QSO 300 Milestone One: BYD Case Study
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Southern New Hampshire University
Milestone One: BYD Case Study
The BYD case reflects the company strive towards dominating the electric automobile industry through its revolutionary battery innovations. The Chinese company is focused on becoming the leading and the largest electric automakers in the world. It has presented the market competition by other battery manufacturers and the issues they are facing in their operations. The case is fairly simple for a middle-level student to easily read and understand within a single lecture.
- Evaluate how the company in the case study uses operations management functions to provide products and generate value for its customers. Support your claims with examples from the case study or outside sources.
Through reverse engineering of the Japanese batteries, the founder of BYD came up with a more cost-efficient battery. The company is able to produce batteries at a lower cost of production, thus enhancing operations. Its customers benefit from cheaper but good batteries for their electric vehicles. Through its operations management, BYD has been able to produce ferrous lithium-ion batteries, which are safer to the environment than other lithium batteries. This is beneficial to the customers as they keep their environment cleaner. The company planned to produce cheaper electric cars that have higher mileage. For instance, the cheaper version is expected to be between $23,000-$25,000 with a 100-mile range, which will save a lot for the consumers (Rarick et al., 2011). The operation management managed to develop products that were cost-effective to both the company and its customers.
- Assess how this company achieves a competitive advantage using operations management. Provide examples found in the case study or outside sources to support your reasoning.
The BYD company achieved its competitive advantage through several ways aided by its operations management. First, it was able to make cheaper ferrous lithium-ion batteries that its competitors were unable. This made it easier for the company to move a bit faster in the production of electric cars. Another reason is because of using the public stock offering on the Hong Kong Stock Exchange, which helped in the rapid growth of the battery business due to adequate capital (Rarick et al., 2011). The production of dual-mode cars boosted the company’s competitiveness. The cars could run on electricity up to approximately sixty miles before switching to gasoline, and this was a cost-saving to consumers.
- Compare and contrast service operations and manufacturing operations at the company in the case study. How are they the same? How do they differ? How does each of these operations provide value for their customers?
Manufacturing operations deal with the production of goods and their storage before being delivered to the consumers. Service operations focus on facilitating the production and consumption of services, and they cannot be stored for future use. Both the service and manufacturing operations fall under operation management (Olsen, 2011). Some of the manufacturing operations at BYD include the manufacture of ferrous lithium-ion batteries and electric cars such as the F3DM and e6 (Rarick et al., 2011). The service operations are offered by the company through its headquarter in Shenzhen and the two offices in America. Customers can reach out to the company through the offices and get assistance.
Theories and Techniques
- Compare and contrast the critical path method (CPM) and the program evaluation and review technique (PERT). What types of projects at this company would favor PERT over CPM? Why? What types of projects at this company would favor CPM over PERT? Why?
Program evaluation and review technique (PERT) is used in projects that have no definite time for the completion of given activities. Pert analysis is calculated while considering optimism (O), pessimism (P), and most likely (M) factors. The formula for calculating time, in this case, is (P+4M+O) (Liu, 2013). BYD should use PERT in the battery production project. It cannot be determined exactly when there will be the most efficient battery for the car. The critical path method (CPM) is used in projects which have recurring events that can be predicted when to end. CPM follows several steps, which include specifying every activity, develop activity sequence or dependencies, draw a network diagram, estimate completion time for each activity, identification of the critical path, and finally updating the critical path diagram (Moghayedi, 2016). All the steps must be followed, respectively. CPM can be used in the production of the e6 car model, which was estimated to be completed by the end of 2009.
- Explain the steps used to develop a forecasting system. How would these steps be specifically utilized by this company? What do you predict would be the result of implementing a forecasting system for the top-selling product line at this company?
The first step in a forecasting system is the identification of the problem. The company has to identify a market gap where there is a need to be satisfied (Von Plate et al., 2020). The collection of information step follows, and where the data may not be available and hence the need to gather information. If the data is available, it can be analyzed. BYD must venture into the market and listen to what the consumers want. The next step is a preliminary analysis of the data. This will help BYD to determine its viability in the project. Then, a forecasting model is chosen. This model can either be qualitative or quantitative to determine the possible outcomes. Data analysis follows where a suitable method can be used. The next step is a validation of results where the forecast is compared to the actual data. Lastly is the utilization of the forecast if it is in line with the actual data (Von Plate et al., 2020). This gives the company the green light to proceed.
List the major categories of supply chain risk and associated risk-reduction tactics. How could the company mitigate exposure to supply chain disruptions caused by natural disasters? For example, consider the 2011 earthquake and tsunami that devastated parts of Japan.
- Strategic risk: This involves determining the appropriate supply chain management strategy (Ritchie, 2005). It can be mitigated by forming the right upfront strategy and identification of the right suppliers.
- Market risk: Involves factors such as the brand, compliance with regulations, capital, and exposure to the market. It can be mitigated by strategically identifying a product demand in the market, its quality regulations, impact anticipated, and the requirements needed to introduce the product (Khan & Zsidisin, 2012).
- Performance risk: Entails the financial and supplier issues that face the company. Choosing a supplier is one thing as progress is what matters most (Ritchie, 2005). The company must ensure that it constantly monitors the suppliers so that they do not cause any disruptions to the production line.
- Implementation risk: This involves the enactment of the agreement with the suppliers and performance incline. It is important to evaluate the suppliers early to determine any risks that may arise due to their performance (Khan & Zsidisin, 2012).
- Demand risk: It involves the challenges and fluctuations in the demand and inventory of the company. The market demand may fluctuate, and this should be in consideration when planning. Some suppliers may be enthusiastic but be opportunistic and fail to deliver (Khan & Zsidisin, 2012). Therefore, there needs a closer watch at their performance and regular check of the inventory to prevent losses.
Supply chain disruptions by natural disasters are difficult to control. However, with proper early planning for any eventualities, the company would be in a better position to handle the challenge. Proper inventory keeping and regular monitoring of the suppliers would ensure that natural disasters have a lower impact on their performance.
The BYD company had a great vision of becoming the leading manufacturers of electric cars in the world. Their operations management enabled them to overcome the competition by developing cheaper batteries that were efficient. With strong financial support, they were able to grow rapidly and come up with better and cheaper cars. Its future is promising as it continues to employ newer and advanced technology in the batteries for electric vehicles.
Khan, O., & Zsidisin, G. (2012). Handbook for supply chain risk management. J. Ross Pub.
Liu, M. (2013). Program Evaluation and Review Technique (PERT) in Construction Risk Analysis. Applied Mechanics And Materials, 357-360, 2334-2337. https://doi.org/10.4028/www.scientific.net/amm.357-360.2334
Moghayedi, A. (2016). Improving Critical Path Method (CPM) by Applying Safety Factor to Manage Delays. Scientia Iranica, 23(3), 815-826. https://doi.org/10.24200/sci.2016.2161
Olsen, T. (2011). The manufacturing and service operations management (MSOM) society. Wiley Encyclopedia of Operations Research and Management Science. https://doi.org/10.1002/9780470400531.eorms0894
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), 19-27.
Ritchie, B. (2005). Supply Chain Risk Management. The International Conference On Business & Technology Transfer, 2004.2(0), 8-23. https://doi.org/10.1299/jsmeicbtt.2004.2.0_8
Von Plate, M., Kirschnick, F., & Heggemann, J. (2020). Get Ready for Forecasting! The 7 Steps for Success with Prognostics. Findanyanswer.com. Retrieved 2020, from https://findanyanswer.com/goto/174462.