Comprehensive Case Study Analysis- BYD of China Southern, Lecture notes of Accounting

Download Comprehensive Case Study Analysis- BYD of China Southern and more Lecture notes Accounting in PDF only on Docsity! Comprehensive Case Study Analysis- BYD of China Southern New Hampshire University In this comprehensive case study analysis, the improvement of the company’s operations will be addressed. Firstly, the critical elements of generating value for customers and theories and techniques in operations management processes will be explained. I will use a time process map to show the processes for producing one of our products and also a cause and effect diagram that will assess why some of our supply chain partners might have struggle to implement materials need for our manufacturing process. The new location will be analyzed based on political risk, transportation costs, labor productivity, rental costs, labor costs and taxes. Additionally, the inefficiencies of the company’s inventory management process will be analyzed and recommendations made for improving inventory management. Also, I will describe how the emerging concept of the triple bottom line can be used to enhance operations management at BYD. I will explain how the company integrates ISO 14000 standards in its manufacturing plants as well as ways in which the company can integrate corporate responsibility principles into our operation. BYD was established in 1995 by Wang Chaun-Fu with its head office Shenzhen, China. Wang Chaun-Fu had a keen interest in finding ways to make batteries of great quality at a low cost and did so by shifting the state-of-the-art technology into multiple business industries (Rarick et al, 2011). The company started producing lithium batteries which are most popular and used in laptops, cell phones and electric vehicles. The metal component can mainly found in South America – Bolivia, Chile and Argentina. Also, there are significant deposits of lithium in China. Although, lithium is the most popular choice for electric vehicles and store three times more of the capacity of nickel metal hydride batteries, they are a bit expensive. In this regard, BYD moved to produce ferrous lithium ion batteries which were cheaper and safer on the environment (Rarick et al, 2011). With a 10 percent capital interest in the company by Berkshire Hathaway, BYD was able to compete internationally (Rarick, et al, 2011). BYD prides itself in sustainability, low cost labor for expensive machinery and attention to detail, proving to be a great success. With its batteries being an innovative product, BYD moved to produce electric vehicles. Some of the earlier models include F3DM, F6CTV and E6 (Rarick, 2011). Today’s models include the ProDM, DM, and EV which are new energy vehicles, with a broad range of internal combustion systems, hybrid and battery- electric passenger vehicles. In order to save more energy, reduce emissions and improve quality of life for our customers, the company added innovative products to their portfolio (BYD.com). With BYD’s share price of 246.40 CNY, the company is ranked second in the Electric Auto Battery Industry (Bloomberg, 2021; GlobalNewsWire, n.d). Generating Value Competitive advantage is fulfilled when we are able to find creative ways to manufacture our products or provide services that are second to none. Companies compete on differentiation, cost and response to attain competitive advantage. Differentiation equates to providing an exclusive product. It is going above and beyond both physical characteristics and service elements to encompass everything about the product that influences the value that the customer desires from it (Heizer et al, 2020). Competing in cost entails achieving maximum value as defined by customers. Low value however, does not suggest low quality. Competing on response demands reaction related to appropriate product improvement and delivery as well as consistent scheduling and flexible performance. Flexible response is the capability to compete in a connect all activity; Assigning time and cost approximation to each activity and computing the longest time path through the network (Heizer et al, 2020). If we were to build a new factory in Spain, PERT would be the best option. We would have to select employees who would be responsible for the project. The site would have to be surveyed and the factory plan drawn. The project manager would have to prepare designs and choose equipment for the factory. Applicants would then be interviewed to fill the positions. The equipment would then be purchased and the factory constructed. The information system for the power plant would have to be developed after which the factory equipment would be installed. The final activity would be to train staff to run the system. On the other hand we would use CPM to launch a new product or perform research and design on. These projects would be applicable for the CPM method to be used since the projects are a well defined set of jobs. Also, jobs are autonomous of each other in the sequence (Levy et al, 1963). Job Sequencing There are four priority rules for job sequencing. Jobs processed on a First Come, First Serve (FCFS) basis are dealt with in the order that the job was received. Jobs processed by Shortest Possible Time (SPT) deals with the jobs that take the shortest time to be completed before any other jobs. The shortest processing time requires time estimation for each operation of the job. Conversely, with the Longest Possible Time (LPT) those jobs that take the longest to complete are tackled first thereby reducing the number of long jobs outstanding and ensures that long jobs are finished before they are needed. With Earliest Due Date (EDD) priority is placed on the job with the earliest due date. This rule allows us to measure quality performance through the number of late jobs (Cross, 2017). Theory of Constraints (TOC) Theory of Constraints (TOC) is concerned with anything that limits company’s ability to achieve its goals and the perception of TOC is that every company must have at least one constraint that prevents that company from realizing its goal.Two constraints of BYD are not being able to source natural resources for their products and lack of automated machines. One way in which we can minimize the need for natural resources for their electric batteries is to construct several lithium–ion recycling plants. These recycling plants should be strategically located close to main manufacturing plants as well as car dealerships that sell the company’s electric vehicles. The key components in the batteries would provide a valuable secondary source of materials, thus minimizing environmental issues in keeping with building a greener earth. Also, the company could use automated machines, in the production process, thus decreasing costs and limiting possible defects. BYD should divest some of its finances into constructing several recycling plants which would help to minimize the need for exploiting the natural resources used in the production of the batteries. Additionally, the company could sell some shares to raise capital to construct recycling plants and to purchase automated machinery. In order to reduce the effects of using more natural resources and speed up the recycling process, BYD could decide that batteries that are more than seven years should be recycled. This would allow for the company to extract the secondary components that can be used in other ways.Once these two constraints have been identified and fixed, the company must now repeat the process of identifying a new constraint and following the steps to get the flow of things that are needed. Forecasting System Forecasting is basically predicting a future event. It involves taking historical and current data and using the data to project what can happen in the future (Heizer et al, 2020). T he forecasting system helps to make decisions about new products or improving existing products. The Han luxury sedan was launched in August 2020 and is number eight among the best selling electric vehicles (Cheng, 2021). The company could use a short range forecast with a timeframe of three months to a year to make the product better. As this is a fairly new product, the short range is sufficient. We could also use qualitative and quantitative forecasting models such as Sales Force Composite, Market Survey and Linear Regression. With the Sales Force Composite each salesperson would estimate the sales of each region. The forecasts would be evaluated to guarantee that they are indeed pragmatic (Heizer et al, 2020). We could ask the salespersons to estimate the sales of the Han luxury sedan and based on previous customer purchases state which color is popular so that the company would know make a decision as to what color of the model to produce. Market surveys require the input of present and potential customers regarding their purchase preferences past and future Heizer et al, 2020). The information received from market surveys in terms of customers’expectations would help to improve the product. Associative models such as linear regression could be used to incorporate the factors that might influence the quantities ordered. Factors could include competitor prices and advertising budget (Heizer et al, 2020). In gathering data we can use external market surveys, mail in questionnaires, telephone interviews and email surveys to gather information about the Han luxury sedan. After gathering the data, we would then be able make the forecast then review the data to ensure that the model, assumptions and data collected are acceptable (Heizer et al, 2020). Supply Chain Risk The major categories of supply chain risk are supplier failure to deliver, supplier quality features, outsourcing, logistics delays or damage, distribution, loss or alteration of information, political and economic risk, theft and vandalism and natural catastrophes(Heizer et al, 2020).To Lean Lean operation is the way of managing a company by focusing or providing greater customer satisfaction, while using as few resources as possible through continuous improvement. In lean operations, any activity that does not add value to the customer is classified as waste. Ways in which BYD could lose money is by overproduction, idle time, transportation, excess raw materials, unnecessary movement of equipment, over processing and defective products (Heizer et al, 2020). If BYD were to use lean operation the company’s waste would be eliminated whether from defects, worker inefficiency or environmental conditions. Employee satisfaction would increase as employees usually respond in a positive way when they are involved in improvement of the company. Also, the company’s competitive advantage would increase by developing employees skills as employees would be quick to quick to adapt to change in delivering customer requests. On the other hand, BYD would experience low margin for errors, employee frustration and inefficiencies. Because the lean operationis geared towards eliminating all types of wastes, the company would be prone to scheduling problems, late deliveries from suppliers and maintenance. Additionally, workers may become more frustrated and revert to old ways. Total Quality Management (TQM) Total Quality Management (TQM) affects an entire company and is a united effort towards quality in all aspects that are vital to the customer’s expectations (Heizer et al, 2020). The seven concepts for an effective TQM program are Continuous Improvement, Six Sigma, Employee Empowerment, Benchmarking, Just-in-Time, Tuguchi Concepts and Knowledge of TQM tools (Heizer et al, 2020). BYD can use benchmarking to compare cost of vehicles, energy saving capabilities of batteries and carbon emission levels against those of their competitor Tesla. The company would use the benchmarking steps to acquire, analyze and take action. In order to improve customer’s experience the company could purchase innovative equipment, install top of the line software and implement stricter quality check on their products. Employee empowerment include structuring communication networks that include employees, developing open, supportive superiors, delegating responsibilities to employees and creating recognized organization of groups (Heizer et al, 2020). Six Sigma is a process by which a company seeks to improve the capabilities of their business processes to improve profits, employee morale and reducing defective products (Heizer et al, 2020). Taguchi is a method of quality control which emphasizes the roles of research and development in reducing the occurrence of defects and features manufactured. BYD could use Taguchi to focus research and design that ensures that every unit of every product that we produce matches the design specifications and perform exactly as designed (Liberto, 2019). TQM tools comprise of tools for generating ideas, organizing the data and identifying problems. Tools for generating ideas are used for recording data records and showing comparison and comprise of check sheets, scatter diagrams and cause and effect diagram. Tools for organizing the data and includes the Pareto Chart for identifying and plotting problems or defects in descending order of frequency and the flow chart that describes the steps in a process. Tools for identifying problems include a histogram which is a distribution that shows the frequency of occurrences of a variable and Statistical Process Control Chart for plotting values of a statistic (Heizer et al, 2020). Hypothetical Process (Time-Function) Map To produce an electric car at BYD, it takes about two years from designing to launching of the electric vehicle. Designing spans for three to six months and the design team is responsible for designing new products. The samples go through a process where the board members make the decision on the product that they want to start producing. During the designing stage, the production department gives an estimate of the materials needed to start production. Once completed the order is sent off and takes about three months to be fulfilled, once all goes according to schedule. Manufacturing, which is the next phase, consists of putting the frame together for the vehicle which then goes on to the body works section to be painted. The next step is assembly and this takes up to six months to complete. After all the parts are put together, the vehicle goes through the tedious quality control process. At this stage, every aspect of the vehicle is checked. Cause-and-Effect Diagram We have a problem with our supply partners failing to implement materials for the company. Several issues that suppliers have related to lack of materials to the include manpower, method, equipment and inventory. Manpower is essential to making products for BYD. Suppliers have issues with unskilled workers that have to be trained. In order to function, the unskilled worker would need to be trained. Training takes place during work hours and therefore causes scheduling problems and some employees are on vacation and other are on sick leave. The issue of industrial action is present as some employees who feel disenfranchised have gone on a go slow, thus hampering production. Another issue that suppliers have is the availability of raw materials needed to convert into goods for customers. There has been a depletion of some natural resources that make it hard on them to provide doe their customers. Also there have been some closures to sea ports in light of the Corona virus thus slowing down transportation times. business of producing rechargeable batteries and electrical vehicles. The company is more than concerned with the environment and reducing their carbon footprint with the products that they use. ISO 14000 ISO14000 is a set of rules that help companies reduce industrial waste and environmental damage. ISO14000 includes several standards that cover aspects of the managing practice inside facilities and the life cycle of actual products. The key standards of ISO14000 comprise of :ISO14001- Specification of Environmental Management System; ISO14004 - Guideline Standards; ISO14010 – ISO14015 Environmental Auditing & Related Activities; ISO14020 – ISO14024 Environmental Labeling; ISO14031 and ISO14032 – Environmental Performance Evaluation and ISO14050 – Terms & Definitions. Being ISO14000 certified is an indication to the financial market that we are devoted to environmental sustainability. The standards once utilized allow companies that are qualified to trade with each other in that they can sell their products to other qualified companies. ISO14000 standards help companies to reduce waste as well as take advantage of the use of available resources (Kenton, 2019). We integrate ISO 14000 standards in our manufacturing plants as we seek to position ourselves as an innovator in environmental sustainability. We use fluids in our batteries that are nontoxic that does not hurt the environment. By making a major breakthrough in battery technology, we will be able to minimize costs than that of its competitors (Rarick et al, 2011). Corporate Responsibility We are dedicated to the harmonious and sustainable development of our company and the environment. We strive to augment the interest of governments, shareholders, customers, employees, partners and other stakeholders through innovative technology, products and management and sound commercial operation, seeking to earn the trust and respect of compliance and consistent improvement towards social and environmental responsibility. We ensure that we are compliant in law and customer needs, shareholder relations, examination and management of risks, employee feedback and participation, reviews and evaluations, commercial integrity, no bribery stance, disclosures, safety of products and services and community engagement (BYD.com). Conclusion The operations of a company is essential is generating profit, providing customers with innovative products and exceptional service that will ensure their continued patronage. Competitive advantage is achieved by outperforming other companies even though they produce similar products. Operations managers use different theories and techniques to achieving products such as MRP to guarantee that materials are available for protection. PERT is used to help schedule, monitor and control large scale projects while CPM is used to determine which activities are critical to monotonous tasks. Job sequencing helps managers know which jobs to tackle first by using First Come First Serve, Short Possible Time, Longest Possible Time and Earliest Due Date. With any method used materials may not be available to complete tasks. Theory of Constraints is used to identify a company’s limitations in realizing its goal. Once the constraint is identified it is remedied and the cycle continues once another constraint is identified. Forecasting helps to make decisions about new products or improving existing products by quantitative and qualitative measures such as market surveys and linear regressions. A company is constantly susceptible to supply chain risks and measures must be put in place to minimize those risks. Measures include lean operations, JIT and TPS. Total Quality Management (TQM) is important to the entire company and is pertinent in delivering quality to customers expectations. Hypothetical Time Process Maps are used to describe the flow of work in a given time period. the processes needed to complete the activity are plotted on the graph to show the time required for each process. A cause and effect diagram helps managers to track down reasons for imperfections, variations, defects or failure of an operation. The company is in the process of setting up a new location in Mexico City. This location was chosen instead of Columbia, SC based on factors such as political risks, transportation costs, labor productivity, rental costs and taxes. Inventory management is concerned with sourcing, storing and selling inventory. ABC Analysis helps the company to see what products we have as surplus and what products are revenue generation products. Sustainability is concerned with the environment and companies implementing practices to preserve the life of our planet. Triple bottom line is an extension of accounting structure of generating profit. It is concerned about people, profit and planet. In supporting people companies ensure that their employees are treated well , providing good working conditions and adequate wages. Planet is concerned with the environmental impact of the company. Additionally ISO 14000 are incorporated to reduce industrial waste and environmental damage. BYD is dedicated to sustaining the environment through technology, products and best practice. This comprehensive analysis has provided a wealth of information for all parties involved. There are some issues that we have to undertake and in doing so we will continue to reap the benefits of being one of the leading companies in the rechargeable battery auto industry. References BYD Co Ltd Retrieved January 2021 https://www.bloomberg.com/quote/1211:HK