BMW-Operations Mgt.

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MASS CUSTOMIZATIONTHE BMW WAY

THE BMW WAYInaugurated 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

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.

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.- DIXIAustin 7 car. Marketed under name BMW 3/15. Early 1930s introduced several successful models. 327 Saloon & 328 Roadster.

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. 1980s, 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.

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

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) product is not made until order is received.

Build-to-order approach

Minimum order quantity of one

MASS CUSTOMIZATION REQUIRES SIX CORE COMPETENCIES 1. Eliminating Customer Sacrifice 2. Modular Design and Integration 3. Supply Chain Management 4. Lean Production 5. Process Organization 6. Multi-project Management

MASS CUSTOMIZATION1990`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 planning became an integral part

Advanced

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

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

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.

CHALLENGES TO MASS CUSTOMIZATIONTo 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.

FUTURE OF MASS CUSTOMIZATIONThe 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

CONTDSeveral 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

THANK YOU.Aayushi Jalan Ritesh Navani Presented By: Nitin Tripathi Shyam Sistla Pankaj Chaudhary Sukruti Nayak