Running Head: Operational Decision Making: VAUXHALL MOTORS

OPERATIONAL DECISION MAKING: VAUXHALL MOTORS

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Operational Decision Making: VAUXHALL MOTORS

EXECUTIVE SUMMARY

In the efficient functioning of any company, it is essential that the operations cycle is
adequately maintained and adhered to. This report has been prepared in the form of a
management report and is addressed to the stakeholders of the organisation. In this report, an
analysis of the critical areas of the operations cycle has been outlined. The value choices of
the organisation in respect to speed, quality, cost and dependability have been critically
analysed. The 4 Vs of the supply chain, concerning the operational choices of the
organisation have also been highlighted in this report. The structure, location and layout of
the supply chain for VAUXHALL MOTORS have been discussed. At the end of the report,
the supply chain analysis has been aligned to the working environment of the company.

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Operational Decision Making: VAUXHALL MOTORS

TABLE OF CONTENTS
1: INTRODUCTION

2: VALUE CHOICES OF THE ORGANISATION

3: OPERATIONAL CHOICES OF THE ORGANISATION

4: STRUCTURE, LOCATION AND LAYOUT OF SUPPLY CHAIN

5: EVALUATION OF THE ORGANISATIONAL FIT

6: CONCLUSION

REFERENCES

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Operational Decision Making: VAUXHALL MOTORS

1: INTRODUCTION

This report outlines the operations cycle that is involved in an organisation and discusses its
importance and significance to the management. To explain the importance of an operational
cycle, Vauxhall Motors Ltd has been chosen. Established since 1903, Vauxall Motors is
originally a segment of Groupe PSE ("About Our Company & Its Values | Vauxall", 2019). It
is the second largest-selling car brand of UK with a staff of over 1800, capacity of around
200,000 units and the latest recorded (Q3, 2018) revenue of over €3.9 billion ("Groupe PSA:
Q3 2018 Group revenue +7.8% growth", 2019).

The recovery of the company from this ‘failure’ to its operational functioning has
been discussed in this report. The concept of supply chain management and the value and
operational choices of the organisation have been considered.

2: VALUE CHOICES OF THE ORGANISATION

Vauxhall Motors is a part of automobile industry for over 100 years, which is generally a very
competitive industry. It has a lot of competitors, with a wide range of close substitutes. These
factors influence the strategic decisions of the company, and it is essential that the company
builds on it to gain a competitive edge over its rivals. Vauxhall used the market segmentation
method to identify its customer base. The market demographics developed by Vauxhall
reveals the following information:

Table 1: Vauxhall market segmentation (Haggerty, 2013)

Age 18 to 65
Gender Males and Females
Family Size 1 to 2, 3 to 4, and 5+
Income £1,000 and above
Family Lifestyle Includes all

Table 2: Market segmentation based on psychographic variables (Haggerty, 2013)

Social Class Middle and Upper class

Lifestyle No specifics available
Personality Ambitious and demanding

Vauxhall has to consider the market pattern of the demand of its consumers. Customers from
different localities in the same country may have different tastes and preferences. Therefore,

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it is essential that the company provides value to its consumers after analysing the relevant
market segment (Garvin, 1988). Vauxhall has numerous showrooms all over the UK. The
showrooms have been placed at locations that would attract visits from the most number of
potential customers. After analysing the market segment, Vauxhall has developed the
following value choices for its supply chains:

 Lean Manufacturing
 Cost
 Quality and
 Speed (Stewart, 1997)

For an automobile company, these are the most important values that a company can
generate. Customers expect fast delivery of the products, expect the excellent quality of
materials used to process the automobile, and despite all these additions, expect the cost to be
affordable. In order to facilitate the value choices adopted by Vauxhall, it undertakes the
following activities:

 Cost – Vauxhall manufactures its automobile products at a relatively lower

price as compared to the industry standards. In order to control costs, Vauxhall
follows the concept of lean manufacturing and six sigma process. The
company purchases meagre amounts of raw materials from its suppliers, and
produce most of them indigenously. For instance,Vauxhall manufactures steel
fibre framework of its cars with Opel (Dettmer, 2003). While other companies
delegate the manufacturing of engines to other companies, Vauxhall prefers
manufacturing them on its own. This reduces its production costs and results
in a higher profit for the company(Coomber, 2017).
 Quality –Vauxhall stresses on the variety of its products which include
passenger cars and light commercial vehicles. To improve its efficiency
further, it has partnered up with Bedford vehicles to focus on vans, buses and
trucks manufacturing. It aims to provide good quality automobiles (which are
one of their main selling propositions) to its customers. In order to facilitate
this value provision, the management of the company follows strict guidelines
regarding the production of its automobile products ("Vauxhall Motors: a
history", 2009). Vauxhall claims to have the technologies which will be
majorly popular in the current era of sustainability of environmental
development. Besides, state-of-the-art factories, adequately trained staff and

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adherence to the legal frameworks in the country are some of the main
activities that Vauxhall undertakes to ensure good quality of its automobiles
(Davies, 2012).
 Reliability –This is one of essential value choices that Vauxhall has to consider
regularly, as customers stress on this the most. Readily available automobile
products attract customers and ensure their loyalty to the company. Vauxhall
follows a three-tier approach to solve this issue: training, research and
implementation. Vauxhall trains all its employees to provide efficient, yet
effective services. Vauxhall conducts regular market research and considers
customer feedback as one of the main learning points. Implementation of the
strategies is the last tier of ensuring the reliability (availability of vehicles for
customers) by the organisation. Knowing the market conditions is essential,
but being the first to change decides the company's position in the
market(Bolla, 1995). This serves Vauxhall significantly because it is a
customer-focused company.

3: OPERATIONAL CHOICES OF THE ORGANISATION

The market segmentation of Vauxhall provided above shows how it affects the product
designing of Vauxhall. For a company that is engaged in the automobile industry, it is
challenging to adhere to the needs and demands of a diverse range of customers. Table 1
above represents the diversity of consumers of Vauxhall. In order to address this issue, the
company needs to make a sales forecast so that it can meet its consumer’s demands and at the
same time, reduce its losses.

The sales in a year for Vauxhalldo not remain constant, as sales depend upon a large number
of factors. The social and macro-environmental factors determine the number of sales in a
given year (Bos & Millone, 2015). Therefore, in order to address the issues, Vauxhall had to
design its operational choices. An analysis of the executive management of the company has
been made below:

 Volume – As elaborated in “Reliability”, Vauxhall focuses on enough operations to

meet market requirements. The role of the employees here is crucial as they have to
guarantee the quality of the product, keeping the numbers high at the time of peak
season. While a higher capacity can meet the demands of the consumers all at once,

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maintaining quality is also one of the main requirements of the company, especially
when Vauxhall is following just-in-time inventory system (Stewart et al., 2009).
 Variety –Vauxhall offers a massive range of automobiles to its consumers with a focus
on a few segments. This not only helps them to capture a large portion of the market
by satisfying the diverse needs of the consumers but also gives the company a chance
to negate the competition from close substitutes in the market. However, variety has a
negative correlation with volume. Higher varieties will lead to a lower amount, and
vice-versa (ibid). One of the main reasons that Vauxhall is the second largest
automobile company in UK is because it wide variety of focused choices to its
consumers.
 Variation –This represents the level of changes in demand in the market. Vauxhall has
well-maintained guidelines to make market predictions, to face the competition in the
market steadily. However, variations are very hard to predict. One example of this
from Vauxhall’s point of view is when the Luton manufacturing plant received an
investment in the month of April in 2018. The company made cost decisions to
increase the pressure on competition. This has resulted in increased sales by 22% in
2018.
 Visibility –This refers to the processes that are visible to the consumers. It plays an
important role in enhancing the customers engaged with the company. Vauxhall has a
prompt feedback system, which employs feedback from its customers. Besides,
Vauxhall has a well-maintained website and press releases that keep the customers
informed about the proceedings of the company ("Customer Care | Vauxhall", 2019).

4: SUPPLY CHAIN

After the acquisition of Opel and Vauxhall by PSA in November 2017, the company had to
cut the staffing by around 4000 employees at its Ellesmere Port manufacturing plant (Kable,
2017). Cutting out the employees does not add to the reputation of the company but it could
be considered as a part of timely strategic decisions which were also taken by the company to
prove the importance of effective supply chain management. Brexit is close (29th March,
2019) and the level of uncertainty over supply chain structures among the companies is high
(Meyer, 2017). Considering this factor, there is concern for the Ellesmere manufacturing
operation’s future.

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Operational Decision Making: VAUXHALL MOTORS

Keeping in mind the complexities, the next step to address the issues is to control the
elements related to inventory management. In order to balance between demands and supply
in the market, Vauxhall uses the just-in-time system for the supply of components (Mangan,
Butcher & Lalwani, 2010).

Under this method, there is no on hand inventory, so the managers are required to make the
products available when it’s demanded. The demand forecast need to be accurately placed by
the forecasters. There is no inventory cost as there is no storage. Vauxhall has to cooperate
with the suppliers in order to have an effective supply chain. The company also coordinates
with the third parties that financial analysts (to calculate lead times, re-order levels and re-
order quantities), and audit firms (to conduct an audit of the firm) (Wild, 2017). However,
collaboration with suppliers and third parties to provide these services gives rise to certain
concerns:

 If a regular supplier has a breakdown, there would be a major fall for the company to
fulfil the commitments to customers as they are based on JIT system. This results in
competitors to take over.
 It’s not possible for Vauxhall to meet the requirements of an unexpected bulk order
 An inaccurate demand forecasting leads to unavailability of products at the time of
demand. Investments need to be made on IT for better forecasting system, and better
communication system with suppliers (Black, 2010).

With Brexit on the verge of happening, the UK now faces a serious need to develop a strong
local supply chain network. While government strategize the future plans for the UK based
automotive industry, the focus should be on developing the policies that will effectively
enhance the local production of vehicles and domestic supply chain. This in turn will
drastically lower down the price of spares and components for the UK made automobiles.

PSA’s Chairman Carlos Tavares, who bought Vauxhall from GM in 2017, said “A hard Brexit
would present a nice opportunity to be able to source from inside the UK.” He further showed
his determination in the government that the authorities will recognise this need and will
focus significantly on developing local supply chain policies to ensure a stable and
sustainable manufacturing of Vauxhall automobiles in the UK (Dean, 2017).

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5: EVALUATION OF THE ORGANISATIONAL FIT

As discussed above, Vauxhall aims to provide value to its customers means quality, cost and
speed. In order to align the work activities with the value choices, Vauxhall has to follow a
clear process map. Vauxhall follows the ‘high-level process map’ to facilitate work activities
to align with its value choices. The company prefers a high-level process map because it
reflects a high-level depiction of interactions of the company with its suppliers, input,
processes, output and customer (SIPOC). The fit of Vauxhall policies with the consumer
demands have been mentioned depicted in the I-P matrix:

 Speed
Performance

 Cost

Quality

 Importance

Figure 1: IP Matrix of VAUXHALL's fit

(Source: Created by the Author)

The IP matrix places the speed value over everything else. It has been found that the speed
provided by the company has been given the most importance. The P-D ratio reflects the time
required to produce a product and the time provided by the customer to get it delivered. This
coincides with the IP matrix, with speed being the most determinant factor for the company.
The P-D ratio calculation denotes that the time taken by VAUXHALL to deliver its products
is relatively smaller, with the ratio being small. This means that the inventory management

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system of the company is efficient in meeting with customer demands. The perpetual
inventory ‘just-in-time’ approach has benefited the company in efficiently managing its P-D
ratio. Therefore, the organisational fit of VAUXHALL is aligned with its value provisions.

6: CONCLUSION

This report studies the operational management approach of one of the largest automobile
multinational companies in the world – VAUXHALL. The company aims to provide value to
its customers on the grounds of speed, quality and cost. To facilitate efficient provision of the
said values, the company has a well-laid approach to the volume, variation, variety and
visibility. The operational management of the company fits well with the demands of its
customers, and VAUXHALL manages to implement the same successfully. The inventory and
supply chain management practices like JIT of the company is well designed so that it can
cater to the needs of numerous consumers in the market, while at the same time, staying
aligned to its policies of operational management and value provision.

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REFERENCES

About Our Company & Its Values| Vauxall. (2019). Retrieved from
https://www.vauxhall.co.uk/about/our-heritage.html

Black, K. (2010). Business statistics. Hoboken, NJ: Wiley.

Bolla, P. (1995). The Visibility of Visuality: Vauxhall Gardens and the Siting of the
Viewer. Vision And Textuality, 282-295. doi: 10.1007/978-1-349-24065-4_14

Coomber, I. (2017). Vauxhall: Britain's Oldest Car Maker. UK: Fonthill Media.

Customer Care | Vauxhall. (2019). Retrieved from https://www.vauxhall.co.uk/tools/contact-

us-customer-care.html

Davies, A. (2012). Achieving sustainability in manufacturing via organisational and

operational learning. International Journal Of Sustainable Engineering, 5(2), 135-144.
doi: 10.1080/19397038.2011.628420

Dean, S. (2017). 'Hard' Brexit would be good news for Vauxhall. Retrieved from
https://www.telegraph.co.uk/business/2017/03/06/psa-seals-19bn-takeover-vauxhall-
opel/

Dettmer, R. (2003). Hybrid pioneers [hybrid electric vehicles]. IEE Review, 49(1), 42-45. doi:
10.1049/ir:20030102

Groupe PSA: Q3 2018 Group revenue +7.8% growth. (2019). Retrieved from
https://www.businesswire.com/news/home/20181024005790/en/Groupe-PSA-Q3-2018-
Group-revenue-7.8

Haggerty, A. (2013). Vauxhall to become first advertiser targeting gender and age
demographic on Channel 4oD's new ad system. Retrieved from
https://www.thedrum.com/news/2013/08/16/vauxhall-become-first-advertiser-targeting-
gender-and-age-demographic-channel-4ods

Kable, G. (2017). PSA Group wraps up purchase of Opel and Vauxhall with new financial
company. Retrieved from http://www.autocarpro.in/news-international/psa-wraps-
purchase-opel-vauxhall-financial-company-26856

Mangan, J., Butcher, T., & Lalwani, C. (2010). Global logistics and supply chain
management(p. 106). Chichester: Wiley.

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Meyer, D. (2017). Brexit Uncertainty Is Already Causing Supply Chain Problems, Says
Industry Body. Retrieved from http://fortune.com/2017/11/06/brexit-uncertainty-supply-
chain-cips/

Stewart, P. (1997). Striking Smarter and Harder at Vauxhall: the new industrial relations of
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Stewart, P., Murphy, K., Danford, A., Richardson, T., Richardson, M. and Wass, V.J.
(2009). We sell our time no more: Workers’ struggles against lean production in the
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Vauxhall Motors: a history. (2009). Retrieved from

https://www.theguardian.com/business/2009/sep/10/vauxhall-history

Weygandt, J., Kieso, D., & Kimmel, P. (2010). Financial accounting (p. 207). Hoboken, NJ:
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Wild, A. (2002). Best practice in inventory control. Oxford: Butterworth-Heinemann.

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