Supply Chain and Logistics Management for Audi AG



Audi AG is an automobile company and a member of the Volkswagen Group that is involved in manufacture, design, production, engineering, marketing, and distribution of luxury vehicles. The company has succeeded in building the future for supply chain management in the past three years (Harrison and Van Hoek, 2008). Being a premium car manufacturer has enabled the company to update its production system through focus on reducing the number of employees and inventory. The company also ensures that there is coordinated order and delivery system which make it possible to make changes in production and flexibility in delivery of new orders. In the recent years, it was the first company to utilize the latest logistics concept known as the NLK that coordinates the supply chain from assembly to manufacturers. It is easy to introduce new logistics and production concepts to Audi AG since the company has invested heavily on infrastructure in its major plants. The company has close to perfect transport links and logistics centers neighboring the plants. While Volkswagen Logistics conducts purchases on behalf of Audi AG, it manages the purchases at a group level and across the brand as well as interplant activities. Both Volkswagen are responsible for tracing the flow of orders from customers and dealers thereby creating a production schedule that includes a complete knock down kits. The Audi brand logistics also includes planning of transport, pre-production logistics and in most cases the outbound logistics. 

This paper will discuss the key operations, logistics and issues faced by Audi AG in its supply chain management. The essay will also give a detailed explanation of the issues faced by operation and supply chain managers for the Company. In a nutshell, the paper will discuss the major issues in new product development and the process of managing quality.

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New Product Development

In order for companies to succeed, there has to be use of information and data that is useful in the process of planning. When developing new products, managers and engineers always examine the history of the company performance in the current products. Performance and manufacturing history of products is also compared with that of competitor’s products, which involves the examination of any information that is available to customers (Dauletova 2008, p. 101).

New product development for Audi AG involves development of engines that include transmissions and power units, design and developing of body that involves coming up with a complete vehicle. Supply chain managers are involved in ensuring that the vehicles go through crash tests in order to ensure safety. Crash tests are a part of technical development that act as proving ground, wind tunnel and  EMC measuring hall where the vehicle electronics are tested to ensure proper functioning of electromagnetic capabilities. The company has employed 4236 employees that are involved in technical development of which are third are industrial workers while the remaining are salaried employees. In order to ensure quality of the products, the company opened up an electronics center in 2003.

In the case of Audi AG, the quality management function is used to capture important issues in planning process. The most recognized and widely used method for quality planning it the house of quality method. The house of quality has been a successful method that is used by many companies, including Audi AG. As part of the planning process, the method focuses on coordination of skills within the organization that include the design, manufacture, and marketing of new products. The foundation of the house of quality is the belief that customer taste and preferences must be considered when coming up with new products. Audi, therefore, ensures that marketers, design engineers, and the staff involved in manufacturing work together from the conception of the products. The house of quality provides a means of interfunctional planning and communication whereby people with different responsibilities can flag out design priorities and refer to the evidence patterns on the production.

Supply chain and logistic managers are faced with the problem of designing cars that satisfy the needs of all customers at once. This means that they have learn from customer experiences and reconcile whether engineers can reasonably build what the customers want. Before the era of industrial revolution, engineering, marketing and manufacturing were integrated to a single person but today, the functions of production are conducted by different engineers (Holweg et al, 2005). In order to curb this problem, Audi AG ensures that the top executives come up with interfunctional teams that can come up with good designs. The top management of the organization comes up with a team that is beneficial in design, marketing and manufacture and here is where use of house of quality comes in. Audi is popularly known for its record in production of unique in terms of design and quality and this is achieved due to its coordinated production and design decisions as well as focus on customer concerns. Currently Audi is dedicated to sophisticated marketing techniques that enable it to compare and track customer perception regarding its products with a high level of accuracy and the companies are able to compete on a quality life. After realization that there is nothing about house of quality model and that all it requires efforts to get used to its conventions, Audi has been able to introduce new products in the market without failure. Audi utilizes the house of quality as a source of reference for related products and upgrade of future products. While it is used as a communication tool in all the processes, the matrices are the means but not the end. The purpose of the theory is to encourage horizontal and vertical communication within the organization. Before the introduction of new products, Audi ensure that quality is taken into consideration through identification of core components that need change. There is identification of issues that are not bound to happen, a scenario that would not have happened if the problems were solved through other methods (Dauletova 2008, p. 87). Audi addresses the issues by driving them through other matrices in order to identify the critical parts in manufacture and control measures that are required for production of products that fulfill the needs of customers and producers in the development cycle.

The Audi AG supply chain managers are faced with the challenge of ensuring that all the future models are electric vehicles. The manufacture of such new products will require addition of 89,400 more employees which will put more pressure to the logistics managers. This challenge is further exacerbated by the need for Audi AG to open up new global production networks in Mexico. The biggest logistic challenge for future of the company is digitalization that requires the company to organize its processes in order to fit the digital era (Wagner, 2012). Currently, the company has adopted the use of cloud solutions and premise software in order to improve its supply chain management function. Audi AG supply and logistics managers admit that they have not seen a notable change on the sale of new models. For Audi AG, brand logistic, accuracy expectations, delivery targets and flexibility are core factors in maintaining the company image.  Customer expectations for the premium cars are high since when ordering they expect the company to make changes , therefore the customers are connected directly to the logistics pipeline in order to build the entire supply of cars. Audi AG is therefore able to keep up with competition through adopting a flexible logistics system depending on different markets. 

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Quality Management

Total Quality Management (TQM) describes the attitude, culture, and structure of organizations that strive to provide services and products that meet and surpass customer expectations. In manufacturing entities, such as Audi AG, Total Quality Management forms the core of all operations and emphasis is placed on getting things done right the first time as well as minimizing wastes and defects. TQM facilitates the involvement of the management and employees in the continuous improvement of the quality of products and services by combining various management and quality tools to eradicate wasteful processes and enhance business value. In essence, TQM integrates all functions in an organization, including finance, marketing, engineering, marketing, customer service, and productions, to satisfy organizational objectives and customer needs. In Audi AG, TQM is considered as a collection of the right processes that incorporate the experiences and knowledge of workers. The principle essentially entails management commitment, evidence-based decision making, employee empowerment, customer focus, and continuous improvement.

Audi AG is a public company incorporated in Germany in 1932, headquartered in Ingolstadt, Germany, and is involved in the global manufacture and sale of automobiles. The firm has ten production plants across eight countries, all of which are involved in the day-to-day manufacturing activities of the renowned Audi luxury cars. The multiplicity of manufacturing activities required for the production of every unit requires a strategic use of TQM principles. Audi AG’s Total Vehicle Materials and Corrosion Engineering department lists activities such as selection, processing, and chemical analysis of all raw materials. TQM principles are evident throughout the firm’s manufacturing activities.

Firstly, Audi AG has positioned itself as a world-class manufacturer of luxury German automobiles that are distributed throughout the world. One of the primary challenges to realizing this goal is making sure that the quality standards adhere to the level of luxury expected by the firm’s global customer base. As such, the company’s TQM processes entail the selection of superior quality materials for manufacture. Specifically, Audi AG uses natural leather from animal hides and skins for all its upholstery. Wood veneers are also a common feature of virtually all Audi cars, which help in creating a feeling of class and elegance in the cars’ interior surfaces. Further, the vehicles’ surfaces either repel liquids or are extremely easy to clean. The company also caters to the varying needs of its customers by manufacturing a broad range of models, such as wagons, hatchbacks, coupes, and sedans, all of which have different standards in terms of appearance and performance, including speed, acceleration, and fuel consumption.

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Secondly, the organization recognizes the central role of leadership and management in the application of TQM. Audi AG’s executive management is tasked with being the main driving force that enforces and upholds the application of TQM techniques by creating an apt environment that facilitates the implementation of such measures. Despite the numerous changes that have been implemented in the company over the years, emphasis has always been on the application of TQM in all organizational processes to ensure the satisfaction of customers’ needs and preferences. Moreover, Audi AG’s management has been on the forefront of campaigning for workers; involvement in the manufacturing process. Accordingly, the company has structures its production phases in such a way as to enhance specialization. According to Goetsch and Davis (2014, p. 214), Audi AG has experienced and demonstrated considerable improvement in the quality of its cars since its inception, as well as considerable growth in its manufacturing function, starting with a single plant in Germany to eight others in foreign countries. The organization has particularly focused on developing new models that meet and, perhaps, surpass the expectations of the target group of customers. 

At the core of every business is an effective quality management system that allows for the coordination between the company, its customers, and products. The management structures adopted by an organization usually has a direct effect on the efficacy of TQM measures. The management structure in Audi AG has been one of the important factors that have helped the firm to establish an ideal position for the firm, with regards to meeting customers’ needs, reducing wastes and costs, enhancing process control, facilitating employee training, boosting workers’ morale, and increasing the market share. Specifically, Audi AG has structured its management to include a senior management that is responsible for all decision-making and determining the key processes with the goal of meeting the expectations of the majority stakeholders. 

Technological advancements have facilitated the ease and clarity of data collection and evaluation through Big Data techniques and other computer-aided software applications. The automotive industry is one of the industries that have spearheaded the implementation of data collection and analysis software for product quality evaluation and improvement (Harrison and Van Hoek, 2008). Audi AG makes use of a proprietary software known as RIB Construction Suite in its manufacturing and engineering activities to forecast costs and evaluate contracts, among other control figures. He application has proved to be particularly useful for controlling the company’s internal processes, and also provides key data for benchmarking and managing future developments. 

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TQM is primarily concerned with combining an array of management and quality tools to increase sales volumes and reduce losses that could potentially result from wasteful practices. Business organizations that effectively incorporate the primary notions and ideals of TQM, including competitiveness, customer orientation, client-supplier relations, employee involvement, and continuous quality enhancement, produces several meaningful gains (Goetsch and Davis 2014, p. 214). In the case of Audi AG, the organization has experienced some considerable positives culminating from the persistent use of appropriate TQM techniques in the general manufacturing processes as well as its specific engineering activities. One of these gains is the empowerment of its staff and its entire human resources. The management acknowledges the importance of employees as key stakeholders with regard to meeting company goals. As such, the organization consistently instils morale in its employees through training, updating them on all relevant technological advancements, rewarding excellent performance, and giving credit where it is due. As a result, the employees have adopted a culture of seeking out, determining, and rectifying quality issues with close to no supervision. Other benefits include the continuous improvement in Audi vehicles, market expansion, reduction in product call-backs, and increase in sales.


Audi AG has achieved tremendous milestones since its inception, including the introduction of a broad range of vehicle models, market growth, and global reach. The company’s success is partly attributable to successive managements’ proficiency in managing the key operations, supply, and logistics across its eight production plants, particularly with regard to new product development and quality management. Part of Audi AG’s engineering process entails advanced checks on all vehicles’ performance and components through numerous rigorous tests and data analysis to meet the needs and preferences of customers. The management facilitates coordination between the various development teams and stresses on both vertical and horizontal communication throughout the organization. The company also endeavors to minimize costs by eradicating all wasteful processes and to increase the value of its products by using high quality raw materials, including wood and natural leather. Combined with the multiplicity of vehicle models, the organizational structure, and effective quality management processes, Audi AG manages to meet the demands of virtually all its customers. 

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  1. Dauletova, A., 2008. Influence of the end customer on the car development. In IPD 2008: Proceedings of the 7th Workshop on Integrated Product Development, Magdeburg, Germany, 17.-19.09. 2008.
  2. Goetsch, D.L. and Davis, S.B., 2014. Quality management for organizational excellence. Upper Saddle River, NJ: pearson.
  3. Harrison, A. and Van Hoek, R.I., 2008. Logistics management and strategy: competing through the supply chain. Pearson Education.
  4. Holweg, M., Disney, S., Holmström, J. and Småros, J., 2005. Supply chain collaboration:: Making sense of the strategy continuum. European management journal, 23(2), pp.170-181.
  5. Wagner, S.M., 2012. Tapping supplier innovation. Journal of Supply Chain Management, 48(2), pp.37-52.
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