Following a rebound in the United States market, Volvo has decided to invest in the company\u2019s first United States plant.\u00a0 This investment totals to be another 1 billion dollars to the factory already under construction.\u00a0 In this expansion, Volvo will add a second production line to the factory in Charleston, South Carolina.\u00a0 The plan for this new plant is to make the S60 Sedan in late 2018, along with another unnamed vehicle.<\/p>\n
This expansion for Volvo will almost double the amount of jobs initially planned for the plant.\u00a0 2,000 jobs were planned initially and this expansion will add 1,900 more to the company size.\u00a0 By expanding the plant and adding more workers, the plant\u2019s capacity (the maximum rate of output of a process or system) will increase.\u00a0 This is because more workers are now able to produce more output, cars.<\/p>\n
The Charleston plant is part of Volvo\u2019s United States growth bid.\u00a0 The company wants to expand its United States market even more.\u00a0 Volvo\u2019s \u201csales have rebounded over the last two years amid a strong U.S. marketing push\u201d.\u00a0 By creating a plant within the United States, the company hopes to increase its sales even more moving forward.<\/p>\n
Volvo is expanding its product line through the creation of the new plant.\u00a0 Further research in Automobile News shows that the company aims for \u201c800,000 global vehicle sales by 2020-50% more than last year\u2019s record total\u201d.\u00a0 One of the only ways Volvo\u2019s goal for 2020 is attainable is through an increase in production capacity with this new plant and expansion.<\/p>\n
Volvo\u2019s competitive priority in the past was mainly focusing on passenger safety.\u00a0 Now, Volvo is becoming a \u201cleader in driver assistance systems and autonomous vehicle development\u201d (Automobile News).\u00a0 With this shift in competitive priorities, the company must find ways to increase their capacity and sell more automobiles.<\/p>\n
Volvo\u2019s decision to expand the Charleston plant is classified as capacity planning or a long-term capacity decision.\u00a0 The company\u2019s investment in a new facility plans to cover at least two years into the future.\u00a0 At this point in time, the company\u2019s overall success depends on the success of this plant to increase capacity.<\/p>\n
From the article, it is apparent that the company measures the capacity based on output measures of capacity.\u00a0 These output measures are best utilized with companies that have a small number of standardized processes with high volumes.\u00a0 This makes sense for the car manufacturer, Volvo, as their capacity can be measured as the number of cars produced per day.\u00a0 Volvo\u2019s capacity measurement also fits well with the company\u2019s overall goal.\u00a0 Because the company aims for an increase of 50 percent in global vehicle sales, it follows that Volvo would measure the capacity based on output measures.<\/p>\n
Also involved in Volvo\u2019s planning of long-term capacity was the company\u2019s decision about timing and sizing expansion.\u00a0 An important decision companies must make is in determining when is the appropriate time to adjust capacity and by how much.\u00a0 It has been seen that capacity expansion is done in response to the change of market trends.\u00a0 Volvo followed this trend to expand their plant after an improvement in the United States\u2019 market conditions.<\/p>\n
Overall, do you think Volvo will be successful in the company\u2019s expansion of the plant?\u00a0 Will the company meet its goal for 2018 of selling 800,000 in global vehicle sales?\u00a0 How can you relate Volvo\u2019s decision of expanding the plant to linking process capacity to other operating decisions?<\/p>\n
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