The Case Study of Vw Ag

Everything is in the world has their aims, missions and responsibilities. While a tree has to produce oxygen, the aeration of soil must be provided by earthworms. In this context, the primary mission and responsibility of companies is to sustain their life. However, whilst they do this, also they have to protect the balance of the nature and hence companies should ensure their improvement not only economically but also socially and environmentally. “VW AG is aiming to be Number 1, both economically and ecologically by 2018” (VW, 2010).

For this purpose, the case study of Volkswagen is investigated on all these three characteristics. Moreover, to be more cautious, the Volkswagen AG Sustainability Report will be compared with European Automobile Industry Report and SMMT Automotive Sustainability Report in this study. If a company is not strong enough economically, it cannot be expected that this company may be sustainable. Thus, companies should try the cheapest cost to be powerful economically. The most important way of achieving cheapest cost is to reduce purchase costs because the purchase costs in the auto industry exceed 60% of the sales and hence any savings are significant (Slaper and Hall, 2011).

VW has been trying the cheapest cost on all action areas; production, inventory, location, transportation and information and they have a purchasing strategy which helps to improve them (Figure X). Table 1 shows some examples of sustainability practices at VW AG. Furthermore, it may be claim that many economic applications also help for social and environmental characteristics of supply chains. For example, when VW started to use trains for transportation, this reduced 35 kg CO2 emissions per car in addition to cheaper cost.

Figure X: The framework of VW’s Purchasing Strategy

Table X: The examples of sustainability implementation at VW. (Compiled from the VW Sustainability Report, 2010)

Senge claims (2010, p. na) “sustainability issues are often supply chain issues and 90% of supply chain issues are still transactional so big companies pressure their upstream suppliers to get their cost down. There is very little trust and very little ability to innovate together.” However, VW started to investigate the best sustainability options in the mid 1990s and they noticed that if they want to be good at sustainability, they have to work together with their stakeholders and they uses the integrated structure of sustainability. Moreover, they created a useful network system and they involved everyone from first supplier to end customer. Figure X: The sustainability of the VW AG.

In addition to network system, VW has a special school called Prioritat and there are various courses for employees and suppliers at this course. For sustainability aim, they work together on all supply chain networks and they try to improve all the materiality matrix topics (Figure X).

Figure X: The main courses at Prioritat.

Figure X: The materiality matrix of VW.

Considering from the green perspective, VW claims that they are 90% green in all their supply chains and their cars are green as much as possible with today’s opportunities. However, the independent entities have some doubts about this. According to The European Union Sustainability Report car manufacturers may not try to do their best because of some marketing and sales considerations. It is believed that when companies focus on mainly green issues, they may perform better between 35% and 40%. For example they may produce and distribute 100% electricity cars better than their claims.

Lastly the terms of behavioural characteristics, auto industry shows the characteristics of efficient supply chains due to the relatively predictable demand, more than two years product cycle life, relatively lower contribution margin (5% to 10%) , low product category, low average stock rate (1% to 2%) and so on. In conclusion, when this information compares the independent entities’ reports, VW seems to try to be one of the best for sustainability but they should improve their performance not only cost reduction and economical issues but also green and social issues like all other car manufacturers.