Mass Customization: The BMW way

Aditya Kumar Sharma

Anurag Sharma

IBS JAIPUR

BMW’S New Plant:

• In May 2005 at Leipzig area ,Germany• Gerhard Schroder, Germany Chancellor

opened Plant with Helmut Panke,the Chairman of Company.

• BMW invested € 1.3 billion.• Manufacture BMW 3-Series car’s.• Max annual capacity: 650 cars/day• Expected to create 5500 jobs in that area.

The ceremonial process of signing the Plant Establishment

Contract.

BMW history

• In 1913 in Munich,Germany,Karl Friedrich Rapp established the Rapp-motorenwerke.

to manufacture Aircraft Engines.

In 1916

• During First World War Company secured contract to manufacture aircraft for Austria-Hungarian army.

In 1917

• In 1917 Rapp needed additional financing to complete this contract .

• The partnership with “Camillo Castiglioni.

• The new partnership company named as Bayerische Motoren Werke Gmbh

• The company soon get into difficulty due to over expansion.

• Sell it to Australian industrialist,Franz joseph Popp,in 1917

In 1918

• Bayersche Motoren Werke manufactured its first aircraft engine.

• It reached upto an altitude of 5000 metres in 29 minutes, creating a world record.

In 1919

• Treaty of versailles banned Germany from producing Aircraft.

• The company shift to manufacture Railway brakes.

In 1922

• 1922, Bayerische flugzeugwerke AG.• Manufacturer of small aircraft merged with

BMW to form BMW AG.

In 1923

• BMW started manufacturing Motorcycle R32-500 cc Bike designed by Max Friz.

• Company started producing car in late 1920’s.

From late 1920’s to 1950’s

• In 1928-BMW setup a car manufacturing unit in Eisenach region of Germany.

• There they manufacture DIXI cars and sold under their name.

• By early 1930 they started designing their own cars.

• And introduced many successful carr’s like 327 saloon and 328 roadster

Saloon 327 & Roadster 328

Cont…

• During second world war BMW again concentrated on manufacturing of aircraft engines and motorcycles for German army

• At the end of war they were heavily bombed .

• During 1950’s BMW tried to enter in premium segment market but failed.

Late 1950’s to 1990’s

• In1959 launched BMW 700 of “sporty exterior” which was the main selling point.

• They launched other models based on BMW 700 and won many competitions.

•

Cont…

• In1961 BMW launched another successful model BMW 1500

• With powerful sporty sedan with its front disk brake and four wheel independent.

Cont…

• In 1970 BMW moved its headquater to Munich.

• The building looks like the four cylinder of cars.

Cont…

• From 1970’s to 1990 they focussed on exports market’s.

• Like US ,south Africa, Australia, Asia, Japan, Austria and Bavaria.

• In1992 BMW outsold the Mercedes for the first time in europe.

• company became the first european car maket to operate in US market.

Cont…

• In1994 BMW attempt to enter in mass market by bringing British Car m/c MG Rover.

• The purchase gave the company ownership of many successful brands like Mini, Land Rover, and Triumph etc.

• But some of the models were clashing with the BMW’s model

From 2000 to 2005

• In 2000 BMW sold the MG Rover to Phoneix consortium for a nominal £10.

• Mini and Triumph Hold by the BMW and Land Rover and Range Rover sold to Ford.

• In Early 2000 BMW launched its 1-series and 6-series.

• For launching this car model company faced many criticism.

1-Series & 6-Series

Cont…

• In 2004 company added three 3 car brands-BMW, Mini, and Rolls Royce

• In 24 cities,12 Countries on 4 different continents.

• Company employed 70,000 people• Customer deliveries increases from 1.2

millions unit. • Revenue in 2004=US $ 60.47 billions • Profit=US $ 3.03 billions.

Rolls Royace & Mini

Operation Strategy Model

Results

Operations

Strategy

Corporate

strategy

The Mass Customization

• What is Mass Customization ??

– Meeting particular customer’s need on a large scale.

– Basically combining the concepts of mass production with customization.

Contd…..

• Drivers of the Idea :– One of the criticisms against B.M.W. Was

that most of its cars looked alike.– As a maker of luxury cars it had to deliver

value to its customers.– In older system customer had to do away with

whatever limited options they had.– Total customer satisfaction became the new

buzzword.

Impact on Operations strategy

• As a result of customization program there was a stocking more in showrooms.

• COSP – Customer oriented sales and production.

• Production process was defined by the car ordered by the customer.

• This was supplemented by the online ordering system launched by the company.

Some interesting facts

• There were 1032 options available within the B.M.W. product range.

• The B.M.W. & series alone offered 1017 variations.

• The B.M.W. X-5 sports utility vehicle had 1000 bumper variations, 4000 instrument panel choices.

The Insiders

• Advance planning was the key reason for the excellent management for BMW’s supply chain management.

• B.M.W. had a very efficient ERP solutions provided by SAP.

• It connected the supply chain management very well.

• Once the data entered it reached automatically to the production areas.

© PROSTEP AG 2002

The actual Supplier SituationThe Solution

BoM

CADSystem 4

PDM

CAD System 4

PDM System 4

BoM System 4

BoM

CADSystem 2

PDM CAD System 2

PDM System 2

BoM System 2

BoM

CADSystem 1

PDMCAD System 1

PDM System 1

BoMSystem 1

BoM

CADSystem 3

PDM

CAD System 3

PDM System 3

BoM System 3 -------

---------

Document data

-- --- --- -

Administrativedata

Productstructuredata

Comparative analysis

gene

ral m

otor

s

toyo

ta m

otor

s

ford

mot

ors

volks

wagen

daim

ler c

hrys

lerbm

w0

50000

100000

150000

200000

250000

revenue

revenue

profit margin

general motorstoyotafordvolkswagendaimlerbmw

The operating leverage conceptStatement Dec 04 Dec 03 Dec 02

revenue 60472.9 52122.2 44315.8

Quantity sold 1.5 1.30 1.07

E.B.I.T. 4847.7 4022.9 3455.6

Operating leverage =(%change in E.B.I.T.)/(%change in quantity of goods sold)

So we get degree of operating leverage as 0.76

Synopsis

• Mass customization- endless possibilities.• Customer satisfaction and loyalty.• Innovation generation.• Idea feasibility and implementation

through operational strategy.