BMW-Operations Mgt.

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MASS CUSTOMIZATION THE BMW WAY

Transcript of BMW-Operations Mgt.

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MASS CUSTOMIZATION

THE BMW WAY

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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 allow maximum flexibility and effective communication

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CONTD..

Old way- customers ordered whatever the dealer had.

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

Website to match the preference Suggestions from dealers using the online ordering

system. Communicated to suppliers so that order received

at the right time. Suppliers close to plants. Differentiation- styling with excellent performance,

exclusivity and pride.

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BACKGROUND 1913, Karl Rapp established Rapp-Motorenwerke: manufacture aircraft

engine- Munich, Germany. 1916, got contract to manufacture aircraft engines for Austria-

Hungarian army- Partnership with Camillo Castiglioni & Max Friz in 1917- Named BMW(Bayerische Motoren Work GmbH).

Over expansion resulted in selling it to Austrian industrialist, Franz Joseph Popp, in 1917.

1918, BMW manufactured type 3a aircraft engine, which powered biplane to reach 5000m in 29 min.

After first world war , Treaty of versailles,1919 banned for producing aircrafts. Shifted to make Railway brakes.

1922, Bayerische Flugzeugwerke AG merged with BMW to form BMW AG.

1923, started manufacturing motorcycles.(R32, 500cc). 1928, BMW bought car manufacturing unit in Eisenach, Germany.-

“DIXI”-Austin 7 car. Marketed under name BMW 3/15. Early 1930’s introduced several successful models. 327 Saloon & 328 Roadster.

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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

wheel suspension. 1971, moved to new head quarters, Munich. Increased focus on exports. 1973, set up 1st overseas plant in South Africa. 1980’s, increased exports to US, Asia and Australia. 1981, first European car maker to set up subsidiary in Japan. Engine plant in Austria (‘82) & Bavaria(‘86). 1992, BMW outsold Mercedes for first time in Europe. 1994, bought MG Rover-mini, Land Rover, Range Rover,

Triumph. In 2004 BMW manufactured & assembled three brands –

BMW, Mini & Rolls Royce at 24 sites in 12 countries. Employed 70000 people, customers up to 1.2 million units

and revenues were US $60.47 billions.

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MASS CUSTOMIZATION

Mass customization is the ability to satisfy the particular needs and wants of individual customers at competitive prices of mass produced products and services that approximate the wishes of many customers in large market niches

Mass Customization links two production concepts - mass production

customization

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MASS CUSTOMIZATION REQUIREMENTS

Mass Customization requires: System for customer to specify requirements

easily e.g. online ordering, call center. Advanced manufacturing systems

Enable economies of scope (keep cost and price low) Build-to-order approach

product is not made until order is received. Minimum order quantity of one

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MASS CUSTOMIZATION REQUIRES SIX CORE COMPETENCIES

1. Eliminating Customer Sacrifice2. Modular Design and Integration3. Supply Chain Management4. Lean Production5. Process Organization6. Multi-project Management

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MASS CUSTOMIZATION

1990`s criticisms levied…

Post purchase customization was big business in US

& Europe

1998, BMW launched a system called COSP,

supported by an interactive web site

Did not take online orders by customers

Advanced planning became an integral part

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ERP for real time interaction - Suppliers

Parts received from suppliers were stored at the highly

automated parts warehouse known as Sequence Center

Plants were highly automated (50 – 75%)

Assembly lines facilitated shifting between models

Interchangeability of parts enhanced flexibility and

helped them deliver in approx 12 days

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“ Our logistics challenge is to let customers change

their choices right up until production process starts”

While a certain part of vehicle was mass produced,

combination of final elements was customized

BMW looked on its buyers as ‘investors’ and not as

customers

Around 80% cars were customized in Europe & 30%

in US

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BENEFITS TO MASS CUSTOMIZATION

CUSTOMER• Personalized Car• Higher Customer Satisfaction• Great Amount of Flexibility• Perfectly Matching the need of Customer

BMW• Brand Image in the auto industry• Company's Profitability• Cut in Inventory• Competitive Advantage.

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CHALLENGES TO MASS CUSTOMIZATION

To Balance the Mass Production and Differentiation.

Maintaining Supply Chain. Reduction in Order Processing Time. To carter customers in foreign

countries. Foreign countries rules and

regulations. Integrating customer preferences with

the image of the country.

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FUTURE OF MASS CUSTOMIZATION

The driver of Mass customization was the gap between what the customer wanted and what a company could supply

It was used with great efficacy by Dell Inc. in manufacturing computers

More than 50 percent of the cars built did not have 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, window frames were also using it to improve their production systems

In case of auto industry manufacturing in small batches or customizing products was not economical for plants and also the fluctuating production led to inefficiencies of plants

This meant that companies would produce a wide variety of options in large batches and then use the internet to find a product from among those already manufactured that exactly matched a customer order

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THANK YOU.

Presented By:Aayushi Jalan Nitin Tripathi Pankaj ChaudharyRitesh Navani Shyam Sistla Sukruti Nayak