BMW and Rosslyn Plants Supply Chain Management and Logistics

BMW (Bayerische Motoren Werke), is arguably a luxury car manufacturer. BMW group headquarter is in Munich, Germany, however the company is settle all over the world (BMW Group, 2004) More detailed in (Appendix 1). In the early 1973, BMW opened his first international plant in Rosslyn South Africa (Autointell.com, 2007).

Introduction

The shifting business conditions of the 21st century has led to companies facing issues ranging from economic uncertainty to new technologies, globalisation and increasing consumer demands. In the automobile industry, as manufacturers design and build vehicles globally, their supply chains turn into increasingly multifaceted with challenges that frequently stand in the way of profitability and higher shareholder value such as long order-to-delivery lead times, unpredictable production schedules, excess inventory across the supply chain, lengthy demand planning cycles and lack of visibility of suppliers. The effect of the global economic meltdown increased the pressure on automotive executives to make right decisions about their supply chain for better performance.

This paper will analyze how the German car manufacturer BMW South Africa (SA) at Rosslyn plant operates and how supply chain is conceived, supported, delivered and developed as well as identify the inventory management and the performance improvement that are affected by the identifying the logistics and supply chain management (SCM) systems as a possible strategy to respond to changing consumer demand.

BMW Supply Chain Management process

Supply chain management (SCM) can be defined as the design and management of seamless, value-added process across organisational boundaries to meet the real needs

of the end customer (Fawcett et al., 2007). Generally, SCM involves relationships and managing the inflow and outflow of goods, services and information (network) between and within producers, manufacturers and the consumers (Christopher, 2005; Samaranayake, 2005; Gripsrud, 2006). A supply chain includes all activities, functions and facilities (directly or indirectly) in the flow and transformation of goods and services from the material stage to the end user (Sherer, 2005). It consists of an upstream supplier network and downstream channel (Mangan et al, 2008).

The supply chain process at BMW starts from the customer and ends with the customer. BMW uses built-to-order structure to provide their customers what they want. Customer makes their request online or throughout the dealers. The information is then transmitted to Munich (Germany) which is captured in a central database. Bill distribution is done to establish cost of manufacturing and deciding where the car will be manufactured (Academicsjournal.org, 2010). This is informed by the nature and design of the product, the cost involved and the lead time. All parts are complete on built-to-stock foundation on the model life of the car imported. Parts are received at the Cape Town international airport by shipment in the case of South Africa Rosslyn plant (SAP) (Academicsjournal.org, 2010). It is then conveyed to the Rosslyn plant in Pretoria where it is then assembly. After assembled, it is taken to the warehouse where it is transported to the dealers set for collection by the customer (Kaps, 2006). Several of the manufacturing, distribution of cars, suppliers of parts, exportation, quality values at BMW and the employ of mySAP technology for steering communication. These processes can be explained as follows.

Production

The production practice of cars goes during different shops where precise technologies are practical to make sure that value cars are delivered to customers. The procedure starts at Body-in-White Shop, where diverse pressed body parts are assembled into a body shell (Academicsjournal.org, 2010). The next procedure is the Paint Shop, where it is painted according to the customers’ request. At last the painted body goes to Assembly Shop where parts are fixed as per specification ordered by the customer. The essential issue is stretchy manufacturing (Academicsjournal.org, 2010).

Paintings of car

A painting of car is flexible to manufacture cars which meet the customers’ exact requests. Colour is an important principle for the customer choosing a car and is an influential marketing tool. Each customer is provided with the specific model require, with personalised features and all the options ordered, calls for an exceptionally high standard, not only in assembly but also in production and vehicle delivery management (Academicsjournal.org, 2010).

However, one of the main activities on the assembly line occurs at the mix point: the point at which the engine and drive train are “mixed” to the body of the car. Improvements are made on the assembly line which has made it possible for BMW plant to produce all the 3 Series 4-door model derivatives and option requirements for the local and export market (Academicsjournal.org, 2010).

Suppliers and assembly line

BMW Rosslyn plant for example has about 44 local suppliers. Suppliers bring more than 60% of the mechanism of each car to the line. Just in time (JIT) supply processes ensure that certain components of the vehicle are on the assembly line just in time to be fixed to the exact vehicle they are made for. JIT supply systems are used to bring door panels, exhaust systems and rear and front axles to the correct point on the assembly line. Using a JIT supply scheme saves space by minimizing stock on the premise (Acamdemicsjournal.org, 2010). Typically, there is only one and a half hours of stock on the line at any set time which prevents damage to stock transport costs and saves storage. BMW plant delivers world-class worth products to consumers across the globe. All operational production is managed for offering uncompromising, best quality. However each and all procedure in manufacturing involved the car is checked for process inspections and aptitudes are implemented where needed (Academicsjournal.org, 2010).

Distribution

BMW plant Vehicle Distribution Centre (VDC) has a distribution facility and a cost-effective storage, allowing the safety and quality protection of the vehicles. A 200-vehicle car-train loads export vehicles use dedicated railway facilities and off-loads each day import vehicles. For example Rosslyn plant has about 196 dealers locally. Vehicles intended for dealers are loaded onto car carriers and to dealerships around the country, which save the vehicle from any marks wear and scratch prior to delivery to a customer (Academicsjournal.org, 2010). All vehicles are inspected by associates VDC prior to loading to guarantee that the highest possible levels of quality delivery to dealers are maintained. The VDC provides a mechanical and paint/body workshop for the service and repair of company vehicles in addition to approve used cars. Manufactured vehicles are then transported to Durban (SA) for export. Transportation of vehicles to Durban port is on a daily basis. BMW South Africa (SA) has two train carriers, each one with a storage capacity of 176 units (Academicsjournal.org, 2010). The trains are used to transport imports units from Durban harbour to the VDC in Rosslyn. The vehicles are loaded onto car carrying vessels at the Durban harbour, known as RORO ships. These ships transport vehicles to several marketplaces at the opposite ends of the earth. Cars are conveyed on a bi-monthly basis to the Far East, USA and Australia, respectively (Academicsjournal.org, 2010). The transit period differs depending to the destination: Japan – 23 days, USA – 29 – 49 days, Australia – 13 – 22 days (Academicsjournal.org, 2010).

Quality Standards

To ensure optimum customer satisfaction, the built quality of the vehicles produced at BMW Rosslyn Plant is measured through a process called Complete Product Audit. This audit compares the quality of a unit to the customer’s requirements, including technical specifications, fitment and function. These audits are performed

throughout the build process at specified points. These strict audit standards are set at BMW Germany by the Central Quality department and are the same for all BMW plant (Academicsjournal.org, 2010).

Using mySAP at BMW

BMW uses mySAP Automotive to inspect assembly rank in real time. MySAP automotive parts use information and registers production validation every three minutes. Although, parts used during assembly are separately from the inventory count, and costs are posted to calculate the value of work in process. mySAP automotive helps to reduce order-to delivery time, reinforces supply chain activities in the areas of demand planning by tracking, tracing of material deliveries and improves inventory accuracy across BMW plant – enabling significant reduction time-to customer (Academicsjournals.org, 2010). It also receives custom-configured manufacturing orders from BMW’s planning system which include all the parts necessary to manufacture each car. However, BMW sends these long-horizon forecasts and short-horizon JIT delivery schedules to its suppliers. Larger suppliers receive the information via electronic data interchange (EDI) whereas other suppliers access the mySAP automotive supplier portal, where BMW posts the requirements to present up-to-date information on its delivery needs (Academicsjournals.org, 2010). By using only an Internet browser, suppliers can view this information in real time, including purchase documents, engineering documents, release schedules and invoices. When they ship parts, the suppliers send BMW advance shipping notifications (ASNs) to provide the car manufacturer with exact information on parts counts and delivery dates. Parts arriving at the BMW dock are then received and transferred directly to the line (Academicsjournals.org, 2010).

BMW plant has fully integrated systems and network worldwide because BMW uses a service management system as part of a wider plan to improve supply chain lifecycles. The platform is triggered by complexities in the technology embedded in its cars and subsequent demand for systems to support servicing (Academicsjournals.org, 2010). BMW uses a portal to integrate information and systems with its suppliers which leads to faster information platform for communication however -advance technology applications is also used such as mySAP, JIT manufacturing, built-to-order which are all characteristics of lean manufacturing and innovations (Mangan et al, 2008; Academicsjournals.org, 2010).

BMW Rosslyn plant logistics

Logistics is part of the overall strategy of BMW as is part of the supply chain such as flows of material, information, people and equipment (BMWGroup.com, 2007).

‘Doing logistics involves various activities such sourcing and purchasing inputs, managing inventorying, maintaining warehouses, and arranging transportation and delivery’.

(Mangan et al, 2010: )

Logistics play an important role in the manufacturing and the production of BMW’s products which are shaped by a very highly and flexible efficient production network with mature work practice and the most advanced plants and facilities. As a worldwide player, the BMW Group is represented through its quality products of the BMW, MINI and Rolls-Royce brand in more than 140 countries. A flexible network of 23 production plants in 12 countries ensures that each customer receives the car he has ordered tailored to his specific needs and preferences (BMW Group, 2010).

Efficient and flexible assembly at BMW is guaranteed by stylised logistics for an efficient production and a smooth flow of materials. Proficient logistics at BMW ensures accurate delivery of the parts required exactly on time, with a smooth and accurate flow of parts from BMW Group components or supplier (BMW Group, 2007). My SA 2nd automotive receives custom-configured manufacturing orders from BMW’s planning system (Sap.com, 2010). The orders include:

Mass customization

BMW plants were designed to allow maximum flexibility and effective communications – two factors that BMW emphasized for customization of its cars. BMW was reputed for its customization program, which allowed buyers to design their own cars from a set of available options. These orders were then transported to the factory which manufactured them according to the requests, which are then delivered to the buyers in the shortest possible time. In manufacturing world, this structure is called ‘mass customization’ (IcmIndia.org, n.d), which is one of the essential enablers of agile supply chain as it combines both advantages of mass customization with those of production (IcmIndia, n.d; Mangan et al, 2008). Most analysts agree that BMW was one of the prominent implementers of mass customization in the auto industry.

BMW promoted differentiation of it products which is an important attribute for luxury car by proving 1000 bumpers variation, 4000 panels choices and 488 different door panels (See Appendix 2 Interesting facts). A very high percentage of their output is already made to order (Autoexpress.co.uk, 2010).

Role of supplier and IT

BMW suppliers are located near the factory which is makes easy to be accessible and the time waste. The company keep the supplier constantly in the information loop and the information system for assembly. BMW had a very accurate ERP solution established by SAP. It linked the SCM very well. Once the data entered it reached automatically to production areas (Scribd.com, 2010).

BMW at Rosslyn plant is typical example of how this IT practice has been organised using synchronised logistics. In the BMW example the incoming trucks are set a pager and preparing the specification by radio frequency identification (RFID) tag on arrival which is sent either straight to one of the waiting area or to the waiting bays. When the next loading bay in the delivery/pickup sequence for a given truck becomes available, the truck is paged to drive up and be unloaded / loaded (Psionteklogix.com, 2010). The RFID unit as well acts as a transponder to recognize the loading bay location of the truck in the factory during its activities, which are monitored by the system. In other instances such as at DaimlerChrysler Bremen the incoming trucks for JIT and JIS (Just-In- Second) deliveries all have GPS and radio data units and they are tracked from their starting point at the supplier to the factory (Psionteklogix.com, 2010). By monitoring the progress of the incoming trucks any delays are recognized in advance and the unloading plan amended accordingly. Based on the planned arrival of vehicles, the SyncroSupply system can plan the allocation of unloading bays, forklifts and other equipment essential to unload the goods and get them to their final location in the factory. In addition to supplier vehicles the system also manages internal truck movements, inter factory transfers, milk runs, return of empties (psionteklogix.com 2010, Ciltuck.org.uk, 2010).

Performance improvement

The automotive industry is currently witnessing rapid increases in the number of models and model variants that are available on the global market. The industry is

now required to meet specific customer requirements in terms of specification and delivery date. Therefore, a fundamental change in BMW manufacturer shifted towards build-to-order, suggesting dramatic rise in flexibility and responsiveness across supply chain partners by implemented the leagile framework.

Leagile is the combination of the lean and agile paradigms within a total supply chain strategy by positioning the decoupling point so as to customer end of the supply chain (downstream) while providing level scheduling supplier end of the supply chain (upstream) from the marketplace (Mangan et al, 2010). In order to achieve leagile supply chain, the upstream at BMW of the decoupling point have best suit the need for responding to an unpredictable demand designed to be lean while downstream agile (Mangan et al, 2008).

Critical analysis

Although the efficient supply chain processes and technology following the process needs to be faultless and as quicker as possible for survival in these uncertain times. BMW plant is quite flexible to customer demands giving the choice for them to request the type of cars they want at the appropriate price available. Cars are built-to-customers orders rather than by mass production. For example, differentiation techniques are used during painting as well as choices of the car features for comfort, hence flexible manufacturing. They do not hold inventory because the strategy is focused on built-to-order, so cars are made in sequence as the orders are placed using advanced technology such as mySAP which communicates demand planning across the supply chain (BMWGroup.com, 2004; Mangan et al 2008). Hence, BMW acquire characteristics of lean and agile supply chain (BMWGroup, 2004). Therefore the implementation of a framework for leagile supply chain at BMW is best so as to react to changes in the market (Mangan et al, 2008).

Traditionally, the BMW has employed mass production strategy focusing on cost reduction (Zhang and Chen, 2006). However, due to globalisation, changes in the business environment etc, there has been a noticeable shift from the practice (Elkins, 2004; Sweicki and Gerth, 2008). BMW Rosslyn plant and the automobile industry in general have felt the results of the global economic meltdown resulting in a noticeable the actors of the supply decrease in sales and export across the globe (BMWGroup.com, 2007). To alleviate the situation, BMW has focused on strategies cost reduction with suppliers by reducing manufacturing plants. Not surprisingly, cost containment is a concern that figures prominently on the automobile agenda (Mangan et al. 2008). IBM (2009) survey indicates that there are five primary challenges facing auto makers in this economic downturn. This includes risk, customer demand, visibility, cost containment and globalisation which are raising interest rate, raw material, energy cost and strong fluctuation. In this uncertain business climate, in addition to lean manufacturing, automobile manufacturers should be agile and responsive in addressing change which is BMW characteristics. A superior supply chain is a must to help auto manufacturers redesign and differentiate themselves (Academicsjournals.org, 2010). The application of RFID technology at BMW warehouse has enabled the reading of multiple items simultaneously is an ubiquitous technology which could reduced motivation and job satisfaction which could lead to the reduction of operational performance because employee involvement in system design is important (Mangan et al, 2008). However there is the necessity to redesign and redefine BMW supply chain strategies, operations and layouts thus as to be able to react to varying market demands. It should be accepted that BMW have both lean and agile characteristics and the full implementation of a leagile supply chain is vital for the survival of BMW in this uncertain business times and for the years to come.

Conclusions

In a highly challenging and competitive environment such as today, where supply chain is a popular tool for improving the organisational competitiveness, an efficient and effective supply chain strategy is a must for BMW and their component manufacturers so as to meet changing consumer demands.