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Ferrari Case study business operations...

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A report on operations management of Ferrari Company Table of contents Contents----------------------------------------------------------------------------------Page Number Executive summary------------------------------------------------------------------------------3 Company background…………………………………………………………………4 Mission and Vision statement…………………………………………………………4 SWOT analysis………………………………………………………………………..5 Global operations strategy…………………………………………………………….6 Competitive strategy…………………………………………………………………..6 Quality of products…………………………………………………………………….7 Quality management tools……………………………………………………………..7 Process strategy………………………………………………………………………..8 Layout strategy…………………………………………………………………………9 Inventory and material requirement…………………………………………………..13 Recommendations and suggestions…………………………………………………..14 Conclusion……………………………………………………………………………14 Workload table………………………………………………………………………..15

Executive Summary: Ferrari Company was established in 1929 by Enzo Ferrari. This company produces luxury sport cars. However officially this company started in 1947 when first Ferrari car appeared. Enzo Ferrari

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spent his whole life in creating and designing sports cars. The share capital of Ferrari Company has been divided among fiat group and Piero Ferrari in this percentage that is 90% to fiat group and 10% to Piero Ferrari (Arik Wynkoop, Rex Jariwala and Marin Dyakov, 2009). Additionally in this company formula Uomo is used. This is an innovative program that keeps the employees towards the central aim of the company by giving them safe, bright, economic friendly and innovative working environment. The logo of Company is actually a prancing horse and Enzo designed the logo in a way that he placed this horse on a yellow shield and used three Italian colors at the top. Ferrari Company has increased its annual sales in the past years. There are certain challenges that Ferrari Company has faced while operating at international level for example increased competition, changed patterns of consumers’ behaviors, diversifying in product portfolio etc. However Ferrari Company has maintained its brand strength by overcoming these challenges. The company has focused on innovation in the last decades in its global operations. There are three main factors that are significant in its global operations strategy. These factors are beauty of design, superior technology and sensation of driving (Fellice Physioc, January 2013). The company is differentiating its products by using race red color. Also company is emphasizing on its performance in Abu Dhabi. Because company is catering more economic growth in the Gulf region. Additionally Ferrari is using a competitive strategy i.e. it is allowing its customers to customize their cars through a program that is called as Carrazzeria Scaglitte. Ferrari Company has centralized organizational structure. It means that all decisions lie in the heads of departments and board of members. Ferrari Company has kept decision making process as centralized because it maintains standards of highest quality for every car that is manufactured (Syed Arif, November 2013). Most of the parts and mechanical pieces that are needed to manufacture Ferraris are made in house in by the company itself. However there is an exception for shocks and breaks. Breaks are manufactured according the preferences of the buyers in Italy and are supplied by Brembo to the company. Shocks are supplied to Ferrari by Koni. The facility is designed in such a way that it equips engineering, tunnel testing, actual manufacturing and painting sections (Marguerite Rigoglioso, 2010). It means that the processes are kept to the highest quality standards in the Company in order to give unique and customized products to the customers. The customers are offered to customize their cars. Company History: Enzo Ferrari founded this Company in the year 1929. This company produces luxury sport cars. However officially this company started in 1947 when first Ferrari car appeared. Enzo Ferrari spent his whole life in creating and designing sports cars. He was hired by Alfa Corse in 1938 but he left the company in order to establish his own company. In the beginning his company was named as Auto Avio Costruzioni. But after the Second World War, this company transferred from Modena to Maranello. At the end of this war, a competitive design of Ferrari was displayed in the market that made this company prominent among other automobile manufacturers. Ferrari Company has achieved more than five thousands victories on the roads. Afterwards 50% shares of the company were sold by Enzo in year 1969 to Fiat group (Arik Wynkoop, Rex Jariwala and Marin Dyakov, 2009). The share capital of Ferrari Company has been divided among fiat group and Piero Ferrari in this percentage that is 90% to fiat group and 10% to Piero Ferrari. Additionally in this company formula Uomo is used. This is an innovative program that keeps the employees towards the central

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aim of the company by giving them safe, bright, economic friendly and innovative working environment. The logo of the company has heroic history. This was initially used by an Italian pilot Francesco Baracca. Later on his parents offered Enzo Ferrari to use it as a logo of the company. This logo is actually a prancing horse and Enzo designed the logo in a way that he placed this horse on a yellow shield and used three Italian colors at the top (Fellice Physioc, January 2013). Mission and Vision statement: Mission and vision statement of Ferrari Company is “To create different sports cars that are scheduled to show the superiority of Italian cars not only on the roads but also on the racing tracks” SWOT analysis: Strengths: 1. It has extremely strong position in the world of racing (Marguerite Rigoglioso, 2010). 2. Groups of owners are created by Ferrari where the owners can interact with each other 3. Cars are equipped with high class facilities regarding safety 4. A light metal is used in manufacturing that assist in handling in a better way and good acceleration 5. Design is extremely efficient and research and development department is competent 6. Brand equity of Ferrari Company is very strong. 7. Company facilitates second hand sales in order to enhance reach of the customers 8. Heritage of this company is large. Weaknesses: 1. Prices of cars are extremely high. 2. Service and distribution network is limited 3. In various countries, Ferrari company has no experienced professionals 4. In some markets base for potential customers is restricted (Arik Wynkoop, Rex Jariwala and Marin Dyakov, 2009) Opportunities: 1. Pride in having Ferrari is increasing in the world 2. There is an opportunity for the company to differentiate the portfolio of its products

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3. Utilizing owners groups to access expected customers 4. There is an opportunity for the company to enter in hybrid segment 5. Company can increase its service and distribution network (Fellice Physioc, January 2013) Threats: 1. There is a threat that company will not be able to meet the expectations of the customers 2. Competitors are coming with more innovative products and economical engineering 3. In some countries, custom policies are making purchase procedure a lengthy method Product Portfolio: Ferrari Company is offering these products to its customers around the globe 

Ferrari FF

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Ferrari California

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Ferrari F50

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Ferrari F12 Berlinetta

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Ferrari 458 Italia

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Ferrari F40

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Ferrari 458 Spider

Global operations strategy of Ferrari Company: Ferrari Company has increased its annual sales in the past years. There are certain challenges that Ferrari Company has faced while operating at international level for example increased competition, changed patterns of consumers’ behaviors, diversifying in product portfolio etc. However Ferrari Company has maintained its brand strength by overcoming these challenges. The company has focused on innovation in the last decades in its global operations. There are three main factors that are significant in its global operations strategy (Arik Wynkoop, Rex Jariwala and Marin Dyakov, 2009). These factors are beauty of design, superior technology and sensation of driving. All of these three factors are combined with another important factor i.e. exclusiveness in its global strategy. The company operates on the strategy of less production but more exclusivity. CEO of Ferrari Company says that it is not important for the company to increase the number of its products but to enhance the concept of thinking this company as a culture (Syed Arif, November 2013). Additionally the company aims to increase its profits by enhancing its sales volume. For this purpose company is focusing on expanding to the new markets and bringing versatility in its designs. For example now the company is selling four models for those customers who love to own Ferrari but want to place kid’s seats and groceries in their car as well. Moreover, Company has expanded on broader scale to China (Fellice Physioc, January 2013). And China has become the second largest market for Ferrari Company. In this way it is helpful for Ferrari Company to bring innovations in its

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designs according to the needs of the targeted market. This global operation strategy is proved to be successful for Ferrari Company because its revenues have been increased by 18.9% in the year 2011 as compared to the last year. Competitors and Competitive strategy: The competitors of Ferrari Company are BMW, Porsche, Mercedes, Bugatti and Lamborghini. These competitors are offering higher quality and better color and performance. Therefore Ferrari Company is facing tough competition. The company is differentiating its products by using race red color. Also company is emphasizing on its performance in Abu Dhabi. Because company is catering more economic growth in the Gulf region. Additionally Ferrari is using a competitive strategy i.e. it is allowing its customers to customize their cars through a program that is called as Carrazzeria Scaglitte. The company is heavily utilizing words of mouth strategy to advertise its products because people feel pride to own a Ferrari which is a competitive edge for this company (Syed Arif, November 2013). Quality of Products: Ferrari Company has centralized organizational structure. It means that all decisions lie in the heads of departments and board of members. Ferrari Company has kept decision making process as centralized because it maintains standards of highest quality for every car that is manufactured. Centralized decision making is the key to maintain quality of products by Ferrari Company. Quality Tools: In Maranello, there is only one plant that is used for manufacturing cars by Ferrari Company. The machines and technology tools of highest quality are used by the workers to manufacture every automobile. Every single car that is manufactured is matched with the previous item to maintain the zero tolerance rate for faults. In order to manage this zero tolerance rate, the management lay out precise guidelines and then these guidelines are provided to the assembly line laborers (Arik Wynkoop, Rex Jariwala and Marin Dyakov, 2009). The workers are strictly asked to follow these guidelines to ensure highest quality in each product. Therefore decentralized decision making is not followed by Ferrari Company because it will deteriorate the reputation of the company. Because different decisions are made by different workers along the assembly line. There is a machine bureaucracy in Ferrari Company. This bureaucracy is needed to ensure the quality and dependability of the cars. These bureaucracies require that each employee should be trained well in his or her specific job so that he or she can understand the instructions and perform in effective way. The quality strategy of Ferrari Company is firm. This strategy helps in maintaining the requirement of high skills (Fellice Physioc, January 2013). But it also helps in keeping control of decision making at highest levels of organizational structure. This operational strategy is of highest quality used by Ferrari to offer best quality cars to its customers. Every tool and machines that is used in production process is patented by the company itself (Syed Arif, November 2013). Even the quality of paint on cars is highly confidential and scientifically advanced. The process of manufacturing is handmade still the level of quality is highest. Materials of highest quality are used in manufacturing i.e. steel, aluminum and carbon fiber etc. Total Quality management tools used by Ferrari Company: Ferrari Company avoids traditional practice of just in time inventory. The production workers of the company examine every shipment of aluminum that is used in casting. This aluminum is tested before the process of casting motors. If they find that aluminum has more impurities then it is utilized in manufacturing of other less important components instead of using in casting motors. Thus the casting

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process is potentially delayed (Syed Arif, November 2013). Here it can be explained that if Ferrari company would use strict just in time inventory system then it would not be possible for the company to maintain highest quality standards in its products because in that case the workers would be forced to use low quality metal. Therefore most of the just in time inventory system function best if they encourage the use of information regarding employee productivity on time. Also Ferrari Company focuses on continuous improvement of its processes of production. Company also reports and verifies its greenhouse gas emission on annual basis to European directive on Emissions trading. SIP that is called as system improvement process is used at Ferrari Company. This system was actually designed to resolve difficult social issues particularly sustainability issues. SIP has refined al processes at Ferrari. There are three tools that are used to solve the problem in this system improvement process at Ferrari Company (Fellice Physioc, January 2013). These are analysis of root causes, problem solving through a process and analysis on the basis of model. Root cause analysis is done to determine the basic causes of a problem. Then it second tool which is used to improve the process by a group of problem solvers. With the passage of time the process becomes so refined that it becomes the most powerful asset of the company. Third tool is utilized to capture, analyze and communicate the outcomes of process improvement. Process Strategy: A new assembly line is added to the production plant of Ferrari Company. The building covers more than 21,000 square meters space that is divided between two floor for 12 and 8 cylinder cars. Additionally there is a test area, offices, meeting rooms and a facility for the development of sample of products that are created for testing. The building is designed with a roof having skylights and reflective lights to offer more openness. Body and chassis of cars are developed at carrazzeria scaglietti and they are painted in a separate building. From the engine assembly space, bodies of the cars with fully checked engines and gearbox modules are transferred to the new assembly line. At this assembly line, every step is completed manually by the technicians of Ferrari Company (Arik Wynkoop, Rex Jariwala and Marin Dyakov, 2009). The engines are placed in the body of vehicles, chosen material regarding seating, dashboard etc. is inserted. Every vehicle requires three working days to be completed. Also the last stages of manufacturing process together with production take three weeks. Every car is rotated along the path with a description sheet that indicates each and everything about the design of the car for the convenience of the technicians. Moreover 8 and 12 cylinder cars are manufactured at different assembly lines. 8 cylinder car needs one and a half hours of work at each step and 22 cylinder car needs an hour at each step of work. The operating hours at the factory are 8am to 5pm. A new assembly line that is added to the manufacturing plant has a system that is called as carousel system. In this system pincer machines are used that are prepared by Italian robotic manufacturers to offer technicians easy reach to every side of cars. Cars are placed at suitable height so that the workers can work easily under the cars too (Syed Arif, November 2013). Product focused as well as process focused strategy: The strategy that is used by Ferrari Company is process as well as product focused. It means that the processes are kept to the highest quality standards in order to give unique and customized products to the customers. The customers are offered to customize their cars. They can choose not only different paint colors but also the seating materials and interiors for their cars. This results in same Ferrari cars but each one is different. Moreover new supply chain processes have been introduced by Ferrari Company along its line of production (Arik Wynkoop, Rex Jariwala and Marin Dyakov, 2009). This process strategy takes into consideration all potential elements of fusion. A production grid has been developed that assist the company to have right components at the right time and right place. Thus company is able to produce cars

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quickly according to the needs of the customers. At the same time efficiency and time saving of these automated processes is utilized. Layout Strategy:

The company is located in Maranello. The beautiful building itself represents uniqueness and differentiation strategy of the company. The company is located in a quiet and peaceful area. This offers a peaceful working environment to the workers.

A new assembly line has been added to the manufacturing plant of the company. This new assembly line has pincer machines that make it easy for the technicians to reach all sides of the cars.

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Cars are moved along the production line. Cars are located at the best height along the production line so that the technicians can work underside of the cars.

The machines in the factory allows the workers to control and rotate the vehicles for their ease so that they can work efficiently without being stopped by any hindrance.

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There is a separate building for finishing and painting of the cars. Here cars bodies are completed before their arrival to assembly center.

Office building is designed beautifully. Particular red color is used for the design of building that indicates Ferraris symbol.

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Abu Dhabi office building of Ferrari Company is beautifully designed with its prancing horse logo. The building itself is a unique in its design.

The interiors of Ferraris are designed according to the choice of the customers. Inventory and material requirement: Most of the parts and mechanical pieces that are needed to manufacture Ferraris are made in house in by the company itself (Marguerite Rigoglioso, 2010). However there is an exception for shocks and breaks. Breaks are manufactured according the preferences of the buyers in Italy and are supplied by Brembo to the company. Shocks are supplied to Ferrari by Koni. The facility is designed in such a way that it equips engineering, tunnel testing, actual manufacturing and painting sections. The facility of engine assembly is responsible to design engines for Ferraris (Fellice Physioc, January 2013) . There

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are 31 stations in the main assembly line that are for 8 cylinder Ferraris. Additionally finishing material is also prepared in the manufacturing facility of the company. There are two important tools that need attention while taking into account the inventory management by Ferrari Company. These are production and sales volume per year. The company produces low number of cars ever year. The main reason for keeping the inventory low is to stick to the highest performance and quality standards (Syed Arif, November 2013). However...