Manufacturability & Value Engineering

We learned in our “Operation Management” class that designing operations processes aims to reduce cost; reduce complexity; additional standardization of components; improvement of functional aspects of the product; and improved maintainability of the product. Furthermore, manufacturing and value engineering procedures are concerned with improvement of design and specifications at the research, development, design, and production stages of product development. Also, we learned that organizations develop a strategy plan to set their expectations of achieving missions and goals.

Volkswagen (VW) Group set a strategic plan known as “Strategy 2018” that aims to make the VW Group a worldwide leader in 2018. Over the long term, VW aims to increase unit sales to more than 10 million vehicles a year and intends to increase its return on sales before tax to at least 8%. To achieve these goals, Volkswagen announced an introduction of new manufacturing design platform called Modular Transverse Matrix or (MQB), which will play a vital role.

Volkswagen Group is a German multinational automotive manufacturing group headquartered in Wolfsburg. It is the world’s second-largest motor vehicle manufacturer by 2011 unit sales and the largest based in Europe. The Group is made up of various big brands: Volkswagen, Audi, Porsche, Bugatti, Lamborghini, Bentley, Skoda, SEAT, VW Commercial Vehicles, Scania and MAN.


Generally, each automobile platform is designed specifically for a market segment and shared between cars of similar size. A typical mass market of VW platform underpins different brands with several model variants. VW is now creating shared modular platforms to serve needs of its different subsidiaries. One of the prominent features of the MQB is the uniform position of all engines designed to accommodate two new four cylinder engine cars. The new engines will reduce the Group’s engines and gearbox variants in the MQB system by 90% and the MQB will also enables an identical mounting position for all current alternative drive concepts from natural gas and hybrid versions to the pure electric drivecitation.


Soon, all of the models and brands under VW Group will be produced on the same assembly line, and even will produce MQB models of different brands together. The advantages of creating a modular design are: simplifications of manufacturing and assembly; easier repair and replacement; parts interchangeability; standardization; and easier diagnosis and remedy of failures. By creating a standardized, interchangeable set of parts from which to build a variety of cars, VW plans to cut the time taken to build a car by 30%. The MQB platform will allow the VW Group to produce a worldwide high volume and niche models at extremely competitive costs over the long term. The MQB takes advantage of synergies in key technologies and allows for greater boost in salescitation.

The modular platform concept is a radical structural advantage for Volkswagen Group in the global automotive industry, allowing it to reduce costs and be more competitive on prices. Do you think that Volkswagen Group cars will dominate the world market share by 2018?


For more information about the new MQB, please read VW press release

Safety First!

Safety in the workplace makes a good business sense. A lack of proper safety measures and practices can lead to accidents, added business expenses and missed work days. This is often referred to Lost-Time Injury or LTI and is measured according to hours lost in productivity. Most industrial companies measure their safety performance by maintaining a low level of Lost-Time Injury Frequency (LTIF). Whether to the employer or employee, safety is a valuable investment that helps companies to stay in business.

Developing a work environment that endorses safety in all areas of a business     indicates organizational commitment and awareness to employee wellbeing. There is a number of industry sectors worldwide which have identified the benefits of effective safety management by implementing a comprehensive business management system designed to manage safety elements in the workplace known as Safety Management System (SMS). A company that adopts SMS usually meets the minimum requirements of general health and safety laws by incorporating safety objectives into company goals. Furthermore, a company should promote safety in the workplace through management leadership; employee participation; hazard identification and prevention; and education and training. When identifying safety hazards in the workplace, the company should remove them where possible to mitigate the risks. If the hazard cannot be removed from the workplace, employee should be made aware that they exist and how to avoid them.

Companies around the world losses a hefty amount of money each year due to weak workplace safety implementation that leads to accidents. In the 2005-2006 financial year of Australia, the total economic cost for workplace related incidents and illness was estimated to be $57.5 billion, representing 5.9 per cent of GDP. The cost of workplace related incidents is often divided into two categories: direct costs and indirect costs. Direct costs include property damages, injury or fatality reimbursement, loss of key staff, disruption to business activity, increased workers compensation liability, fines and legal responsibility. Indirect costs refer to the worker’s lost wages, productivity losses, recruiting and training costs, decreased morale and damage to the company reputation. These indirect costs have been calculated at between 8 and 36 times the direct costs.

Providing a safe workplace for employees and customers is vital to all businesses, regardless of size or industry. The relative impacts of workplace safety hazards on Small and Medium Enterprises (SMEs) is greater than on comparable larger enterprises. Generally, SMEs lack readily available credit, and that is why it is essential that they understand the economic benefits of improving and promoting safety; otherwise, they will go out of business so easily if safety to be violated.

A strong investment and implementation of safety culture in the workplace is extremely important to businesses and cannot be compromised as it is considered in the same manner as other elements of business management.

Further Reading: Safe Business Is Good Business

Why Waste Time & Money On Outsourcing?

Outsourcing is a business practice where companies outsource selected or part of their business operations to other companies that specialize in those operations in order to lower cost and improve efficiency. But is always the case?!!

Gulf Air, the national airline of the Kingdom of Bahrain, has gone through a series of outsourcing some of its core business function to independent organizations. The first ever outsourcing done by Gulf Air was in 1977 when it helped to setup and form a new company called “Bahrain Airport Services (BAS)”, which gulf air owns 30% shares. Gulf Air ceased to perform ground handling operations and instead purchased it as a service from BAS. Then in 1987, Abu Dhabi-based Gulf Aircraft Maintenance Company (GAMCO) was formed as a joint venture between Gulf Air and Abu Dhabi government. Gulf Air outsourced its heavy maintenance operations of its aircraft maintenance department to GAMCO the same year. In 2010, Gulf Air disbanded its Training Department in an effort to reduce staff and cut cost and outsourced the training services to a new company called Gulf Aviation Academy (GAA), which took over Gulf Air state of the art aircraft simulators and training buildings. The same year another company formed “Gulf Technics” owned by government which also when it will be ready building their facility will handle the whole Engineering Department services which Gulf Air intend to outsource. Latest news on the sales side at Gulf Air is that they are likely to outsource most of their sales activities to a General Sales Agent (GSA).

With all of these outsourcing deals, was it a right move by Gulf Air or it was not a wised decision by the carrier? Recently Gulf Air is seeking a $1.762 billion from the government to help the company stay in business otherwise it will be forced to close. Gulf Air is losing nearly $1 million each day. Although the airline outsourced some of the core operations in order to cut costs and reduce their staff, but it failed to do so. So, what went wrongly? Obviously, the airline outsourced the business units that actually brings money and could help generating added revenues to the company. BAS is taking care of all the foreign airliners that land at Bahrain International Airport and provide full ground handling support to them. Now, GAMCO known as (ADAT) is fully owned by Abu Dhabi and is doing multi million projects with regional airlines. GAA is also making money and gulf Air accounted for less than 35% of their revenue. Also, the airline would pay so much commission to the GSA instead of bringing the business in-house. Overall, outsourcing did not alleviate the airline rather puts more responsibility on the airline for monitoring the service provider continuous performance.

So, do you think that it is the right time for Gulf Air to reverse their previous decisions and brings back their core business functions and put them under Gulf Air umbrella?