QSO 300 Final Project Milestone One PDF

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Running head: CASE STUDY ANALYSIS

Final Project Milestone 1 Managing Operations Case Study Analysis Florencio Reyes Jr Southern New Hampshire University QSO-300: Operations Management Professor Stephanie Busam November 8, 2020

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MANAGING OPERATIONS CASE STUDY ANALYSIS

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The case study of a Chinese company known as BYD, “Build Your Dreams” discusses its early beginnings as a battery manufacture in 1995 to a company that has been the world’s largest producer of electric vehicles for the past several years. This paper will outline several areas that include how the company uses operational management functions to provide products and generate value for the customer, how it keeps a competitive advantage by using service and manufacturing operations, and how forecasting and supply chain mitigation strategies are used to further propel them into the future. As the case analysis begins, it’s important to know first what the management process is. The text states “The management process consists of planning, organizing, staffing, leading and controlling”(Heizer et al., 2017). To do this successfully, each of the ten strategic operational key decisions must have the process applied to each one. There are several ways that BYD uses OM strategies to provide products and generate value for its customer base. For example, the use of ferrous lithium-ion batteries in various types of devices such as vehicles, mobile phones, electronic tools, and portable electronic devices have proven to be safer, cheaper, and more readily available than their competitors(Rarick et al., 2011). To further generate value for its customers, BYD has implemented a cost innovated strategy that included reverse-engineering more expensive Japanese batteries by using cheaper substitutes to create a more efficient product(Rarick et al., 2011). Even with the current trade friction between the United States and China, and the decline in the worldwide use of the electrics car during the pandemic, BYD’s use of cost control, and in-house research and development have enabled them to stay far above any competitor during the last several years(BYD 2019 Annual Report, n.d.). Competitive advantage has been defined as “ Factors that allow a company to produce goods or services better or more cheaply than its rivals”(Twin, 2020). BYD has used several

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attributes such as cost structure, quality of products, and joint ventures to gain a competitive advantage over some of the largest automobile producers in the world. For example, BYD took a chance on purchasing more expensive machinery instead of low-cost labor that allowed them to produce a longer-lasting detail-oriented product(Rarick et al., 2011). To produce better quality products, BYD looked toward a more environmentally friendly solution that included the use of non-toxic fluids, and research that allowed for a longer-lasting battery charge that could be reproduced multiple times(Rarick et al., 2011). To gain an even greater advantage, in 2019, in cooperation with Toyota Motor Corporation, BYD entered into a joint venture agreement with the manufacture to create a research and development company for pure electric vehicles(BYD 2019 Annual Report, n.d.). From this joint-venture, it allowed for an even larger component supply option, along with greater information exchange that would allow for further research into intelligent networking and driving(BYD 2019 Annual Report, n.d.). Manufacturing operations have been said to produce a tangible product while service operations are considered intangible (Heizer et al., 2017). BYD’s manufacturing operations primarily include the electric automobile, rechargeable batteries, handset components, and assemblies(BYD 2019 Annual Report, n.d.). Service operations that normally come after the product have been produced may include repair, maintenance, finances, and facilities. According to its website, BYD offers one-stop services for several items that include design manufacturing, assembly, testing, and certification. Their Central Research Institute is involved with research into semiconductors, polymers, and composite materials that are being used in many of their products today(Electronics, n.d.). Considering the complexity of a company like BYD, two project management techniques such as the program evaluation and review technique (PERT), and the critical path method

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(CPM) could be useful to “help managers schedule, monitor and control complex projects”(Heizer et al., 2017). The PERT and CPM both follow a six-step process that includes defining what the project is, planning, and controlling the entire process from start to finish. Although both techniques are similar by way of tracking the entire project by the critical path analysis, there is a distinct difference between the two. For example, the PERT uses three-time estimates for each activity, while the CPM assumes the activity times are known therefore only requiring a one-time factor for each activity(Heizer et al., 2017). To begin any project, it’s required to know what product is to be manufactured and the specifics of how it’s to be done. When referencing the PERT or CPM for the products within BYD, it’s important to know which project technique will work best for the specific product. For BYD, the PERT technique that uses an arrow diagram may be beneficial for the production of their batteries since each type of battery has a sequence of events to complete to ensure the batteries are made efficiently for the products that will use them(What Is an Arrow Diagram? n.d.). The CPM technique that uses an activity-on-node diagram may be useful for the production of their electrical cars(Activity-onNode, n.d.). Since BYD manufactures various types of electrical cars, and each of them can have detailed steps that have to be monitored to ensure a quality build, using this technique from beginning to end can have a major impact on the timeline of the project if not watched closely. A forecasting system can be defined as “the art and science of predicting future events” that can include economic, technological, and demand forecast models(Heizer et al., 2017). These types of forecasts can be further broken down into short, medium, and long-range time horizons(Heizer et al., 2017). A forecast system has a seven-step approach that will be used to describe BYD’s top-selling item, the electric car. The first step is to determine the use of the forecast. Since BYD makes electric cars, it’s important to determine what type, model,

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accessories, and batteries will be used to create the product. This will allow for a more accurate assessment regarding staffing, equipment, and locations needed to start and maintain the product. The second step is to select the items to be forecasted such as personnel, scheduling, and maintenance. The third step is to determine if this is a short, medium, or long term project forecast. For a model of an electric car, BYD may chose a medium-range forecast to off-set the various models they produce(Heizer et al., 2017). Next is to select the type of forecasting model. Considering several types of electric cars are made, they may choose a time-series model based on previous year sales on the current model. The fifth step is to gather the data needed to make the forecast. This information could come from several sources such as the annual financial report, various car manufactures, and sales data. After gathering information from the previous 5 steps, creating the forecast is step 6. Once the forecast has been made, in step 7 the data will need to be reviewed, validated, and reexamined for further clarification and necessary adjustments. If BYD would implement the necessary forecast based on past, present, and future information, it will only ensure that a well-thought-out, in-demand, and reliable product is made. Supply chain risks have long been part of any organization that’s involved with the manufacturing and distribution of any type of product. It’s been said that “Companies need to focus not only on reducing potential disruptions but also on how to prepare for responses to inevitable negative events”(Heizer et al., 2017). There are several categories of risks that include supplier’s failure to deliver, supplier quality failures, outsourcing, logistics delays or damage, distribution, information loss or distortion, political, economic, natural disasters, theft, vandalism, and terrorism(Heizer et al., 2017). Each one of these risk categories must have a reduction tactic that allows will the company to forecast possible solutions to minimize any damage to the company. BYD has numerous supply chain risk factors that have been identified

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within both the case study and annual financial report that required necessary reduction tactics for each one. The table below will show the risk category, and reduction tactics BYD has taken to mitigate them. RISKS

RISK REDUCTION TACTIC

Supplier failure to deliver/ quality failures

BYD entered into a joint venture with Toyota to establish a research and development company for just electric vehicles(BYD 2019 Annual Report, n.d.).

Outsourcing

BYD had enough resources within the company footprint that allowed them to produce batteries and maintain the operation, and was able to cut down on outsourcing. Most of their production facilities are located in China with several factories in India and Hungary.

Logistics Delays Or Damage

Much of their operation was completed in house. In several of their plants, BYD employees, scientists, and engineers would live on the factory premise which would cut down on complex logistics issues from place to place(Rarick et al., 2011)

Distribution

BYD has several factories throughout the world, and locate them close to key customers; One office in Elk Grove, Illinois, and another in San Francisco, California that is close to Motorola, and Apple(Rarick et al., 2011). This would cut down on delivery location destinations from their factories in other countries.

Political/Economical

BYD realized some key issues involving leadership issues from countries like Bolivia, which could hinder a reliable supply chain. They kept everything in-house which would cut down on having both political and economic issues. Another economical advantage is most of BYD’s revenue comes from cell phones, components, and batteries, as well as lower labor costs(Rarick et al., 2011).

MANAGING OPERATIONS CASE STUDY ANALYSIS

Natural Catastrophes

BYD has 11 factories, and several are located in India, Hungary, and Romania with employees living on the factory premise, including two offices in the U.S. If there was a natural disaster as mentioned in the case study, they would be able to still maintain a semblance of their organization functions without catastrophic results.

Wang Chuan-Fu had a fascination with batteries that led to the creation of BYD. As a global leader in the production of electric cars, BYD has maintained a competitive advantage that all others are trying to reproduce. Their innovative strategies, low operating costs, and unique understanding of operational management techniques have continued to generate value for the customer for years to come.

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REFERENCES Activity-on-Node. (n.d.). Project Management Knowledge. https://project-management-knowledge.com/definitions/a/activity-on-node/#:~:text=An %20activity-on-node%20diagram%20can%20be%20used%20to%20provide,represented%20as %20having%20a%20defined%20beginning%20and%20end BYD 2019 Annual Report (p. 175). (n.d.). [Company Annual Report]. https://www.byd.com/sitesresources/common/tools/generic/web/viewer.html?file=%2Fsites %2FSatellite%2FBYD%20PDF%20Viewer%3Fblobcol%3Durldata%26blobheader %3Dapplication%252Fpdf%26blobkey%3Did%26blobtable%3DMungoBlobs%26blobwhere %3D1600575141311%26ssbinary%3Dtrue Electronics. (n.d.). https://www.byd.com/en/ElectricSolutions.html Heizer, J., Render, B., & Munson, C. (2017). Operations Management (13th Edition). Pearson. https://mbsdirect.vitalsource.com/#/books/9780135202722/cfi/6/28!/4/2/10/4/2/4/4@0:0 Rarick, C. A., Firlej, K., & Angriawan, A. (2011). BYD OF CHINA: Electrifying The World’s Automotive Market. Journal of the International Academy for Case Studies, 17(1). https://learn.snhu.edu/d2l/le/news/566003/2857185/view Twin, A. (2020, July 7). Competitive Advantage. Investopedia. https://www.investopedia.com/terms/c/competitive_advantage.asp What is an Arrow Diagram? (n.d.). ASQ - Learn About Quality. https://asq.org/qualityresources/arrow-diagram

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