36590399 BMW Operations Mgt

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MASSCUSTOMIZATION

THE BMWWAY


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THE BMW WAY Inaugurated its plant in Leipzig area of

Germany BMW invested $1.3 billion in building the

Leipzig plant

Implementer of mass customisation

Leibzig plant was designed to allowmaximum flexibility and effectivecommunication


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CONTD..

Old way- customers ordered whatever thedealer had

New way- Maker of luxury cars had to offerextra value to customers (example)

Website to match the preference

Suggestions from dealers using the onlineordering system

Communicated to suppliers so that orderreceived at the right time. Suppliers close toplants

Differentiation- styling with excellenterformance, exclusivit and ride


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BACKGROUND

1913, Karl Rapp establishedRapp-Motorenwerke: manufactureaircraft engine- Munich, Germany

1916, got contract tomanufacture aircraft engines forAustria-Hungarian army-

Partnership with CamilloCastiglioni & Max Friz in 1917-Named BMW(Bayerische Motoren

Work GmbH)


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CONTD.

BMW 700, small car with air cooled,rear mounted engine.

It had sporty exterior- sport sedan

1961, BMW 1500- compact sedan-front disc brakes & 4 wheelsuspension

1971, moved to new head quarters,Munich

Increased focus on exports

1973, set up 1st overseas plant in


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MASS CUSTOMIZATION

The ability to satisfy the particular needs andwants of individual customers at competitiveprices of mass produced products and servicesthat approximate the wishes of many

customers in large market niches

It links two production concepts

Mass production

Customization


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5/5/12MASS CUSTOMIZATION

REQUIREMENTS

q Mass Customization requires:

System for customerto specify requirementseasily

e.g.online ordering, call center

Advanced manufacturing systems

o Enable economies of scope (keep cost and pricelow)

Build-to-orderapproach

o Product is not made until order is received

Minimum order quantity ofone


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5/5/12MASS CUSTOMIZATIONREQUIRES SIX CORE

COMPETENCIES1. Eliminating Customer Sacrifice

2. Modular Design and Integration

3. Supply Chain Management4. Lean Production

5. Process Organization

6. Multi-project Management


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5/5/12MASSCUSTOMIZATION

1990`s criticisms levied

Post purchase customization was big business inUS & Europe

1998, BMW launched a system called COSP,supported by an interactive web site

Did not take online orders by customers

Advancedplanning became an integral part


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ERP for real time interaction - Suppliers

Parts received from suppliers were stored at thehighly automatedparts warehouse known asSequence Center

Plants were highly automated (50 75%) Assembly lines facilitatedshifting between

models

Interchangeability of parts enhanced flexibilityand helped them deliver in approx 12 days


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Our logistics challenge is to let customerschange their choices right up until productionprocess starts

While a certain part of vehicle was mass

produced, combination of final elements wascustomized

BMW looked on its buyers as investors andnot as customers

Around 80% cars were customized in Europe& 30% in US


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BENEFITS TO MASS CUSTOMIZATIO

q

CUSTOMER Personalized Car

Higher Customer Satisfaction

Great Amount of Flexibility Perfectly Matching the need of Customer

q BMW

Brand Image in the auto industry Company's Profitability

Cut in Inventory

Competitive Advantage


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ALLENGES TO MASS CUSTOMIZATI

To Balance the Mass Production andDifferentiation

Maintaining Supply Chain

Reduction in Order Processing Time

To carter customers in foreign countries

Foreign countries rules and regulations

Integrating customer preferences with theimage of the country

FUTURE OF MASS


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5/5/12FUTURE OF MASSCUSTOMIZATION

The driver of Mass customization was the gapbetween what the customer wanted and what acompany could supply

It was used with great efficacy by Dell Inc. inmanufacturing computers

More than 50 percent of the cars built did nothave a potential consumer when they rolled off

the final assembly line Companies like Ford and GM had already

following built-to-order programs


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CONTD Several other Industries like consumer

durables, packaging equipment, windowframes were also using it to improve theirproduction systems

In case of auto industry manufacturing insmall batches or customizing products wasnot economical for plants and also thefluctuating production led to inefficiencies ofplants

This meant that companies would produce awide variety of options in large batches andthen use the internet to find a product fromamong those already manufactured thatexactly matched a customer order

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ThankYou.

36590399 BMW Operations Mgt

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