Business Process Analysis of Volkswagen’s Production Process

Introduction 

Established in Germany in 1937, Volkswagen is one of the largest automobile manufacturers in the world. The company has three cars in the top 10 list of the best-selling cars of all time (Eger and Schhfer 2018). These cars include the Passat, the Beetle, and the Golf. The company surpassed Toyota as the largest automaker in the world in 2015. During this period, the company sold 5.04 million cars across the world while Toyota sold 5.02 million cars (Mačaitytė and Virbašiūtė 2018). Despite its success as an iconic brand with car models that span multiple generations, cheating on emission test has landed Volkswagen in a shocking situation. A recent report by the Environmental Protection Agency (EPA) indicated that the company has been covering a production failure in its cars since early 2009 (Eger and Schhfer 2018). Succinctly, Volkswagen was producing cars that exceeded the U.S. emission limits. Accordingly, the company attempted to cover up the production failure by fitting the affected cars with software that turns emission control systems on and off during testing, thereby enabling the cars to pass emission tests in the U.S. Volkswagen has a difficult task of gaining customer trust and restoring its reputation following the discovery that it attempted to cover up the production or manufacturing failures that resulted in its cars exceeding the emission limits in the United States. 

Assessment of the Problem 

In July 2018, Volkswagen announced that it was in the process of recalling millions of cars worldwide. The decision to recall cars came in the wake of a scandal that exposed issues in the company’s production process. In particular, in 2015, the Environment Protection Agency (EPA) reported that many of the Volkswagen cars being sold in the United States had failed the emission tests (Eger and Schhfer, 2018). EPA found out that many Volkswagen diesel cars had software called a “defeat device’ installed in their engines. Eger and Schhfer (2018) demonstrate that this software was specifically installed in cars to allow them to cheat emissions tests in the United States, with the installation then being systematically covered up. The software would turn off emission controls when the car is being driven normally on the road. 

However, the software would automatically detect when the car is undergoing a test and turns on the emission control system (Schiermeier 2015; Kelemci 2017). In particular, EPA realized that when the cars were not hooked up to emission test equipment, they were emitting up to 40 times more pollutions than allowed in the United States (Tai Ho Woon et al. 2016; Jolly 2019). However, when the car recognizes that an emission test equipment has been hooked in the engine, the software communicate with the cars computer in order to adjust how the car is running, thereby reducing emissions to legal standards (Schiermeier 2015). The result, therefore, was an inaccurate emission tests on diesel vehicles fitted with the device. 

Undoubtedly, the emission scandal help prove that the company had failed to achieve its objective of enhancing the efficiency of its combustion engine technology. The company had announced in 2009 that it was focusing on producing low-emission engines in order to conform to the growing demand for fuel-efficient vehicles across the world (Karsten and West 2015; Nen 2013). Jacobs (2019) demonstrates that the company knew that in order to sell its products in the United States, it had to make significant further improvements in engine efficiency. Initially, the Volkswagen production team thought of using the three-way catalytic converter technology to address the need for fuel vehicles in the United States. Since the 1980s, this technology has been efficient for reducing nitrogen oxide in petrol engine exhaust (Mačaitytė and Virbašiūtė 2018). However, when the production team tested on diesel exhaust, they found out that it did not work well, especially because of its relatively high proportion of oxygen. To this point, it was clear that the production team was going to encounter significant challenges in its attempt to produce the fuel-efficient engines that the company had promised. 

The only available technology that would have enabled the production team to achieve its objective of producing the fuel-efficient diesel engines was the Mercedes’ BlueTec system. Mercedes’ BlueTec system is an advanced NOx reducing technology for vehicle emissions control in diesel-powered vehicles. Although the production team pushed Volkswagen to purchase the rights to this system, the management team refused their proposal, arguing that the company was better off developing its own system (Mačaitytė and Virbašiūtė 2018). Accordingly, in 2009, working closely with the design engineers, the production engineers worked to produce a system for reducing pollution in the diesel cars. 

Accordingly, the design engineers and the production engineers started to work on a new engine known as the Turbocharged Direct Injection (TDI) engine. As demonstrated by Jacobs (2019), TDI is a design of diesel engine that features turbocharger and direct fuel injection system. From theoretical standpoint, the new engine led to better air/fuel control ratio as well as better fuel atomization (Jacobs 2019). In turn, this led to better control of emission. The production team mass produced these engines. From then on, they fitted them with piezoelectric injectors on a common rail. During this time, the production team was still certain that the common rail direct fuel injection system and turbocharger they had fitted in the diesel engine would allow for greater engine efficiency. 

In reality, however, as demonstrated by Mačaitytė and Virbašiūtė (2018), the system failed to achieve the efficiency level the design engineers and production team had hoped for while designing and producing the system. During testing phase, they realized that the system could not combine good fuel economy with the compliant NOx emission (Mačaitytė and Virbašiūtė 2018). However, the production team was under pressure to meet the deadline required for launching the vehicles in the U.S. market. Therefore, instead on working to improve the new engines by revisiting the designs and correcting mistakes made during operations, the production team opted to cover their failures by designing ‘defeat device’, a software program that would enable the vehicles pass the emission tests in the United States. Jacobs (2019) demonstrates that the technology used by the production team, that is, the Turbocharged Direct Injection (TDI) system does not have the capability to enhance fuel-efficiency in vehicles. As such, he recommended that the company should have focused on acquiring the highly efficient BlueTec technology was has been ascertained to be efficient in reducing NOx emissions. 

Succintly, Volkswagen’s production team failed to achieve these aims in the design of its car engines, most of which were sold in the United States. During the production process, the engineers ascertained that they would not be able to make significant improvements in engine efficiency (Jacobs 2019; Noel De Nevers 2017). As such, they resorted to developing software that would enable them to cover their failure (Li et al. 2018; Schiermeier 2015). The company continued to oversee the production of millions of vehicles that emitted over 40 times more than the allowed emission standard in the United States. 

Formulation of the Solution to Help Address the Problem 

The potential solution or improvement to be implemented at Volkswagen must fulfill four important measures. First, the suggested solution must be able to address the growing quality concerns while also minimizing the cost of operation. Second, the suggested solution must enable the company to regain the trust of their customer. Third, the suggested solution should be able to address the growing cost concerns at Volkswagen. Lastly, the solution must consider the skill level of the employees as well as the current environment of the company. Accordingly, in light of the identified problem and the expected measures to be addressed while solving the problem, this report recommends the implementation of the lean six-sigma program. Six sigma refers to a set of tools and techniques for process improvement (Ashok-Sarkar, Mukhopadhyay, and Ghosh 2013). Key benefits associated with six sigma include improved customer satisfaction, reduced costs, increased organizational efficiency, and increased revenues, among others. 

As highlighted in the previous section, Volkswagen has a problem with its production process, that is, it has failed to meet the required quality in the production of its low-emission engines (Schmidt 2018). As such, as such, the necessary improvements should be made in the production process. In this context, the company would have to implement Six Sigma’s DMAIC methodology. DMAIC (Define, Measure, Analyze, Improve, and Control) provides the framework to improve the existing business process in a systematic way (Ashok-Sarkar et al. 2013. As such, it could be used to improve Volkswagen’s production process. 

Definition phase 

The first important step to ensuring process improvement involves ensuring that individuals understand why they are undertaking the process improvement process (Sharma and Chetiya 2010). In tandem to this, individuals must understand that what they are aiming to achieve is an essential ingredient for success. This starts with the definition of the problem. Volkswagen has problem with its production process. Production team has failed to produce low-emission engines. The company has promised customers that it would produce energy-efficient cars; however, the production team failed to produce low-emission engines, this resulted in the production team covering its mistake by implementing ‘defeat device’ in the engines. Definition of the problem could be summarized as shown below. 

Breakdown	Description
Defect(s)	Less-efficient engines that results in emission that exceeds the U.S. limits
Metric(s)	11 million cars with defects (faulty engines) delivered into the market
Problem in terms of metrics	Volkswagen forced to recall all the 11 million cars in order to address the production problem
Objectives in terms of metrics	The new improvement project aim to reduce the number of cars with defects to zero
Benefits	Volkswagen would save over 2 billion if the production process were improved.

Table 1: Definition of the problem 

Measurement phase 

In respect to this phase, the production team determines the output measures that are critical to quality and identifies the variables that affect these output measures. Put differently, the production team will gather data in order to establish items that need to be measured in the project they are tackling. In respect to Volkswagen, the production team will focus on measuring the number of energy-efficient vehicles produced without defects in their engines. The numbers of vehicles would be measured based on their ability to pass the emission test in the United States. As such, the success of the improvement process would be based on the numbers cars that pass the emission test, with the production department being required to achieve 100 percent success rate. 

Analysis of the process 

In this phase, the production team will be concerned with using graphical displays and statistical methods to identify to identify possible causes of process output variations. The possible causes, as emphasized by Ashok-Sarkar et al. (2013), are analyzed statistically in order to determine the root cause. A cause and effect diagram is used to analyze the cause of the emission issue at Volkswagen. As shown below. 

Figure 1: Cause and effect diagram for emission effects 

As highlighted in the diagram, several factors contributed to the manifestation of the problem; failure to define the procedures for the production of the energy-efficient engines was one of the leading factors that contributed to the problem. In tandem to this, lack of qualified personnel to oversee the production of energy-efficient engines played a critical role in the manifestation of the problem. The success of the company in the future will depend on its ability to address these problems. 

Improvement phase 

In this phase, the production team focuses on generating solution alternatives in order to help fix the root cause. The most appropriate solution is identified using the solution prioritization matrix. Diagram 2 below summarizes the identified solutions for improvement of production process at Volkswagen.

Solution	Frequency .9	Importance .7	Feasibility .8	Cost  .6	Total Points
Solution #1: Refitting cars affected by emission scandal with BlueTec technology	3	3	5	5	16
Solution #2: design and production of new cars with high efficient diesel engines	3	1	3	3	10
Solution #3: Revamp of operation to focus on production of electric cars	2	2	1	1	6

Table 2: Solution Prioritization matrix 

Scoring System: 

Very low, 2- Low, 3- Medium, 4- Fairly High, 5- Very High 

As highlighted in Table 1, the most appropriate solution for the company would involve refitting the cars affected by the emission scandal with the highly effective BlueTec engine system, which seems to be very efficient in reducing NOx emissions. It goes without mentioning that the company was forced to recall 11 million cars from the market. I would be extremely expensive for the company to replace these cars with new cars. Besides, the operation will not be feasible, as the production team would have to start designing new cars and engines from scratch. Equally, revamping of the operations is not feasible because it requires time to invest in new technologies to enable the company develop electric cars. It would also be costly to produce new electric cars. To this extent, the production team should focus on refitting the affected cars with new fuel-efficient engines. However, Volkswagen would have to purchase the rights to Mercedes' BlueTec system. 

Control phase 

In this phase, the production team would be concerned with standardization and documentation of the process. Succinctly, the production team will implement monitoring system to ensure that the process is performing as designed. To this end, the cars refitted with new engines would be tested to ascertain whether they met the require standard. The testing method used in the United State would be used to ensure that all the recalled cars are fitted with fuel-efficient diesel engines. 

Conclusion 

Volkswagen needs to address the problem in the production process that has resulted in the manifestation of the emission scandal. The report, therefore, has recommended that the recalled cars should be refitted with new energy-efficient diesel engines. Equally, future cars should be produced and fitted with these new energy-efficient diesel engines. By implementing this solution, the company will regain the trust of the customer because they would be convinced that the company is dedicated to protecting the environment. Nonetheless, it is important to note that the company will incur huge production costs in the short term, which, in turn, would translate to reduced profitability as well as reduced returns to shareholders. In the long term, however, the company will make significant profits from sales of its less-emission cars. 

References 

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