PROJECT on BMW supply-chain + presentation

Introduction

Increased competition, fluctuation in market demand, changing customer requirements has brought about changing preferences of customers in the market.  In the automobile industry, such changes have been experienced as firms get involved in globalization that has presented various risks and opportunities. At the same time the changes have put a lot of pressure on manufacturers to improve quality, efficiencies and drive innovation in serving the needs of the customers (Campos & Rebs, 2017). This can be related to the need for increased value-based performance for the various organizations operating in the automobile industry. The role of effective supply chain in improving performance is critical and cannot be overlooked since it gives competitive edge to firms operating in the automobile industry (Schaltegger & Burritt, 2014). The various structural changes and arising issues have informed the supply chain management strategies adopted by organization around the world. BMW is not unique in terms of facing and dealing with such emerging issues. The BMW supply chain has been characterized by a franchise network that is complex and consisting of the manufacturer, suppliers (tier 1-tier 2), distributers, dealers and providers of required logistics (Fleischmann, Ferber & Henrich, 2006). The BMW vehicles are products of much complexity where a range of components are combined in a clear manner (Ambe & Badenhorst-Weiss, 2010). The production of a typical car requires over 20,000nparts or 10,000 major components, while a manufacturer supplies many models that needs constant upgrading. This means that the supply chain should therefore, be robust and flexible in terms of production  line , effective suppliers and even distribution network  that is complemented by customer care and sales department that is responsive enough. To BMW, quality and delivery of suppliers is an important supply of its supply chain and requires an approach that is effective and holistic during selection and evaluation of the supply methods. The build to order system employed by BMW and a strategy for mass customization in accordance with the requirements of customers should be such that it serves the goal of the organization (Melo et. al 2009).

Discussion

The beginning of BMW’s supply chain is the customer and the end is still the customer. The firm has a large supplier network consisting of over 12000 suppliers in over 70 countries (BMW, 2016). The highest percentage volumes is derived from Germany and other parts of Western Europe and the purchasing division of firms  is tasked with selection , evaluation , validation and even quality assurance of products supplied while making sure that sustainability is maintained (Stadtler,  2015). Major aspects in the development of the supplier system involves building of a consistent channel of communication, having the appropriate system for rating supplier and employing many sourcing strategies to know these suppliers. The firm obtains the components and parts from different suppliers around the globe and this determines the supply chain system of the firm

Collaboration and Cooperation with suppliers

Since the firm obtains various parts and components from different suppliers, developing and maintain good relationships with them is very important since as a car manufacturer, its supply chain depend majorly on quality and responsiveness of their services (Reuters, 2017). The firm strategy comprises of Just-in-sequence and Just –in-time methods, where the need to collaborates and communicate on real time basis is an very necessary. Accuracy and on time information is a major aspect for effective and management and controlling of supply chain. The information may get distorted along the chain, from retailer to supplier of raw materials which can lead to bullwhip effect. This may result from conflict on objective views or delays resulting from the complexity of the distribution network. Such delays have been observed in the past where a Tier-1 supplier – Bosch- which suppliers steering gears that are used in building of the BMW cars  1 to 4 series – was unable to meet the demand for such parts which greatly affected the operations of the company (MCGee, 2017).

This represents the type of risks that automobile manufacturers faces in the current supply chain networks in the globe. BMW has tried to negate such issues through integration of IT systems and other technologies like EDI for the bigger suppliers and even mySAP and at the same time making sure that its development is made alongside its suppliers and distributors. The mutual knowledge transfer arising from such collaboration has benefited that firm and assisted in strengthening the supplier network (Noor , 2013). For instance, the North American supplier network has been tied together through its centre for process development that works closely with suppliers and its role is crucial in development of suppliers’ capacity (Brandes et. al 2013).   Such collaboration has created a personal relationship with suppliers in emerging markets like China and India and it has been a tremendous asset. BMW is able to benefit from the knowledge of local customer requirement and make the right strategic changes that are needed for effective process of decision making (Cesarani, 2015).

Designated Production

The industry has experienced many changes since the inception of BMW manufacturing, where the emphasis has seen a shift from mass system of production to a lead system of production and currently a system that is more driven by customer demand. While previous normal practice involved a “built-to-stock” system where car stock was produced on the basis of anticipated demand and sufficient units were built with the warehouse capacity of the manufacture in mind, the shift has seen more focus on market demand (Muller, 2010). The aim of built-in-stock was to achieve economies of scale and constant production of the product in bulk leads to lower production for every unit. In the current market, manufactures have to achieve the right balance between market demand and production and this is a major point of consideration in a market that is continuously volatile (Alenuskin & Schotter, 2012). The production strategy for BMW comprises major of a pull mechanism where the market demand but not forest demand in forms its production cycle. This is enabled by the supply chain which ensures that build-to order, just-in-sequence and just-in-time are integrated into the production system (Pitts, 2015).

Build-to-order Supply Chain

The current market environment is very diverse and the changing customer needs and preferences make it to be fast-paced. There is rapid technological changes and increased globalization which presents opportunities and needs for automobile firms that are aiming at achieving a bigger product range in the different markets in the globe. The risk arises for complexity in the range of car products and need for customized products to satisfy the needs of customers. BMW tries to tackle the market risks through adoption of strategy aimed at designing to defer product differentiation , a case where final product configuration is put off as many times as possible until the market demand allows (Gunasekaran  & Ngai, 2005). The BOSC supply system helps the firm to deal with such risks and exploit the existing opportunities. The system leverages the outsourcing and technologies’ advantages to serve the specific customer needs with effective responsiveness. This involves a ‘Customer-Oriented Sales and Production process ‘where customer informs the production process but not the car. Through the supply system, the company allows the customer to change his preferences in some few days to car delivery which makes it possible BMW to achieve high degree of customer satisfaction and responsiveness (Muller, 2010). All the aspects that are captured in the process like finished goods zero inventory and zero work-in-process stocks are achaived in the process.

Distribution system

The system of distribution revolves around market demand and such strategies used are periodically evaluated. The basic idea is supplying and unloading products in different ports where BMW’s biggest market can be found and this ensures that lead times are greatly reduced. The company is always aiming optimizing the distribution network using built-for distribution project where the department handling materials deals with the incoming transportation and remaining in constant facilities with company’s facilities, purchasing departments and suppliers (Olhager et. al 2015).

Reverse logistics network

This comprises of all operations involved in reusing finished products and surplus materials that are used in forward chain. The framework for BMW reverse logistics is effective and involves utilization of re-manufacturable, recyclable and reusable parts of vehicles. In the production cycle, the company applies a closed-loop method where the residual materials that are reusable are used up in the same machine (Hausladen et. al 2015).The materials such as scrap metal are reused in the production process. The recalling of products also forms part of the aforementioned process of reverse logistic by the company.

Development areas plan 1

Sustainable transportation and logistics

Sustainable transportation requires resources and time which are dedicated for optimization of the inbound and outbound logistics (Schiller et. al 2010). This involves controlling the transportation network for parts and components and the finished products with an aim of optimizing space, reducing cost, improving time needed and reducing the usage of assets. BMW needs to improve on its transportation during the supply of parts and components and optimizing it using the reverse logistics network.

Option Appraisal

The goal of this strategy is to ensure that there is optimization of the transportation route with the aim of minimizing costs of inbound and outbound shipments and other containers used in transportation of materials. Another objective is find an efficient way of obtaining various parts from suppliers in different areas for timely production of cars and hence meets customer demands. Where possible, smart algorithms can be used to determine the best method for optimizing the flow-paths of products and materials used in production.

 Strategic approach

The strategy for this plan is to have a consolidation center where supplier selection and analysis will be done. Since the suppliers for BMW are many and supplying different components and parts, the center can be used for combining smaller trucks or shipments for less large containers and hence reduce the transportation cost. The optimization of the flow-path can select the products to be taken to the center and a network optimization will determine the number and location of consolidation centers. The strategy will ensure that transportation cost is reduced greatly while deliveries are made on time.

Project timeline

 

         Week 1                    week 2              week 3                    week 4                       week 5

 

                                                                                                                                 

 

 

The timeline for the project involves 5 weeks between approval and completion. The first week will involve project approval by the management after which it will kick off. The second week will involve analysis the cost of establishing the consolidation centers and planning for the resource. In the third week, the funding of the plan in the initial development stage will done followed by will involve programming and certification of the process. In the fourth stage, the documentation of the project and obtaining usability feedback will be done after various tests. The fifth week will involve a final checkpoint of the project and closing it.

Resources

Resources for the organization include the funds, equipments, materials, time and knowledge required in the completion of the project (Subramanian, 2015). For the development of the consolidation center for BMW, the resources required will be sourced from the company and will be distributed through a plan for resource allocation. A plan for resource allocation is an essential tool that ensures effective management and allocation of the scarce resources set aside for a project. The various resources required for this development include skilled human resources, equipments for carrying out the logistics and funds will be necessary.

 

Budgeting

Project tasks	Labor cost	Material costs	Transport cost	Administrative cost
Functional specifications development
Preliminary and detailed design
Training personnel
Procure land
Procure materials
Equipments and softwares
Project tests

 

Risk register

Major Risks	Summary	Risk type	Possible occurrence time
1	Difficulty in finding appropriate land for constructing consolidation center	Sourcing	December,2017
2	Compliance  requirements	Regulatory requirement	November,2017
	Supplier resistances to changes	Supplier requirement	November,2017
Minor risks
1	Supplier changes not accounted for	Market requirement	January, 2018
Moderate risks
1	Likely change of supply routes	Market requirement	February,2018
	Suppliers  inability to adjusts	Suppler requirement	January,2018

 

Plan 2

Supplier social responsibility

Establishing supplier code of social responsibility demonstrates a clear intention to have a sustainable ground for validating the economic, environmental and social benefits of the operations being carried out by an organization.

Option appraisal

The establishment and requirement for BMW suppliers, dealers and distributors to be socially responsible is aimed at safeguarding the reputation of the firm and complying with existing legislations. It also aims ensuring that the company meets the expectations of the customers and the society in which it operates. When the firm is associated with suppliers who have little regard for the wellbeing of the community and the environment, it may lose the hard earned reputation and even a portion of market share (Manners-Bell, 2017).

Strategic approach

 The strategy for implementing this suggestion will involves the development of a policy on social responsibility and which a supplier is required to abide with if they are to continue with a business relationship with BMW. This involves the establishment of standards on working practices, management of water and waste, policy on minerals from conflict zones, health and safety for workers and community.

Project timeline

 

 

                       Week 1                      week 2    week 3                          week 4

 

 

 

 

The first week will involve obtaining approval for establishing a code for corporate social responsibility. Presentations on suggested best practices will then be presented to management and suppliers in 3^rd week. The management and suppliers will then have to approve of these suggestions and then enter into an agreement.

Resources

The resources needed for this project include mainly funds for recruiting personnel both internally and consultants with knowledge on automobile industry and related social and environment impact. The resources will be provided by the firm

Budgeting

 The budget include the cost of recruiting internal experts and consultants from outside to draft the required policy

Risk register

Risks	Summary	Risk type	Possible occurrence time
Major risks
1	Failure to comply	Supplier risk	Immediately
2	Little gain from finances spent	Performance  risk	Overtime
Moderate risks
1	Indulgence  in personal interest leading to agency cost	Management risk	Overtime
	Slowed supply chain	Performance risk	Overtime
2
Minor risk
1	Insincere & shallow CSR	Management risk	Overtime

 

 

Reflective analysis

An effective supply chain forms an important part of competitive business strategy since it leads to reduced cost, improved quality of services and products to customers. With increased changes in the global market, BMW supply chain has to manage to face such changes without negatively affecting the operations of the firm. The supply chain of the firm is largely based on 1-tier and 2-tier suppliers who supply various parts and components necessary for manufacturing of various car models. The supply chain has enabled the growth of the company in terms of production capacity and market size since it is based on the market demand. The system has experienced various hitches where the suppliers have been unable to meet the production demand of the firm which has affected the operations of the firm. This calls for an improved system of supply which will ensure that increased efficiency is achieved by suppliers at reduced cost. The adoption of consolidation center will enable the firm to optimize on the optimization of materials and products and this will lead to reduced cost and hence, profitability. In addition, adoption of a corporate social responsibility policy will ensure that the firm’s reputation is protected at the global market.

References

Schaltegger, S., & Burritt, R. (2014). Measuring and managing sustainability performance of supply chains: Review and sustainability supply chain management framework. Supply Chain Management: An International Journal, 19(3), 232-241.

 

Campos, J. K., & Rebs, T. (2017). Opportunities of Combining Sustainable Supply Chain Management Practices for Performance Improvement. In Social and Environmental Dimensions of Organizations and Supply Chains (pp. 13-34). Springer, Cham.

 

Fleischmann, B., Ferber, S., & Henrich, P. (2006). Strategic planning of BMW’s global production network. Interfaces, 36(3), 194-208.

 

Ambe, I. M., & Badenhorst-Weiss, J. A. (2010). Strategic supply chain framework for the automotive industry. African Journal of Business Management, 4(10), 2110.

 

Melo, M. T., Nickel, S., & Saldanha-Da-Gama, F. (2009). Facility location and supply chain management–A review. European journal of operational research, 196(2), 401-412.

 

Stadtler, H. (2015). Supply chain management: An overview. In Supply chain management and advanced planning (pp. 3-28). Springer Berlin Heidelberg.

 

BMW, (2016).KEY INDICATORS: SUPPLIER MANAGEMENT. Retrieved from: https://www.bmwgroup.com/content/dam/bmw-group-websites/bmwgroup_com/responsibility/downloads/en/2016/BMW_GROUP_KeyIndicators_Supplier_Management.pdf

 

Reuters, (2017).Supply problems hit production at BMW: Focus. Retrieved from: https://www.reuters.com/article/us-bmw-factories/supply-problems-hit-production-at-bmw-focus-idUSKBN18O0GI

MCGee, P., (2017). BMW car production disrupted due to supply problems .Retrieved from: https://www.ft.com/content/e09a322e-446a-11e7-8519-9f94ee97d996

Brandes, O., Brege, S., & Brehmer, P. O. (2013). The Strategic Importance of Supplier Relationships in the Automotive Industry. International Journal of Engineering Business Management, 5, 17.

Noor , J., (2013).The power of successful supplier collaboration. Retrieved from: https://www.mckinsey.com/practice-clients/operations/the-power-of-successful-supplier-collaboration

Cesarani, M. (2015). Global Network, Outsourcing and Relationship Management. LAP Lambert Academic Publishing.

 

Muller, J. (2010). BMW’s push for made-to-order cars. Retrieved from https://www.forbes.com/forbes/2010/0927/companies-bmw-general-motors-cars-bespoke-auto.html#63f6fd482651

 

Alenuskin, D., & Schotter, A. (2012). BMW of North America: Dream It, Build It, Drive it. Thunderbird School of Global Management.

 

Pitts, F. H. (2015). Creativity and the Commodity in the Automobile Industry. International Journal of Cultural and Creative Industries, 2(2).

 

Gunasekaran, A., & Ngai, E. W. (2005). Build-to-order supply chain management: a literature review and framework for development. Journal of operations management, 23(5), 423-451.

 

Hausladen, I., Lichtenberg, A., & Haas, A. (2015). Supply chain design in e-mobility supply chain networks. In Entscheidungen beim Übergang in die Elektromobilität (pp. 383-408). Springer Fachmedien Wiesbaden.

 

Olhager, J., Pashaei, S., & Sternberg, H. (2015). Design of global production and distribution networks: A literature review and research agenda. International Journal of Physical Distribution & Logistics Management, 45(1/2), 138-158.

Schiller, P. L., Bruun, E. C., & Kenworthy, J. R. (2010). An introduction to sustainable transportation: Policy, planning and implementation. London: Earthscan. 123

Subramanian, S. P. (2015). Transforming business with program management: Integrating strategy, people, process, technology, structure, and measurement. CRC Press. 174-175

Manners-Bell, J. (2017). Supply chain ethics: Using CSR and sustainability to create competitive advantage.  

 

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