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Volkswagen Case Analysis
Volkswagen Case Analysis
2. Launch of New Vehicles and New Facelifts: The VGCA plans on launch four new vehicles
and four new facelifts every year for the next three years i.e., twelve new vehicles and twelve
new facelifts. Each new facelift would add 1000 new SKU and each new vehicle would add
3000 new SKU. Thus, the SKUs would increase by 16000 each year for the next three years
and among them 75% of the SKUs would be required to be kept inventory at the fast-moving
Toronto-PDC. But they only have a capacity to increase 20,000 SKUs in future compared to
the required increase of 48,000 SKUs over a period of 3 years.
3. 2016 Growth Strategy: VGCA sold 69,000 vehicles in the previous year and had a plan to
annually increase the sales volume by 10% over the next five years. This will also increase
the growth of demand for spare parts at the same rate. With this growth strategy, plans were
made to open 17 new dealerships in the market over the same next five years primarily in
Ontario and British Columbia. So, in order to make the Toronto PDC able to service the
increased demand it was important to redefine the warehousing.
4. Dependency on the Newark PDC: The Toronto PDC is a fast-moving one and stores mostly
60-80% of the most commonly ordered SKUs. They supplied parts to 122 Volkswagen and
Audi car dealerships across Canada. The Toronto PDC relied on the Newark PDC, the largest
PDC in U.S. to acquire those parts which it did not store. This dependency on the Newark
PDC adversely affected the service level that the PDC was achieving. Hence, expansion
would enable VGCA to house more parts and fulfill their commitment of delivering parts
within 24 hours.
5. Low Service Levels: The sale of service parts shipped out of the Toronto PDC to Canadian
dealerships amount to $200 million in revenue. So, the delivery of service parts was a major
source of revenue for VGCA, and it was important to maintain good relationship with the
dealers. The delivery of spare parts was centralized in VGCA, and they had a master
agreement with all their dealers that committed them to deliver the parts within 24hours of
order receipt. The internal target set by the management for filling orders accurately and
within time was 95%, compared to which Toronto PDC had only 93%.
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Logistics Management, Group Number: 5 (B), Team Member Names: Anunay Jallan, Bhaskar Ghosh,
Musaid Helal Khan, Varun Gokhale
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