BYD China Case Review
QSO 300: Final Project: BYD China Case Review
Abstract
This case study will review a company in China called BYD which is a privately owned company that produces eco-friendly high-quality low-cost batteries. The company was founded by Wang Chuan-Fu who decided that he could make a better Chinese battery that what was already on the market and he could make it cheaper which would make the company profitable. Wang was able to develop a battery that was made using materials that were cheaper but was also of high quality and at the same time Wang was able to increase profits by maximizing his labor force at a cost that was cheaper than his competitors. Over the course of the company’s entrance and subsequent success in the battery industry, becoming the largest producer of batteries in China, BYD entered the electronic vehicle (EV) market and has proven to be a strong competitor in the EV market. In order to make their battery better than the competition BYD China reverse engineered the superior Japanese battery and found a way to make a battery that performed as well, if not better, and was also non-toxic making it environmentally friendly. BYD China did its best to set itself up to minimize any theories of constraint (TOC) while also providing constant and effective total quality management (TQM). The paper will examine the TOC process and how BYD China has used that process to become efficient, as well as BYD China’s TQM process that ensures they are constantly making a high-quality product.
BYD China had a goal to enter the battery industry as a small start-up company and become one the industry leaders in the battery market. The quality of the product and the efficiency at which it can be made has set the products produced by BYD China apart from their competition. BYD China was started based on the values they believed in that have become core to their mission. These values make up the base of their corporate social responsibility (CSR) policies which have only grown with the success of the company. BYD China has developed into a company that promotes Lean production that believes in high efficiency and employee empowerment to develop and produce a high-quality product. This paper will examine some of the production theories and techniques that BYD China implements as well as the CSR values that make it a sustainable company.
BYD China Case Review
Generating Value
“Through the three functions—marketing, operations, and finance—value for the customer is created.” (Heizer, Munson, & Render, 2017, p.6) BYD China knew that the Chinese batteries currently on the market were substandard compared to batteries produced in other countries, with lithium-ion batteries being the battery of choice in the EV market. Wang was able to reverse engineer the higher quality Japanese batteries on the market that used the more expensive components such as lithium that was mined around the world and substitute his batteries with ferrous lithium phosphate. This move by BYD China not only saved the company and the customers money, it made a better battery that was safer for the environment. “Many manufacturers will select lithium iron phosphate as the cheaper battery alternative. The batteries cost less due to the safer iron phosphate chemistry as manufacturers don't have to spend more money to recycle the materials.” (Beck, 2019) Another way that BYD China can save money and generate value for themselves and their customers is on the manufacturing costs, specifically the way in which it operates the manufacturing facilities. Rather than spend a lot of money on expensive machinery BYD China has decided to go with low-cost labor at its 11 factories around the world. All the employees also have living expenses covered and are provided on-site housing on BYD property all over the world which has paid off for the company thus far. “BYD employees, including engineers and scientists typically live on the company grounds with BYD providing housing and other living expenses. The labor cost is a fraction of the costs found in the United States or Europe.” (Rarick, Firlej, & Angriawan, 2011, p.24) BYD has kept all their engineering and production in-house, which means they have not had to outsource any part of the design or manufacturing of their batteries which has generated value. BYD China also has offices that are close to their biggest customers, Apple and Motorola, which does not seem like a large cost saving measure, but it can cut costs through travel expenses, marketing, and R&D.
In order for BYD China to be a success in the battery industry and also the EV market it must have a competitive advantage, which means they have differentiate themselves, offer a competitive product as a lower price, and lastly they must respond to the market’s wants and needs. BYD had to first differentiate itself, “Indeed, differentiation should be thought of as going beyond both physical characteristics and service attributes to encompass everything about the product or service that influences the value that the customers derive from it..” (Heizer, Munson, & Render, 2017, p.36) Many of the batteries produced on the market were lithium ion which are lightweight and can perform well over a long period of time while sustaining itself through numerous charges. BYD decided to use materials, ferrous lithium ion, that were cheaper but at the same time performed just as well as the traditional lithium ion that is found in batteries. BYD also saved money on the manufacturing side by concentrating in low cost labor and attention to detail rather than high cost machinery. By employing a low-cost leadership style which is defined as “Achieving maximum value, as perceived by the customer.” (Heizer, Munson, & Render, 2017, p.38) BYD China has created an advantage over their competition by offering something useful of value to their customers. Wang reverse engineered the better performing Japanese batteries and found that using ferrous lithium ion as a material was not only cheaper, but safer for the environment because BYD’s batteries “…contain nontoxic fluids and thus do less harm to the environment, if the battery is discarded instead of being recycled.” (Rarick, Firlej, & Angriawan, 2011, p.24) Theses batteries developed by BYD China have also been found to hold a charge longer than competitive batteries as well as the ability to be charged numerous times which makes BYD China’s product appealing to not only the consumer but to the companies that use BYD China’s batteries in their products.
BYD China has 11 manufacturing plants that operate around the world and employee over 130,000 employees and consist of engineers, designers, and factory workers, this is what constitutes the manufacturing aspect of the company. The service operations of the company revolve around how the batteries are sold to the companies that use BYD China’s batteries in their products and how they are used by the consumer. “Manufacturers produce a tangible product, while service products are often intangible.” (Heizer, Munson, & Render, 2017, p.11) The physical product that the company makes represents manufacturing operations while its actual use represents service operations. Both rely on a product that satisfies the expected standards of the company but differ in the way in which that expectation is reached. By keeping manufacturing costs low by using low-cost labor and inexpensive materials the manufacturing side provides a high-quality inexpensive product that generates savings for the company that can be passed on to the consumer. The product is environmentally friendly and lasts as long, if not longer than the competitions batteries which also provides more value to the consumer.
Theories and Techniques
One technique that can be useful with the production of a product is a material requirements plan (MRP) which deals with both the gross material requirements and the net material requirements for each product. “A master production schedule, a bill of material, inventory and purchase records, and lead times for each item are the ingredients of a material requirements planning system.” (Heizer, J., Munson, C., & Render, B., 2017 p. 573) The MRP is designed to answer a few questions that are necessary during the production of a product, what is needed, when is it needed and how much of each product is needed. “MRP works backward from a production plan for finished goods to develop requirements for components and raw materials. MRP begins with a schedule for finished goods that is converted into a schedule of requirements for the subassemblies, the component parts, and the raw materials needed to produce the final product within the established schedule.” (Material Requirements Planning (MRP), n.d.) The process for determining the net material requirements is to take the gross material requirements, subtract the inventory on hand and then add back in the safety reserves of materials. Using the MRP technique to produce batteries for BYD China could be particularly useful, especially when it comes to the production of the batteries for their EV’s. Knowing the amount of materials that are on hand as well as what is needed to produce the required orders is critical to the success of a smaller company in the EV market like BYD China. BYD China is a company that prides itself on efficiency and knowing how long each product takes to make, which is exactly what the MRP system does, but from a managerial perspective it would be useful in knowing the areas in the production process where improvements can be made. For instance, if a lead time for a component is taking longer than the rest of the production line it could be researched as to why that delay is occurring and what steps can be made to correct it. BYD China relies on making every dollar count in order to compete with larger EV companies, using MRP would show the areas where to much inventory is on hand than is needed and ordering of materials could be augmented to save the company money. Time and money are important factors to deal with as an operations manager, using MRP could help improve both of those areas making them operate as efficiently as possible.
Two other techniques, critical path method (CPM) and program evaluation and review technique (PERT), are commonly used in operations management which both essentially follow the same framework. There are 6 steps for each "Define the project and prepare the work breakdown structure. Develop the relationships among the activities. Decide which activities must precede and which must follow others. Draw the network connecting all the activities. Assign time and/or cost estimates to each activity. Compute the longest time path through the network. This is called the critical path. Use the network to help plan, schedule, monitor, and control the project.” (Heizer, Munson, & Render, 2017, p.67) The only difference between the two methods is that PERT will use three time estimates for each step that account for time deviations for each step while CPM assumes time factors are certain and only uses one time estimate for each step. Developing new product that has to deal with several different departments such as engineering, budgeting, development and manufacturing would be an example of a project that would benefit from the PERT technique as each step is reliant on one, or several of the steps, to be completed before moving on. Having multiple time estimates for each step would be beneficial in that types of project scenario. Construction of a new manufacturing facility, or development of a new mining facility would be projects that would be better served by using CPM. “CPM places a greater emphasis on minimizing costs and optimizing quality, while at the same time it coordinates and organizes the time frames needed to complete the project within schedule and within the budget.” (LaMarco, 2019)
Job sequencing can be an important theory in the manufacturing business such as BYD China’s. There are four main priority rules associated with sequencing: “FCFS: first come, first served. Jobs are completed in the order they arrived. SPT: shortest processing time. Jobs with the shortest processing times are assigned first. EDD: earliest due date. Earliest due date jobs are assigned first. LPT: longest processing time. Jobs with the longest processing time are assigned first.” (Heizer, Munson, & Render, 2017, p.615) There isn’t one of the rules that is superior to the other and it would mostly be depending on which rule fits the company best and proves to be the most productive. SPT is one that tends to be the most advantageous for companies as it can process the greatest number of products in the shortest time, hence the shortest processing time name. The drawback for this popular method is that bigger projects that would take longer may get pushed aside causing them to be in production longer. FCFS is not advantageous in the manufacturing industry but more so in the service industry as it allows the customer to see that they are being helped in the order in which they arrived. EDD would work well if a product line were consistently behind schedule since this method would adjust scheduling in the sequencing to fix the product that is always late. LPT works by scheduling the jobs that take the longest first, the theory is that if the longer parts of the production line are scheduled first then finishing the job with an area that is relatively fast would help with overall production times.
The theory of constraints (TOC) process is another technique that essentially is a way to determine what, if any, issues exist that could prevent or limit the company from fulfilling its goals. This can be both physical such as a bottleneck in a factory layout, or nonphysical such as poor morale in a company or poorly thought-out procedures. TOC has five steps which are: “Step 1: Identify the constraints. Step 2: Develop a plan for overcoming the identified constraints. Step 3: Focus resources on accomplishing Step 2. Step 4: Reduce the effects of the constraints by offloading work or by expanding capability. Make sure that the constraints are recognized by all those who can have an impact on them. Step 5: When one set of constraints is overcome, go back to Step 1 and identify new constraints.” (Heizer, Render, & Munson, 2020 p. 316)
Essentially the steps in the TOC process are meant to identify an issue that is making the constraint, develop the a plan to address that specific constraint, implement the plan which can be done by moving resources around to ensure the plans success, make sure the plan to correct the constraint does not affect other operations in the company, and finally when the constraint is resolved return to the start of the process to identify another constraint. In the case of BYD China they may have to use the TOC process when it comes to the layout of their automotive manufacturing facilities. The company has been successful manufacturing batteries but the layout and flow of materials in an automotive plant is completely different. Determining if there is a point in the process that is taking longer than it should and slowing the production line down is the first step. BYD China has several facilities around the world, it is unclear how many will be automotive plants, but with several plants the times on the assembly line from each facility could be compared to determine if it is a procedural problem, a layout problem or a personnel problem. “BYD operates eleven factories and employs 130,000, with most production facilities in China, but also operates factories in India, Hungary, and Romania.” (Rarick, Firlej, & Angriawan, 2011) BYD China would then need to develop a plan to overcome that bottleneck and implement that plan without affecting the daily operations of the plant. Finally, another TOC process can begin once a separate constraint is identified. By applying the TOC process BYD would be able to ensure that all their facilities are running at optimum speed and efficiency, and if one or all the facilities are having issues, they can take steps to remedy the constraints.
The Just-In-Time (JIT) method of quality control and improvement is essentially “designed to produce or deliver goods just as they are needed.” (Heizer, Render, & Munson, 2020 p. 223) Using the JIT method for quality control leads to a few advantages for the company, it saves on money due to having less inventory on hand, increases the quality of the product because there is less product being produces errors can be easily found and remedied, and JIT also “allows firms to reduce all the costs associated with inventory.” (Heizer, Render, & Munson, 2020 p.223) thus keeping a high-quality product at a lower price. The disadvantages of using the JIT method can be harmful to a company, especially one such as BYD China. The JIT method requires that the materials needed to make a product arrive on-time with no issues meaning that the supply chain must be perfect every time. BYD China relies on the raw materials of iron phosphate to make their ferrous lithium ion battery used in their electronic vehicles. Should there be an issue with obtaining or shipping that raw material while using the JIT method for inventory BYD China would essentially grind to a halt since they do not have the one essential material that they need to operate. Also, with BYD’s release of newer electric vehicles there could be a demand surge that the company does not anticipate which would delay production and delivery of the product to the customer. “The lack of back-up inventory means customers must wait for the company to receive supplies and manufacture the product. This can mean extended delays, dissatisfied customers and potential forfeit of part of all of an order if any supply chain issues arise.” (What are the main problems with a JIT (just in time) production strategy? 2020) Using JIT would keep the quality of BYD China’s product very high, but even by using a per-order type of approach for their vehicles there is no guarantee that there will be no issues in the supply chain that would severely delay delivery of the final product.
The seven steps used to develop a forecasting system are: 1. Determine the use of the forecast; for BYD China that would entail the need generated by battery sales and what they must do to fulfill that need. 2. Select the items to be forecasted; What type of batteries do they need to manufacture more of, cellphone batteries, EV batteries etc. 3. Determine the time horizon of the forecast; Will this be short-term, long-term, or somewhere in the middle. 4. Select the forecasting model(s); there are many different options in this step both qualitative and quantitative. If the product that BYD China is forecasting is new to the market, then the qualitative method would serve the company best as it deals with little available data. Should the product already be on the market and a change was needed to be made about design or production numbers then quantitative methods would be better suited for BYD China. 5. Gather the data needed to make the forecast; This can be done by a specific team assigned by BYD China to analyze the data and make a forecast recommendation. 6. Make the forecast; Implementing the forecast based on the forecast analysis. 7. Validate and implement the results; Determine if the forecast model(s) were correct or if adjustments need to be made, this could happen at varying intervals of the company’s choice, such as daily, weekly, monthly, quarterly, etc.
BYD China’s latest EV the Yuan 360 needs to be forecasted by the company before it is brought to market. In this case BYD would need to determine the EV market and what the need is for the product. We already know that product, which is the Yuan 360, but the options made available in this vehicle that are not normally offered could be examined as well. The time horizon for this product would have to range between middle and long-term, the success of the vehicle may not be known for several months so making a quarterly time horizon would make the most sense for BYD China. This a new vehicle, but there is some data out there in the EV market and from previous EV BYD China has released. Given that fact it would be best to use a quantitative forecast model using market data already in place. Once the Yuan 360 is released BYD China should gather and analyze data on a monthly basis, this would show best times of year to increase/decrease production and they best times to offer factory discounts to increase sales of the vehicle using pre-existing EV market data. Finally, BYD China can implement the forecast and evaluate its results to validate the forecast.
There are several chain risk categories and risk reduction tactics for those categories that can be applied to BYD China. Supplier failing to deliver risk can be reduced by using multiple suppliers, contracts with penalties, preplanning for the event and using subcontractors on retainers. BYD China could use multiple suppliers for the components it needs to manufacture its batteries, as well as stiff penalties for deliveries that are delayed for reason other than natural disasters. Poor quality by the supplier risk can be reduced by using good suppliers, education, and constant monitoring. BYD China would need to constantly monitor and evaluate the quality of the products they are receiving from their suppliers, should that quality deteriorate they would need to pivot to another supplier. BYD China keeps all work in house and does not outsource any area of the battery production, so there is no chain risk for outsourcing. Logistics delays or damage risk can be mitigated by having multiple transportation modes and warehouses, secure packaging, and contracts with transportation companies. BYD China could use its own fleet of vehicles for part of the transportation of products or have contracts with several companies around the world that will be responsible for timely delivery of BYDs products. The chain risk of distribution can be mitigated by BYD China by ensuring proper training of distribution facilities and strong contracts that will represent the ideals of BYD China. To mitigate the chain risk of information technology (IT) loss it will be important for BYD China to employ a well-trained IT department that can handle cyber security and information backup. There are political risks that must be mitigated by BYD China such as controlling of materials that are crucial for BYD products from different areas of the world. BYD China can find or develop alternative materials from other areas of the world that can be used for their products. Economic risks that BYD China will face deal with exchange rates and the fragile economies of countries around the world, they will also have to deal with the economic success/failure of their primary customers Apple and Motorola. BYD will have to operate manufacturing plants where they will be financially beneficial to the company in terms of costs to operate there and the costs of shipping from those areas. Natural catastrophes is one of the risks than cannot be forecast with a great deal of lead time, un order to mitigate this type of risk BYD China would need to make sure the company has facilities around the world so that should one area suffer a catastrophe there will be one or several plants that are still in normal operation. Finally theft, vandalism, or terrorism is a risk that can be mitigated by BYD China by carrying various types of patents on all aspects of their products and processes, security measures to protect the company and its products as well as insurance that can cover the company should any type of loss for these reasons occur.
Another operational method that could be implemented by BYD China is the Toyota Production System (TPS) which consists of three requirements: “continuous improvement, respect for people, and standard work practice.” (Heizer, Render, & Munson, 2020 p.655) TPS promotes continuous improvement by the employees by allowing employees to meet regularly to discuss needed changes and how to implement them into the day to day operations. By making those minor adjustments on a day to day, or week to week basis the company is consistently improving the product, the work environment, and the profits. A company that promotes the TPS method is all about the employee and how they can affect changes in the company directly that will make the entire company more successful. “Employees are empowered. They are empowered not only to make improvements, but also to stop machines and processes when quality problems exist.” (Heizer, Render, & Munson, 2020 p.655) BYD China appears to treat their employees well because they know that happy employees will make the company perform better, and by empowering their employees in the production process they will ensure a high quality product with a quick production time. “Building effective and efficient processes requires establishing what Toyota calls standard work practices.” (Heizer, Render, & Munson, 2020 p.656) This is the last requirement for a TPS system which involves making sure the work is specified completely from what it is and how long it should take, this is the base that standard work practices are built upon. The work process then requires that suppliers must be direct to the person that needs them and the workflow for materials and supplies from station to station must be as simple and direct as possible. Finally, any improvements that are suggested are not implemented until the lowest level of the organization has a chance to analyze the impact those changes will make. The biggest disadvantages with a TPS system are that if the employees are not happy or engaged then the entire system can break down. BYD China keeps all their employees on-site and pays for housing and living expenses, this is a great first step to keeping their employees happy. By combining employee satisfaction and inclusion in the manufacturing process along with a strong training program the TPS system would be beneficial to the company. If the training were omitted employees may not understand the process and their role in the process which could lead to poor performance, poor quality product and possible misguided suggestions on improvements.
Lean operations are a combination of both JIT and TPS methodologies which basis is success on what the customer wants. “Lean operations supply the customer with exactly what the customer wants when the customer wants it, without waste, through continuous improvement. Lean operations are driven by workflow initiated by the “pull” of the customer’s order.” (Heizer, Render, & Munson, 2020 p.644) If BYD China used the Lean method then anything that the customer did not want or was not satisfied with would be a waste. This can demand perfection out of every step in the production process which would generate a higher quality product. Lean denies the seven wastes as overproduction, queues, transportation, inventory, motion, over processing, and defective product. Anything in those seven categories that does not add value in the eyes of the customer is considered a waste. With BYD China manufacturing specific parts for their EV lines they could benefit from a “doing what the customer wants” mentality as it would keep inventory costs low with a high-quality product and increased profits. This would help BYD China be able to compete with the larger EV manufacturers that are moving into China. Minimizing waste with the seven wastes and optimizing the 5s’ that Lean promotes in terms of production (sort/segregate, simplify/straighten, sine/sweep, standardize, sustain/self-discipline) would make BYD China a well-oiled machine that can meet the customers’ needs in a timely fashion and a high quality product. The downside is that by solely focusing on the customers wants and desires the company may lose track of other items of importance in the business structure which would increase overhead costs. Forecasting may suffer, poor relationship with suppliers because of small order sizes or overly long lead times for projects to be completed can all occur because the company focuses solely on the customer and not the bigger picture.
Total quality management (TQM) is a set of tools that are vital to any business to maximize productiveness with the least amount of error possible. No matter what the industry is every aspect of the business can be improved on which is the basis of TQM. BYD China is set-up for TQM success with the way that they keep all aspects of their business in house and are constantly monitoring the quality of the employees and the products. This does not mean that allis well with BYD China and no improvements can be made, to the contrary it is a stringer reason to implement TQM tools to always find areas of improvement for the company. “TQM requires a never-ending process of continuous improvement that covers people, equipment, suppliers, materials, and procedures.” (Rarick, Firlej, & Angriawan, 2011 p.219) One of the best TQM tools out there to use is Six Sigma which involves using in depth data analysis to show areas of deficiency using statistics as well as implementing a program to reduce defects, improve performance as well as customer satisfaction. Six Sigma can be quite extensive and requires a large commitment companywide which can be time consuming, but once the process is in place results can be extremely useful. One of the best ways to improve TQM is to empower the employees to be involved in the quality of the company and its products as well as identifying and suggesting areas that need improvement and ways to improve those areas. “One study indicated that TQM programs that delegate responsibility for quality to shop-floor employees tend to be twice as likely to succeed as those implemented with “top-down” directives.” (Rarick, Firlej, & Angriawan, 2011 p. 221) Because BYD China employees live on property and are right in the middle of battery development and production as well as EVs they would be a vital resource to use for a TQM process.
Data Analysis
The Fishbone diagram below shows the cause and effect of the failure to implement new material for BYD China. The categories related to the main issue are people, method, inventory, and equipment. The people category for this diagram contains the problems of irresponsible, improper training and no quality control. Method deals with the flow on the manufacturing floor to use the new materials and that includes an unclear process, poor workflow, and the process was not followed properly. Inventory is also listed and that includes poor ordering practices, poor record keeping, and not enough of the new material in stock. Finally, there is equipment which contains problems such as machine failure, the wrong machine for the material and improper settings on the machine.
This process map below will give an operations manager a general idea of how long it will take from the time an e6 EV is ordered to the time the customer Takes receipt of the finished vehicle. This example is for a vehicle that was ordered and not bought off a dealer’s lot. This gives the operations manager an idea of where and when to shift resources in order to complete the order in the desired timeframe. It also allows the OM to understand where the production of the vehicle should be at any given point during the process. The leads to efficiency and cost saving measure that can be implemented when needed throughout the process.
Factor-Rating Method for New Factory
|
Weighted Score | |||||
|
Factor |
Weight |
Mexico City |
Columbia, SC |
Mexico City |
Columbia, SC |
|
Political Risk |
.25 |
70 |
80 |
(.25)(70)=17.5 |
(.25)(80)=20 |
|
Transportation Costs |
.20 |
40 |
90 |
(.20)(40)=8 |
(.20)(.90)=18 |
|
Labor Productivity |
.20 |
85 |
75 |
(.20)(85)=17 |
(.20)(75)=15 |
|
Rental Costs |
.15 |
90 |
55 |
(.15)(90)=13.5 |
(.15)(55)=8.25 |
|
Labor Costs |
.10 |
80 |
50 |
(.10)(80)=8 |
(.10)(50)=5 |
|
Taxes |
.10 |
90 |
50 |
(.10)(90)=9 |
(.10)(50)=5 |
|
Totals |
73 |
71.25 | |||
According to the factor-rating method used in the chart above the best location for the new plant would be in Mexico City. The biggest factors that swayed this data were labor productivity, rental costs, labor costs, and taxes. While Columbia, SC factored well in political risk and transportation costs the total factor valuation has Mexico City ahead of Columbia SC by 1.75 points making it more appealing financially to open a new factory.
ABC Classification System
The ABC classification system is a method used to determine which items need to be focused on and managed better than the items that are not as crucial. “The idea is to establish inventory policies that focus resources on the few critical inventory parts and not the many trivial ones. It is not realistic to monitor inexpensive items with the same intensity as very expensive items.” (Heizer, Render & Munson, 2020 p. 491) The chart below shows an example of an ABC classification system.
Looking at the graph it shows that the company should focus more of its resources on items G2 and F3 as they make up the highest percentage of annual dollar volume classified as A. The next level, B, would include items D1, A2, C7, and B8 which would require less focus because they take up a much lower percentage of the annual dollar volume. Finally, level C includes items I5, E9, J8, and H2. This last category would require little focus since it is such a minuscule portion of the annual dollar volume. With that in mind it, using the ABC classification system would make items in the “A” category more important making sure there was more of those items in stock and ready when needed. Categories “B” and “C” would then follow suit in terms of importance. This could be implemented by a company such as BYD China to determine which products are the most used and most important to the financial well-being of the company thus making the company run more efficiently while being fiscally responsible.
Sustainability
The triple bottom line states that companies must focus on three areas for the company to be considered sustainable in today’s marketplace. “The triple bottom line (TBL) is a framework or theory that recommends that companies commit to focus on social and environmental concerns just as they do on profits. The TBL posits that instead of one bottom line, there should be three: profit, people, and the planet.” (Kenton, 2020) The triple bottom line can be used by operational managers to focus on the areas that are needed to improve all the bottom lines to ensure that a company is sustainable. “…it can be used to drive improvements in the way an organization impacts people and the environment by helping managers focus on what they need to do to improve all of the bottom lines, and keeping this work high on their agendas.” (The Triple Bottom Line: Measuring Your Organization's Wider Impact, n.d.) BYD China has become a sustainable company not only because they developed a battery that was eco-friendly but because they are meeting the triple bottom line standards. “BYD is proud to announce that it has taken third place on Fortune Magazine's “Change the World” list 2019, which is the American publication's annual ranking of companies that are using the creative tools of business to help the planet and tackle society's unmet needs.” (BYD Takes Third Place in Fortune's “Change the World” Ranking, 2019) BYD China’s first focus was on the environment but it is also meeting the social aspect of a sustainable company by producing over 5 million masks a day during the coronavirus pandemic according to a report from Reuters. BYD China has also seen an increase in profits until recently when another EV maker Tesla opened a factory in China. All told BYD China is satisfying the triple bottom line requirements as well as looking to improve by focusing on the people that work for the company as well as the communities that they operate in as well as the constant focus on the environment. BYD China would need to find a way to increase profits and demand of their products to combat rival EV makers such as Tesla.
ISO 14000 is an important piece of the sustainability in terms of the environmental impact that it has. ISO 14000 establishes a set of environmental standards that are established to promote effective environmental management in companies. The first environmental standard was established in 1992 by the BSI group which was then modified by the International Organization for Standardization (ISO) in 1996. The ISO has most recently revised ISO 14000 to ISO 14001 in September 2005. BYD China complies with ISO 14001 standards as well many other manufacturing and testing standards, they also require their suppliers to adhere to ISO 14001 standards.
“BYD adopts strict environmental protection standards, labour practice standards and human rights standard in the selection of suppliers and requires suppliers to have ISO 14001 environmental management system certification, comply the terms concerning environmental protection, labour and human rights set out in the “Suppliers’ Corporate Social Responsibility Agreement” and “BYD Supplier BSR Review Table” and sign the “Toxic and Hazardous Materials Agreement” and “BYD Environmental Management Material Standard for the IT Business Group”.” (BYD CSR Report 2016)
BYD China meets the ISO standards in a few ways, on top of requiring their suppliers to adhere to ISO 14001 standards the company also follows environmentally friendly manufacturing and production of all their products in several different manufacturing plants.
Corporate responsibility has shifted to mean more about the company’s “values”
that it has in years past. “It’s a shift that has been accelerated by the current political climate, in which companies have had to publicly stand up -- both individually and collaboratively -- for values like inclusion, empathy and environmental preservation in the face of questionable policy decisions.” (McPherson, 2019) Corporate responsibility has become better known as corporate social responsibility (CSR) which deals with the aspects that make up the triple bottle line which focus decisions on the social, environmental and financial impacts that company decisions will have. This in turn leads to the sustainability of a company and how it will be able to survive in today’s political and environmentally conscious society. This leads to managers finding shared values in the decisions they make for the company. “Shared value suggests finding policies and practices that enhance the organization’s competitiveness while simultaneously advancing the economic and social conditions in the communities in which it operates.” (Heizer, Render & Munson, 2020 p. 193) BYD China has focused mainly on the environmental factors associated with CSR but in doing so has also led them to contribute to the social aspect of CSR. BYD China’s initial mission was to create a better battery that was eco-friendly which they have succeeded in. BYD China now incorporates that mission into their philosophy and requires everyone in their supply chain to follow the standards set forth in ISO 14001 which has a compounding benefit on the environment. As BYD China becomes more successful more companies will want to do business with them which will encourage more businesses to implement CSR, more specifically focused on positive environmental impacts.
Conclusion
BYD China started as a small player in the field of battery production and through the work and vision of its founder Wang Chuan-Fu has become a world leader in the rechargeable battery industry. BYD China has found a way to develop and make a battery that is cheaper, safer, and just as powerful as its competitors’ products which has led the company into the field of electronic vehicles. BYD China has developed a model for success by being cost conscious and frugal and has stayed true to their beliefs by nit selling themselves out when the financial giants of the United States wanted in. “While most Americans had never heard of the company with its headquarters in Shenzhen, China, the company captured international attention when Berkshire Hathaway bought a 10% interest in the company. Warren Buffett wanted to buy 25% of the company, but BYD refused the offer. A company known for being cost-conscious and frugal, BYD has consistently been profitable.” (Rarick, Firlej, & Angriawan, 2011, p.23) BYD China has been smart with their product and the way in which they operate their business which is a testament to the strong operational management skills that the company has.
This paper has examined the theories and techniques of material requirements planning (MRP), critical path method (CPM), program evaluation and review technique (PERT), job sequencing, theory of constraint (TOC), and total quality management (TQM) for BYD China. Data analysis techniques such as fishbone diagrams, process maps, factor-rating method, and ABC classification systems were also evaluated and applied to BYD China. By applying the management techniques examined in this paper as well as using the data analysis methods that were explored BYD China will ensure that the company remains sustainable by meeting, and hopefully exceeding the triple bottom line benchmarks for years to come. Thorough quality control, a product that outperforms the competition, and an emphasis on proper management techniques and data analysis BYD China will be a leader in the battery and EV industry for many years to come.
References
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BYD CSR Report, 26. (2016). Retrieved from http://store.todayir.com/todayirattachment_cn/byd/attachment/201703291115261730474175_en.pdf
BYD Takes Third Place in Fortune's “Change the World” Ranking. (2019, August 21). Retrieved from http://www.byd.com/en/news/2019-08-21/BYD-Takes-Third-Place-in-Fortune%27s-%E2%80%9CChange-the-World%E2%80%9D-Ranking
Heizer, J., Munson, C., & Render, B. (2017). Operations Management Sustainability and Supply Chain Management. Retrieved form https://mbsdirect.vitalsource.com/#/books/9780134163567/cfi/6/8!/4/2/78@0:18.8
Kenton, W. (2020, February 05). How There Can Be Three Bottom Lines. Retrieved from https://www.investopedia.com/terms/t/triple-bottom-line.asp
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McPherson, S. (2019, January 16). Corporate Responsibility: What To Expect In 2019. Retrieved from https://www.forbes.com/sites/susanmcpherson/2019/01/14/corporate-responsibility-what-to-expect-in-2019/
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. Retrieved from https://www.abacademies.org/articles/jiacsvol17no12011.pdf
Sun, Y., & Goh, B. (2020, March 13). Buffett-backed Chinese EV maker BYD says making 5 million masks daily to fight virus. Retrieved from https://www.reuters.com/article/us-health-coronavirus-byd-masks/buffett-backed-chinese-ev-maker-byd-says-making-5-million-masks-daily-to-fight-virus-idUSKBN2100UE
The Triple Bottom Line: Measuring Your Organization's Wider Impact. (n.d.). Retrieved from https://www.mindtools.com/pages/article/newSTR_79.htm
What are the main problems with a JIT (just in time) production strategy? (2020, March 03). Retrieved from https://www.investopedia.com/ask/answers/040215/what-are-main-problems-jit-just-time-production-strategy.asp
What Is the ISO 14000 Standards Series? (n.d.). Retrieved from https://asq.org/quality-resources/iso-14000
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