companies. The global nature of the Audi business gets affected by the external environment factors which include political factors, economic factors, legal factors, and technological factors, etc. the trade deals, tariff, and cost of the export or import parts have a significant impact on the supply chain of Audi.

It is recommended to the organization to ensure high-quality standards so that issues in its automobiles can be reduced up to a lot of extents. However, still, some failures occur in the product due to ineffective supply chain activities. The organization has set standards for its suppliers so that such issues can be mitigated. Over the years issues like problems in the control module of the cars have been immersed. In the future, the organization will have to maintain high-quality standards so that such issues won’t occur in the future. Focusing on effective inventory management is necessary so that shortage of components can be mitigated because the shortage of inventory leads to shutting down production which will ultimately decline the revenue of the organization.

6.     References of Audi Supply Chain Management

Audi, 2020. Company. [Online]
Available at: https://www.audi.com/en/company.html

Beheshti, H. M., 2010. A decision support system for improving the performance of inventory management in a supply chain network. International Journal of Productivity and Performance Management, 59(5), pp. 452-467.

BRZOZOWSKI, A., 2020. Audi e-Tron Production Suddenly Suspended. [Online]
Available at: https://carbuzz.com/news/audi-e-tron-production-suddenly-suspended

Campbel, D., Edgar, D. & Stonehouse, G., 2011. Business Strategy: An Introduction. s.l. Macmillan International Higher Education.

cerroneseuropean, 2018. Causes Behind Control Module Failure in Audi Cars. [Online]
Available at: https://www.cerroneseuropean.com/causes-behind-control-module-failure-in-audi-cars/

Cordón, C., Hald, K. S. & Seifert, R. W., 2013. Strategic Supply Chain Management. s.l. Routledge.

Gupta, S. M. ed., 2016. Reverse Supply Chains: Issues and Analysis. s.l. CRC Press.

Kourdi, J., 2015. The Economist: Business Strategy 3rd edition: A guide to effective decision-making. s.l.: Profile Books.

Spender, J.-C., 2014. Business Strategy: Managing Uncertainty, Opportunity, and Enterprise. s.l. OUP Oxford.