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MBA 516
Organization Project
Volvo Group
An Analysis of the Organization
Written By:
Marcus Hood, Charles Monu Jr,
John Edwards, Nathaniel Reus, Marciano Diaz
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Volvo Group
The Volvo Group is the one of the world’s largest manufacturers of trucks, buses,
construction equipment and marine and industrial engines. In addition, the Volvo Group
provides complete solutions for financing and service. With global headquarters in Sweden,
Volvo employs about 100,000 people in 19 countries and sells over 100,000 units annually in
more than 190 markets. With eight wholly-owned assembly plants and nine factories, about
95% of the V’s production capacity is located in Sweden, Belgium, Brazil, and the United States.
In 2013, the Volvo Group reported net sales estimated at $41.5 billion dollars, with
Europe accounting for 39% of the net sales, followed by North America at 23%, Asia at 20%,
South America at 11%, and the rest of word at 7%. The Volvo Group also reported the sales of
trucks make up 65% of its 2013 net sales, followed by sales of construction equipment at 20%,
and the remainder coming from sales of buses and customer finance.
While the Volvo Group built its first truck in Sweden in 1928, Volvo did not enter the
North American truck market until 1959. It was not until the mid-1970s that Volvo was
established as a permanent part of the U.S. truck market, through Volvo Group North America.
Currently, the North America trucks are sold and marketed under the brands of Volvo, UD
Nissan Diesel, Renault Trucks, Mack Trucks, and Nissan Diesel Trucks.
The main headquarters of Volvo Group North America is located in Greensboro, NC. It
employs more than 16,000 people in North America, and operates six manufacturing facilities in
five U.S. states, as well as three assembly plants in Canada and one in Mexico. The Volvo
VNM, VNL, VNX, VHD and VAH trucks in the United States are mostly assembled at the New
River Valley Assembly Plant in Dublin, Virginia, while the Volvo engines for North America are
manufactured in the Volvo Powertrain Manufacturing Plant in Hagerstown, MD.
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Volvo Group of North America’s operations and products are guided by the company’s
three core values: Quality, Safety, and Environmental Care. Consistently rated for its safety,
high quality, and dependable performance, Volvo Trucks builds its product lines with emphasis
on fuel efficiency, driver productivity, safety, and uptime. As evidenced by its commitment to
quality and safety, the New River Valley Plant is certified to ISO50001 energy standards, while
both the New River Valley Assembly and the Volvo Powertrain Plants are certified to ISO 14001
environmental and ISO9001 quality standards.
This paper will provide an organizational analysis of the Volvo Powertrain
Manufacturing Plant in Hagerstown, MD. Volvo’s 1.5 million-square powertrain facility
currently builds and sells D11, D13, and D16 engines as well as I-Shift automated manual
transmissions for the Volvo and Mack Semi trucks.
Political Framework
Power, Conflict, and Coalition
In the Volvo organization their main goal is meet the customer’s satisfaction and provide
a quality product that will last for many years. The Purchasing Buyers consists of three groups,
Sourcing, Project and Operation Buyers. The sourcing buyer’s responsibilities are focused on
price negotiations, and contract agreements and creating PowerPoint presentations for
departmental approves these presentations are known as Step 3 & Step 7. The step 3 PowerPoint
is presented to the management group to determine if a group of parts can be moved or modified.
The step 7 presentation is designed to reflect the over cast saving and to reflect the individual
performance and responsibilities throughout the project. It consist of several spread sheets,
quality assessments delivery precisions scores, as well as the supplier financial report. Once a
contract has reached the maximum life cycle the Sourcing Buyer will look at re-negotiating the
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existing contract or look at resourcing the parts to different suppliers to leverage a lower price
under a new contract. The Project Buyer is responsible for new projects or new parts from a new
supplier. They also work closely with the Sourcing Buyer when a new supplier has been selected
for a new part to be implemented. The Project Buyer is responsible for prototype parts and
tooling orders as well as all the technical specification needed to create a new production part.
The Operation Buyer responsibilities consist of the existing production parts, invoicing, technical
parts changes, tooling orders for refurbished tooling, new tooling orders for existing parts,
production orders, packaging adjustment, MCL coast savings ideas, new cost saving ideas, and
the management of supplier delivery precision.
Power and Decision Making
As you can see between the three purchasing group the responsibilities are not actually
equally shared. The buyers share different responsibilities and the Operations Buyer is not
structurally set to meet the same goals as the Souring or Project Buyers. In a nut shell the
Operations Buyer is pulled in several different directions and provides support for the entire
company. The Sourcing Buyer mainly focuses on contract negotiations and the Project Buyer is
focused on new parts being implemented in the system. If the Operations Buyer submits a cost
saving idea it must be submitted to the sourcing group who has the authority to reject the idea or
alter it to fit their desires before it is approved for resourcing. The sourcing buyer will negotiate
with the existing supplier or the new supplier in an attempt to capture a better saving then to
Operations Buyer. This is where the power making decision become a conflict, the operation
buyer may have secured a good price and the sourcing buyer may want more saving to announce
they have made a better deal and capture the credit for the savings. This is a huge power struggle
between the buyers today. It could take several years before this type of saving can be captured
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do to all the red tape a buyer must go through to get an approval. It will take several meeting
before the differences are ironed out and it based on the amount of savings being implemented.
In most cases the managers must come together to determine what is the best method of
capturing the credit for the changes and in many cases it is split between both groups. This power
struggle is being addressed and it has gotten better over the past year. But there is a deep rooted
conflict between the buyers, it is a method used to compete between buyers to get them to
perform at a higher level than their counterpart.
Authorities and Partisans
Once the credit check are submitted the step 3 and step 7 PowerPoint presentation are
complete and the Operations Buyer must submit the cost for machine tooling to the tooling
committee for approval. The tooling approval is a political process that is conducted in Sweden
where the funds are controlled, all decisions concerning contracts, price increase or decrease
must go through several check point before the approval is granted. There are several different
approval levels and they’re based on the cost to get the parts into production. Next is to get the
savings to exceed the startup cost and it include an efficient time line of that will show the return
on the investment. One example from my experience is based on one of my projects that began
in October 2013. I submitted a million dollar a year saving project plan that took two years get
started by moving a group of my parts to another supplier at lower price. I had to go through the
Maintenance Development Board, (MDB) that consist of four Project, one Production Engineers
and two Production Managers. The group meet bi-weekly and each time they request new
information I was placed at the bottom of the list, during the next meeting your case may not be
heard until the following two weeks. This type of action goes on for months; in the mean time
the cost saving is continuing to slip away. After six months of preparing and gathering the
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correct technical documents I cleared the MDB group and then the next step was to present my
case to the Sourcing Buyer who in return creates the step 3 presentation to present to the
Sourcing Board once they approved the presentation he or she will create a step 7 PowerPoint
presentation to show the stakeholders how the savings will be captured. Think of this process as
if you were going to a bank and asking them for a business loan, and the bank manager had to
present your idea to the CEO of the bank for approval. The difference in this case there are many
CEO’s that you need to keep presenting the idea to for approval.
Conflict in Organizations
With all these approval processes; it is bound to have some type of conflict. In this
example there was bound to be some disagreements between committees. The Sourcing Board
found that the MDB group did not request a part number change for the shifter forks that were
being moved from one suppler to another. This caused a huge conflict between the two groups
that carried on back and forth for several months. They had the production managers in the
meeting as well as the engineers and logistic mangers to discuss the process flow of the parts and
where the parts could cause the conflict with the assembling of the parts. In the aftermath of the
entire process the Purchasing and Project managers had to determine the less costly action. This
put another six months delay in the project that carried into the holiday season that caused a
longer delay in the progress of the project. The main problem with the part number change is
who was going to cover the cost to create new drawings with new part numbers, this was not
included in the step 3or 7 presentation so the cost incurred was not covered. As you can see in
every project there is a budget and to change the part number was going to drive the cost in to a
negative cost expense instead of a cost savings. This had the stakeholders at a disagreement for
several months. Finally in April of 2014 they decided to agree that only eight part numbers
would be changed and the cost saving could be met.
Agenda Setting
The agenda of the Purchasing group is to capture cost saving for the company the
methods we use consist of maintaining and managing the parts we purchase from various
suppliers. The MCL targets as set on yearly bases in the business plan to ensure we work for a
common saving which varies from 2 to 3.5 %, which is based off reducing the cost of the parts
each buyer purchase from the suppliers. The agenda is mapped out by the stockholders CEO’s
and top management group in Sweden and passed down through the ranks at the end of each
year, which is implemented for January 1st of each year. They present the ideas and goals to the
US base management group and they give the direction to the sales, finance, purchasing, quality,
and production group to ensure we are working toward a common target. The sales groups push
