The Optimized Configuration of Volvo Car Parts

Abstract

Reducing logistics cost could help an organization to gain competitive advantages over its competitors among homogenous products, since production costs are with little difference. The severe competition in the automobile market in China urges Volvo Car Corporation to cut down its logistics cost and to enhance the service level there to take more market share from its competitors. The main purpose of the study is to analyze effects for Volvo Car of having a certain number of distribution centres situated in optimal locations in China within five to ten years scope. Theoretical methods, either by minimizing ton-kilometres or by using the centre of gravity method, indicates that the logistics cost could be reduced and service level could be improved by reconfiguring the present distribution network. The practical research about the logistics environment in China in five to ten years indicates a strategy level of location selection of the distribution centres. The conclusion is drawn without giving out specific locations of the distribution centres, which guarantees a valuable recommendation and contributes to the strategy decision making of Volvo Car Corporation.