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Case Study Analysis: BYD of China

BYD is a privately owned company that manufacture batteries since 1995 in China. The letters are acronyms for Build Your Dream. The Chinese manufactured batteries were of poor quality, so the Chinese preferred importing from Japan, which was expensive. To breach the gap, Wang Chuan-Fu founded BYD to manufacture low-cost and quality batteries. Despite the long presence of the company, very few people known very little about it. Electric vehicles depend wholly on battery power, and it does not have fuel filters, gasoline tank, muffler, or internal combustion engine. Electric vehicles are quickly improving over the years to become a feasible substitute for vehicles running on gasoline. With stiff competition amongst manufacturing companies, it is significant for BYD to develop a competitive superiority by improving its operations management operations. This paper will examine the management operations of BYD through addressing elements such as value generation, techniques and theories, analysis of data, and sustainability.

Generating Value

Functions

Presently, BYD is able to generate value for its consumer in numerous ways by utilizing effective management operations. The company can keep its cost low by housing the numerous employees who choose to live on site. With the world being more aware of the environment and advocating for renewable energy, BYD is endeavoring to be environmentally conscious and at the same time offer low costs of batteries to its consumers. The company is convinced that it has enhanced the battery technology through its batteries, which will have a lasting charge, recharged several times, and still maintain a lower cost than its competitors (Rarick and Nickerson, 2011). The materials used in the manufacturing of the batteries are readily available within the company hence further cutting down the cost of manufacturing and permitting BYD to maintain a significant portion of their supply chain in the company.

Competitive Advantage

The company has been in operation since 1995; hence its significant competitive advantage will be its contributions and experience in the industry. Lithium-ion batteries are the standard for building electric cars, but their production cost is high, and they can be quite heavy. BYD pioneered a brand they call Ferrous lithium-ion batteries, which are safer and their manufacturing cost cut by half (Rarick and Nickerson, 2011). The factor that significantly contributes to the decrease in the reduced cost is replacing the costly raw materials, which will face the risk of shortage in the coming future. The battery model by BYD can control higher temperatures with negligible dilapidation and have a longer life for uses that have fixed structures or require functioning longer before charging. The higher energy concentration makes them unbalanced for the other models and has a brief life span (Beck, 2019). The ability to manufacture efficient products gives BYD a superior competitive advantage over its competitors.

Compare and Contrast

There exist significant differences and similarities in the functioning of services and goods within the BYD setup. The primary similarity is that the goods also include an equivalent service. The company has branches globally and collaborates with leading telecommunication providers to avail services to clients concerning their products (Rarick and Nickerson, 2011). The advantage of this technique is that it makes consumers feel affirmed domestically. The difference in the company concerns production and service. The company manufactures standardized products such as vehicles and batteries while service is an inconsistent product, for instance, the logistics needed to disseminate precise new car models to dealerships globally.

Techniques and Theories

Gross to Net

According to Munson et al. (2020), Material Requirement Planning (MRP) is a technique based on computer applications developed to help companies be more productive through a principal schedule to define material necessities, estimated receipts, and portfolios, and bills of material. The primary intention of MRP is to observe a production in reverse to establish what is required for raw materials and other elements of a product. Upon collecting these materials, BYD will develop a gross material strategy that displays the overall request for a product, and the precise time they have to commence production to meet the client’s order has guaranteed completion time. After the development of the strategy, the company will also develop the material plan. The goal of developing the material design is to account for the catalog on hand that the gross material plan cannot. MRP would benefit BYD because it will permit them to have a better reaction period with the client orders, hence developing a more consumer-centric encounter.

Compare and Contrast

The primary similarities between Critical Path Method (CPM) and Program Evaluation and Review Technique (PERT) monitor six significant phases in their implementation. The stages comprise describing the task and formulating the work analysis organization, creating the associations among the events, drawing the network linking all the events, allocating cost and time approximations to every event, calculating the time-consuming path via the network, and utilizing the network to aid in controlling, monitoring, scheduling, and planning the task.

The two techniques are dissimilar in that they treat unpredictable and predictable activities very differently. PERT considers standard deviations in its application and would be beneficial for most of BYD’s electric car production. CPM does not account for unpredictable activities such as supply chain concerns on some materials obtained from global merchants, and it would be beneficial for most of BYD’s electronics and battery section of the company. Currently, BYD is appropriate to use the PERT technique.

Four Primary Priority Rules for Job Sequencing

Munson et al. (2020) state that priority regulations’ goal is to establish the classification of jobs in process-leaning services. The four rules comprise extensive processing, earliest due date, shortest processing period, and first-come, first-serve. The longest processing time would benefit BYD because several jobs linked with electric cars have lengthy processing periods. The disadvantage is that it will make BYD focus most on the bigger tasks and neglect minor tasks such as the mobile phone industry. The earliest due date would be advantageous for BYD to meet last-minute client orders, and its disadvantage is that it will lead to quality problems due to the rush to complete orders. First, come, first will be beneficial for the consumers but a hindrance in the assembly production setting. The shortest processing time would be beneficial for prioritizing minor tasks such as mobile phones but could be disadvantageous since the bigger tasks such as electric car production remain neglected.

Theory of Constraints

 The theory of constraints deals with the elements that constrict an organization’s capability to meet its set goals. BYD can use the process to identify and handle their constrictions.

• Recognizing the company’s constraints is the initial stage and can help BYD identify them, such as shortages in the supply of raw materials.
• The second stage involves the company formulating a plan to counter the constraints, such as developing a plan to substitute the fewer materials with new readily available materials.
• The company then combines and redirects resources to support the formulated plan. BYD can involve the research and development team to work on the plan.
• The fourth stage involves decreasing the influences of the constraints through unburdening work and increasing competence. After determining the new materials, BYD can then focus more funding and time in their supply chain for the new readily available materials.
• After determining the current constraint, the company then starts the process again to identify any new constraint.

Forecasting System

The forecasting system comprises seven significant stages in its implementation, which will permit BYD to develop a sufficient quality of brand dependent on demand and reduce overstocking products produced in large quantities like batteries. The following are the stages involved,

• The initial phase is to establish the forecast usage, which in BYD’s case would be to assess how many electric cars to manufacture.
• The second phase comprises selecting the forecast elements, which in BYD’s situation will be previous sales data for every electric vehicle design internationally.
• Determining the period of the forecast is the third stage. Most of the periods set for forecasting are yearly.
• The company chooses the forecasting model, and the moving average forecast will be ideal since the data used are previous records, and the method presumes that the demand in the market will remain dependable (Munson et al., 2020).
• BYD then will collect relevant data to determine the forecast.
• The sixth stage involves making the forecast.
• BYD will then authenticate and apply the findings.

Supply Chain Risk

Any company that operates globally and sources materials out of the country will experience problems at some point with the supply chain system. Explained below are the possible solutions to help BYD overcome its supply chain risk.

• To overcome delivery failure by the supplier, BYD can adjust its contract with the suppliers to cancel if there is over one day delay in delivery.
• To mitigate the supplier’s failure to supply quality products, the company can hire an external quality assurance team to conduct audits on the products supplied.
• To overcome delays or damage in logistics, BYD can develop their logistic system to make sure they can assess the goods within the company.
• To mitigate economic shortcomings, the company can establish an operation in countries where their local exchange rates can boost their brand’s price.
• To overcome naturally occurring dangers, they should build different factories in different corners of the world.

Summarizing Lean, TPS, and JIT

Just in time (JIT) is founded on developing products as needed and reducing waste. It comprises three important elements superior quality via maintaining less inventory at hand, enhancing quality by recognizing new faults, and decreasing the cost of quality. BYD can use JIT to decrease warehouse expenditure related to storing raw materials for long, decrease the probability of mass quality problems, and decrease manufacturing times. Problems in the supply chain system can severely affect JIT, making BYD delay product delivery to clients.

Toyota Production System (TPS) reduces waste, increases the manufacturing periods, and inhibits inconsistency. The significant element of TPS is standard task practice, respect for individuals, and uninterrupted enhancement. TPS can benefit BYD by helping in continuous enhancement, decreasing the production time, and improving quality by doing away with errors.  Currently, BYD is not applying TPS; hence setting it up can be very costly in terms of time and resources.

Lean companies’ model is to understand its consumer and their anticipations and attempt to meet the specific requirements. Lean organizations use the principles involved in JIT and TPS. Using Lean by BYD will help it focus and understand its consumers. The disadvantage with Lean is that it has a small margin of error. A small problem with manufacturing material will completely stop the entire fabrication.

Total Quality Management

Total Quality Management (TQM) underscores that administration to preserve excellence in all aspects of a service or product significant to the consumer. The significant goal of TQM comprises benchmarking, personnel empowerment, six sigma, and continuous enhancement. TQM can help BYD ensure they uphold and grow their market share in the competitive industry. As a developing company, BYD ought to improve its production from a single process to the whole production procedures, making them develop and uphold their competitive advantage. Empowering personnel is significant for BYD to recognize constant errors from the personnel who identify and resolve them.

Analysis of Data

Time Function Map

Time Function Map is a management and planning tool that displays workflow in an organization. A significant issue arising from the time function map is the long time BYD spends acquiring supply chain associate segments into the last assembly. BYD can address this by having the components in stock and decreasing the production period by ten days.

Cause and Effect Diagram

The diagram shows that BYD faces problems with its supply chain associates and their capability to introduce new materials required for new products. The company should endeavor to solve the issues to improve.

Plan Production Location

 To calculate the totals, we multiplying the city figures by the weight.

From the analysis, Mexico is the best location for the new plant because it scores seventy-three against Columbia’s 71.25.

Management Inventory

The ABC categorization system’s primary goal is to split the inventory at hand into three classes founded on yearly dollar volume (Munson et al., 2020). The categorization can aid in overcoming problems concerning overstocking of insignificant products. Class A products should have higher priority; Class B products are less important, whereas Class C products are least important.

Sustainability

Triple Bottom Line

The triple bottom line’s idea comprises three significant elements such as profit, planet, and people. The triple bottom line focuses on sustainability rather than looking at prosperity as stringent cost-effectiveness. BYD should focus on improving sustainable activities entirely for a period, decreasing their personnel’s environmental pollutions and safety. If the company can balance all three elements, it will enhance its sustainability-conscious industry growth.

ISO 14000 Standards

ISO 14000 standards avail external verification that a company pursues effective quality administration and environmental administration principles. The standards are firm rules and regulations formulated by the International Organization for Standardization (ISO) to eliminate manufacturing’s environmental effects. BYD has an ISO 14000 certificate and insists on its suppliers to have ISO certification as well.

Corporate Responsibility

The idea behind corporate responsibility is in managing decisions by considering financial, societal, and environmental influences. BYD constantly publish its social responsibility report for over six years, and it comprises its achievements in social, environmental, and economic accountability (BYD, 2017). The company supports the Paris Agreement by creating new sections of trade dedicated to decreasing international greenhouse gas secretions. BYD received the prestigious significant Zayed Future Energy Prize in 2016.

Conclusion

As much as the BYD is a young company in the battery production company and its attempt to venture into the electric car industry, it should determine and develop a competitive advantage via operations management functions. If BYD can implement the functions, recommendations, and analysis discussed in this paper, it would be a world leader in its industry.