Warehousing Strategy at Volkswagen Group

Canada Inc. (VGCA)

Presented by
Swapnil Khalkar
Natarajan R
Yash Mittal
Vikas Billa
Prashant Yadav
 Introduction
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1 3

Industry Product Range

● Leading Automobile
Manufacturer ● Low consumption small
● headquartered in cars to luxury class
Wolfsburg, Germany vehicles
● Commercial vehicles-
Trucks, Pickups,bus etc

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5 4
Brands represent
● Volkswagen, Audi, SEAT, Parts distribution centers Business spread
Skoda, Bentley,
● Fast moving PDC at Toronto, ● 62 production plants in 15
Lamborghini, Scania,
Ontario European countries and seven
Bugatti, Volkswagen
● Store inventory of spare parts countries in Asia, Africa and
commercial vehicles
America
 Issues

A Capacity constraint for future expansion

Options for expansion of existing

B warehouse

Building and leasing new warehouse

C different location and outsourcing

D Project Budgeting
 Analysis
Expansion Plan Year 1 Year 2 Year 3 Year 4 Year 5 ● Total warehouse requirement for next five
years is 48000 SKUs or Bins will be required
New model Launches 4 4 4 0 0
for next five years of expansion.
Facelifts 4 4 4 0 0

● From above data at Toronto PDC have a

SKUs Year 1 Year 2 Year 3 Year 4 Year 5 capacity of 80000 SKUs of which 16000 SKUs

SKUs for new model 12000 12000 12000 0 0 36000 of space is available to accommodate for
future expansion which is not enough for next
SKUs for Facelifts 4000 4000 4000 0 0 12000
five years expansion of 48000 SKUs so,

Cumulative 16000 16000 16000 0 0 48000 additional 36000 SKUs space is required to
requirement cater to future expansion.

Current Bin Inventory at Toronto Occupied Empty Total

Large bins 16000 4000 20000

Small bins 48000 12000 60000

Total 64000 16000 80000

 Warehouse expansion
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5

10% additional Cu ft 0 0 52000 104000 104000 104000

required for rack

10% additional Cu ft 0 0 52000 104000 104000 104000

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 required for aisels

Cu ft for (120000) - 120000 240000 240000 240000 Total additional Cu 0 0 624000 1248000 1248000 1248000
small bins ft required

Cu ft for (400000) - 400000 800000 800000 800000 Empty Cu ft of 0 0 (40000) (40000) (40000) (40000)
large bins warehouse still
available
Additional (520000) - 520000 1040000 1040000 1040000
Cu ft Additional Cu ft of 0 0 584000 1208000 1208000 1208000
required warehouse required
with expansion

Additional Sq ft of =1208000/30
warehouse required =40267 Sq ft
with expansion

Cubic feet in current warehouse 4800000

Additional cubic ft required 1208000

Cubic feet in expanded warehouse 6008000

 Sample budget for expansion

Additional volume required

1208000
for warehouse (cubic ft)

Cost of expanding the

$80/Sqft
existing warehouse ($/Sqft)

Space required (Sqft) 40266.67

Cost of expansion ($) $3221333

Alternatives
Advantages Disadvantages

Better customer service High cost: $ 4832000

1 LEASING High management control Time to build: 2 years
20-year lease Will increase stocks

Immediate installation
OUTSOURCI Reduced operational cost High cost $ 4832000
2 Better customer service Low management control
NG No disruption to the operation

Cost: $ 3221333
Time to expand: 6-8 months Similar customer service
3 EXPANSION No capacity constraint
High management control

We use Topsis method to analyse different alternatives based on the criteria and found outsourcing of
all/part of warehouse to third party as optimum solution considering all the alternatives
 Contingencies if sales fall short of forecast

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95% Service
High Cost Expanding Disruptions
level
As Volkswagen would Toronto PDC would be Plans of setting up a Toronto PDC wouldn’t have
probably invest in one of the able to achieve 95% warehouse in Western disruptions but if sales
three options given above service level because of Canada would be squashed suddenly increase after a
their expenditure would be low sales as sales don't meet sudden decline there would
high expectations be a lot of disruption
·THANKS·