Bmw’s Operation Management

1 January 2017

BMW is a company that manufactures cars, motorcycles and engines by implementing the ten operations management decisions. The design of cars is usually made by the designers and the company uses an interesting technique in which they put the designers of interior and exterior against each other in a friendly competition, then the head designer of the specific series chooses the best design of this series. After choosing, he then builds a clay model of the car and enhances its visuals to see how it would actually look like.

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Then managers from all departments come to examine the prototype and check for faults and mistakes and if everything checks out, the design will be send to the executives to check its relevance. The quality control procedures that BMW operates within, is achieved through a system of quality audits at the stages of production of parts, and at the stages of the components and in the assembly plants. BMW Group established common policies on flexibility reserves to make sure that their capacity is extremely versatile in production amount.

BMW is the world’s leading luxury car company and is devoted to maintain and improve its existence in key markets worldwide. Layout decisions are important because they allow a company to be more competitive by considering capacity, processes, flexibility, cost, quality of work life, and customer contact and image. BMW uses intelligent software tools as well as WMS (warehouse management system) which is a computer software designed for managing the movement and storage of materials throughout the warehouse, in order to reduce production costs and increase the number of output in distribution centers.

BMW applies selection processes for both internal and external applicants which ensure the appointment of the highest quality staff. BMW is using a service management system as part of a bigger plan to improve supply chain lifecycles. Inventory, material requirements planning, and JIT decisions deal with issues such as how much inventory of each item should exist, and when to reorder. Maintenance deals with issues like how to build reliability into the process and who is responsible for maintenance Introduction:

Operations management is a discipline concerned with the production of goods and services by transforming inputs into outputs. BMW is one of the companies that implements the ten operations management decisions. It’s the operations managers that are responsible for the way the production is planned. Managers in all companies, perform the basic functions of the management process which are planning, organizing, staffing, leading, and controlling. These are applied to the decisions they make in the 10 major operations management decisions.

These decisions include: – The design of goods and services Managing quality – Process and capacity design – Location strategy – Layout strategy – Human resource and job design – Supply-chain management – Inventory, material requirements planning, and JIT ( just-in-Time) – Intermediate and short-term scheduling – Maintenance History: BMW (Bayerische Motoren Werke) is a German automobile, motorcycle and engine manufacturing company founded by Franz Josef Popp in 1916. BMW is currently the 1st most valuable car brand in the world and the 23rd most valuable brand in the world; in 2011 it was the 2nd right behind Toyota.

BMW’s brand value increased 10% while Toyota’s brand value decreased by 10%. It currently own “Rolls-Royce Motor Cars” which is a British manufacturer of luxury automobiles and “MINI” which is a British automotive marque which specializes in small cars. BMW’s main products are: 1 Series: The 1 Series was introduced in 2004 and was the first sports hatch in the highly competitive compact car segment.

The 3 Series is the benchmark premium sports saloon, and continues to define the compact executive car segment. It was launched in 1975. Series: The 5 Series car was launched in 1972 and is available in both Saloon and Touring models with a number of petrol and diesel engine options. The 5 Series is known for its agility, performance and driving dynamics. 6 Series: The 6 Series comes in two models, Coupe and Convertible, and is available in a Launched in 2003, the 6 Series has become renowned for its sporting elegance and cutting-edge design. 7 Series: The 7 Series is BMW’s luxury Saloon, combining performance, elegance and dynamic appeal. X5: The X5 was the first car in the Sports Activity Vehicle Segment, when it launched in 1999.

These can appeal to buyers who enjoy the command driving position, as well as the dynamic driving characteristics of a BMW. X6: The X6 offers a unique proposition: four-wheel and drive model, high levels of performance combined with a sports car coupe body style Z4: The Z4 is BMW’s premium sports car range and was launched in 2003, uses innovative technology and a lightweight engine to offer the ultimate roadster driving experience. M Series: BMW M combines technology and expertise gained from BMW’s motorsport activities and translates it for the road.

BMW M launched its first road car, the M1, in 1978 and the range has since expanded to include the M3 Coupe, Convertible and Saloon, the M5 Touring and Saloon, the M6 Coupe and Convertible and the Z4 M Roadster and Coupe. The company’s bestselling car is the BMW 3-Series which in 2005 accounted for nearly 40% of the company’s car sales; and the company’s most profitable car is the BMW 5-Series which accounts usually for 50% of the company’s profits. In 2011, BMW created a sub brand called “BMW i” which commercializes in low emission vehicles.

It unveiled 2 cars under the “I” brand, the BMW i3 which is an urban electric car and BMW i8 which is plug-in hybrid sports vehicle which can reach a speed of 100 km/h in 4. 8 seconds. BMW cars are found all over the world and in some countries it is the leading car brand. In 1994, BMW acquired Rover Group, which is known for its Range Rover. But eventually in 2000, Rover Group was divested. In South Africa, many car manufacturers such as Ford and GM divested in subsidiaries, but BMW still retains full ownership of its operations in South Africa.

BMW uses a hybrid of diversification and concentration strategy. BMW manufactures its vehicles in 7 countries, Germany, Mexico, Russia, United Kingdom, Austria, U. S. A and South Africa. BMW also has local assembly operations using complete knock down components in Thailand, Russia, Egypt, Indonesia, Malaysia, and Chennai, India. BMW uses a detailed analysis to see if they can achieve their goal in particular countries and if the cost of labor is acceptable hence the opening of manufacturing plants in Mexico, Russia and South Africa.

In some countries there are income inequalities; BMW has a solution for that because of its diverse cars. It has cars for low income people up to the high income people. The price of BMW cars varies from models to series. A 2,000$ BMW E30 can be found up to the BMW Hydrogen 7 at 1,000,000$. BMW’s prime competitors are Mercedes-Benz and Audi which in some countries have taken the market for a limited time then lost it due to BMW’s fast production of new cars. Germany exports 97% of its goods to other countries. Similarly BMW and its German competitors rely heavily on exports to make profit.

In 2010, BMW produced 399,009 BMW 3-series in which 25% of them were exported to U. S. A. Also in 2010, BMW sales were 1,224,280 cars in which only 43,000 were to the local market, it also sold 98,047 BMW motorcycles of which 500 were to the local market. BMW uses a lot of third-party export intermediaries to facilitate the exporting process in a lot of countries. BMW also exports engines. “Alpina”, which is an automobile manufacturing company that sell their own cars based on BMW cars, work closely with BMW so their processes are integrated into BMW’s production lines.

While working closely with BMW, it made the BMW Alpina B7, a high-performance 7-Series, which is priced at 123,000$. It produced a limited amount of B7’s; almost 50% of them were exported to the U. S. A and were quickly sold out. Design of goods: The design of a BMW car starts in an extensive and enthusiastic procedure. Its most exclusive function is the unique BMW internal design competition. This is where developers in the professions of external and internal contend against each other with their suggestions.

Their thoughts and styles are first drawn two-dimensionally on document or on the computer. They then later make a three-dimensional form as elaborate clay models or in virtual renderings using CAD. BMW won multiple awards for its impeccable design of cars, including “iF Product Design Award” for the BMW 1 Series M Coupe, “iF Product Design Award” for the BMW 6 Series Coupe, “German Design Award in Silver” for the BMW 5 Series Touring, “Winner Automotive Brand Contest” for the BMW 328 Hommage, “Louis Vuitton Concept Classic Award 2009” for the BMW

Vision EfficientDynamics and a lot more. Karim Habib, a 42-year old Lebanese-born Canadian, has been named the new head of BMW Design, beginning June 1. He planned the design of the present 7 Series, will report to Adrian van Hooydonk, the senior vice president BMW Group Design. Habib started his career at BMW in 1998, and worked on a number of cars before moving to Mercedes-Benz in 2009 as head of the Stuttgart firm’s advanced design studio. He was lured back last year by BMW to run the company’s Exterior Design group.

The design of BMW cars has been increasingly progressing every decade. There are renowned designers that have made a name of themselves thanks to the BMW Company and in return they gave BMW the best design of cars possible, some of these famous designers of the present day are: Adrian van Hooydonk, he is responsible among others for the gull-wing Z9 Gran Turismo prototype, BMW 6 series E63/E64 and E65 7 series. Jacek Frohlich, he is responsible for BMW F10/F11, the newest 5-series.

Juliane Blasi, who is responsible for the second generation BMW Z4. Karim Habib which we already spoke about, and many more. Quality management decision: Managing quality deals with issues like how quality is defined, and who is responsible for quality which is the key for improving operations. It permits building good and successful strategies of differentiation, low cost, and response. Good quality increases the company reputation and image, and therefore increases profits.

The quality control procedures that BMW operates within, is achieved through a system of quality audits at the stages of production of parts, and at the stages of the components and in the assembly plants. Suppliers of materials and components also follow the same quality control principles. BMW considers quality as a key importance in every stage of the production process. It places a great value on customer feedback and manages quality according to their needs. It empowers its employees so that they become committed to the organization.

The employees’ attitude to quality prevents mistakes and ensures continual improvement and therefore increased profitability. The principles that it applies are consistency and complete coverage of all requirements throughout the development and manufacturing process. When cars are then delivered to the distribution centers, their quality is also checked again and they have a full pre-delivery inspection before delivering them to the customer. In case a fault is found, the BMW management structure allows its team to react quickly and work on the problem.

BMW has received a quality certification, which is the DIN EN ISO 9000, a quality standard with international recognition. BMW Group production has been confirmed as the first-class quality standards many times. Process and Capacity design: Because demand is vague, the BMW Group established common policies on flexibility reserves to make sure that their capacity is extremely versatile in production amount. These policies are obligatory for strategic planning, and they reflect the way BMW interact with long-term need concerns.

They are included in the load-planning model. For a production line, we identify between the maximum potential (per week or per year) based on running consistently seven days a week, 24 hours a day, and normal capacity under normal working conditions. Maximum capacity is a specialized characteristic of the product line, whereas normal capacity depends on the working-time technique, which differs for various development levels and from nation to nation. We show normal capacity as a percentage of the maximum capacity.

Reducing the maximum potential by the flexibility reserve (a percentage) gives the disposable potential. In load planning, any usage between the minimal and the disposable potential is possible, but utilization above the normal potential drives overtime expenditures up. Location strategy: BMW is the globe’s leading high-class luxury car company. This is thanks to their brilliant marketing strategy across the world. Their forceful sales strategy reaches out to millions of people every year across a number of regions.

Their existence is felt universally, adding to the company’s universal dominance. To make that dominance a bit stronger, BMW are to set out various locations for car production, all of which have not been touched before. This will come in line with BMW’s plans to establish new partnerships with different automobile companies across the globe to help their growth and expansion plans. BMW manufactures its vehicles in 7 countries, Germany, Mexico, Russia, United Kingdom, Austria, U. S. A and South Africa. BMW also has local assembly operations using complete knock down omponents in Thailand, Russia, Egypt, Indonesia, Malaysia, and Chennai, India.

BMW is devoted to maintain and improve its existence in key markets worldwide. BMW Group marketing subsidiaries are present in the following countries: Argentina, Australia, Austria, Belgium, Brazil, Canada, Denmark, Finland, France, Germany, Great Britain, Greece, Hungary, Indonesia, Ireland, Italy, Japan, Luxembourg, Malaysia, Mexico, Netherlands, New Zealand, Norway, Singapore, Poland, Portugal, Russia, South Africa, South Korea, Spain, Sweden, Switzerland, Thailand, and U. S. A.

Also BMW currently has 17 production facilities in six countries: Berlin plant, Dingolfing plant, Eisenach plant, Contract production in Graz (Austria), Goodwood plant (GB), Hams Hall plant (GB), Landshut plant, Leipzig plant, Munich plant, Oxford plant (GB), Regensburg plant, Rosslyn plant (South Africa), Shenyang plant (China), Spartanburg plant (USA), Steyr plant (Austria), Swindon plant (GB), Wackersdorf plant. South Africa is a key location for BMW. In South Africa, many car manufacturers such as Ford and GM divested its subsidiaries, but BMW still retains full ownership of its operations in South Africa.

BMW are increasing production of their new 3 Series in South Africa. Millions have been invested in order for this development plan to go ahead. This is a key location as the South African car marketing is currently thriving. It is also in a great location as many of BMW vehicles cars are exported from the country, with it having close connections to other key areas. Frank Peter Arndt, a Board Member of the BMW board and the Chairman of South African division of BMW said how important the 3 Series is to South Africa and the rest of the world.

He said “The BMW 3 Series is the most important volume-produced model for the group, as well as the biggest-selling model in the entire premium segment. Mr. Arndt believes that despite the global economy being uncertain, BMW can still reach targets this year throughout the world. They are so confident that demand will be high that a third shift in BMW’s South African plant is being introduced. Layout strategy: Layout decisions are important because they allow a company to be more competitive by considering capacity, processes, flexibility, cost, quality of work life, and customer contact and image.

It deals with issues like how the facility should be arranged and how large it must be in order to meet the plan. It can help an organization achieve a differentiation, a low cost strategy or response. If a layout is efficiently implemented, the flow of materials, people, and information within and between areas will be much easier. BMW adopts the warehouse layout that supports a low cost strategy in order to achieve this objective. This type of layout deals with minimizing total cost by examining the capacity of the warehouse.

Instead of physically restructuring the warehouse layout or investing in expensive warehouse technology, BMW uses intelligent software tools as well as WMS (warehouse management system) which is a computer software designed for managing the movement and storage of materials throughout the warehouse, in order to reduce production costs and increase the number of output in distribution centers. Human resources: BMW applies selection processes for both internal and external applicants which ensure the appointment of the highest quality staff.

Special selection events are designed to give applicants every opportunity to demonstrate their skills and abilities in a variety of relevant activities, to learn as much as they can about the organization and to take responsibility for the role they are applying for. Generally, vacancies will be advertised internally and wherever possible a current member of staff will be recruited into a position. Only if an internal appointment is not possible will BMW consider external recruitment. BMW encourages its employees in the development of their careers.

BMW operates an equal opportunity policy which is a stipulation that all people should be treated similarly, unhampered by artificial barriers or prejudices or preferences, except when particular “distinctions can be explicitly justified. ” Supply chain management: Car manufacturer BMW is using a service management system as part of a bigger plan to improve supply chain lifecycles. The platform introduction was triggered by complexities in the technology rooted in its cars and subsequent demand for systems to support servicing, said Bennie Vorster, the group’s vice president of IT solutions and technology standards. We are working on the adaptation of the software to cover new car releases, and updates will be made,” Bennie Vorster said.

Supply chain management continues to be a challenge for manufacturers whatever the sector, Vorster told Computing. “Warehouse spaces to handle supply are becoming smaller and firms must deal with issues related to customers’ requirements for more choice and flexibility. So complexities related to the increasing demand for ‘just in time’ delivery processes must be met by efficient supply chain management systems,” he said.

The incorporation of mobile connectivity between systems and necessities from manufacturers or sales departments translates to short supply chain processes. “To avoid inefficiency both in terms of time and space, we don’t order parts long before the production time to keep in our warehouses in case a customer orders a car of any particular specification. “For that reason, the technology behind the process linking suppliers and manufacturers has to be seamless and as fast as possible,” said Vorster. BMW uses “SAP”, which is very popular business software, as its core platform along with a set of modified legacy systems.

The company is looking at updating some of the programs managing diverse parts of its supply chain management procedure, and uses the Agile programming model to speed up delivery processes. Inventory, material requirements planning (MRP), and JIT decisions: Inventory, material requirements planning, and JIT decisions deal with issues such as how much inventory of each item should exist, and when to reorder. Inventory is the items which the firms possess during the implementation of their jobs in the production process. It can take any form of the product such as raw material, work in process or finished goods.

The Production procedure in car development is very complicated, in order to fulfill customer requirements and preferences. Conventional techniques of preparing, managing and tracking the procedure are not appropriate any longer. Thus new techniques are required. At BMW, a system dynamics strategy is used. A simple powerful inventory simulator with a friendly user-interface can considerably improve the inventory procedure. This simulator is used on a day-to-day basis to support monthly, weekly and daily inventory reviews as well as everyday tracking of the performance of the procedure.

To highlight the effectiveness of the developed simulator, the manager of the production-planning division at BMWs plant in Regensburg, who said in an interview: “The simulator used within our division permitted us to improve our results for more than 2000 units this year. This was possible, because the simulator revealed in advance the opportunities of increasing production by introducing extra changes in the production schedule”. Because these 2000 units were required to fulfill customer requirements, this lead to an improvement in net-income of more than 15 million US$.

A material requirement planning is an effective inventory control system that provides the necessary information for a company to compete in the global marketplace. BMW applies excellent standards for its internal processes by using service-oriented architecture (SOA) to redesign its material requirements planning operations, and to enable a more innovative supply chain management strategy based on flexible quantity agreements. The SOA is an IT architecture plan that is open, flexible, and adaptable for developing modular service-based business solution.

It enables enterprises to differentiate their business by lowering material handling costs and improve vendor management. JIT (just-in-time) production is producing and delivering goods on time. The benefits of JIT are: reduced operating cost, improved quality and performance, increased innovativeness, flexibility, improved delivery. BMW is beyond JIT. It shifted from just-in-time production to delivery on demand. BMW sends JIT delivery schedules to suppliers who receive the information via EDI (Electronic Data Interchange) or by accessing the SAP Automotive Supplier Portal, where up to date information about the delivery needs is posted.

The order includes all parts required to build each car. For example, the X5 has hundreds of components listed in the bill of materials. SAP Automotive gathers the delivery schedules for each part to fit the BMW assembly-line planning and sequencing directives. Suppliers then send BMW information about the delivery date. Maintenance: Maintenance deals with issues like how to build reliability into the process and who is responsible for maintenance. it is a very important issue because it ensures sustainability of the product.

It’s a method used to keep an organization running efficiently. Herman Adams, a maintenance planning specialist in the BMW Body Shop, said: “People who buy a BMW are paying for the engineering and quality, not for breakdowns on the plant floor. ” “To achieve maintenance and reliability excellence, it’s all about being the driver. ” On the macro level: “We look at ways that can ensure the equipment is going to be able to do what we want it to do,” says Seaman. And, on the micro level: “We plan all of our maintenance and schedule it. It does not schedule us,” says Adams.

Managers and technicians at BMW are motivated to build and plan maintenance to comply with the plant’s needs. They use reliability centered maintenance (RCM) which is a strategy used to improve production and efficiency of the plant. It includes determining a way to increase operating procedures like maximizing a machine’s uptime by adding more workers or making engineering modifications. They focus on managing the equipment to ensure much efficiency as possible. Moreover, they can easily buy from external partners’ commodity skill opportunities like changing air filters.

There are four different units in the plant that take a distinct spin on maintenance which are: the body Shop, assembly, the paint shop and facilities/energy. In BMW, there is no maintenance manager position. Rather, there is a managerial representative from each unit that plan maintenance. Maintenance and reliability doesn’t reside in one department or with one individual,” says Adams. “Everybody owns maintenance, reliability, uptime and overall equipment effectiveness. It’s a team game. ” Conclusions and Recommendations:

BMW is a well known and highly valued brand. Hence, it is a benefit for the company. In the premium section market, the prices for the vehicles are greater and therefore the well established brand creates credibility and warrants the customers to the purchase of a BMW. An example of this is the BMW 3-series. In the section for premium middle-class vehicles, despite the price, the 3-series is the best selling among the competition. The diversity in their portfolio is wide. In the different sections, many editions of the vehicles are provided.

Moreover, BMW will release new models not only of existing but also in new series in the near future. The various vehicles available are the same in all the different markets. Thus, despite where the car is bought, the style is identical both with regards to efficiency and after sale services which creates creditability among the clients. In the three years that passed, BMW had greater sales volume than its nemesis Mercedes-Benz and at the same time a significantly greater profit edge on each car sold which is a strength for BMW.

Also, it has not been dealing with the same problems with quality that Mercedes-Benz has been dealing with. Actually the quality that BMW has held has often provided the backbone to maintaining a strong brand which provides devoted and satisfied customers. BMW offers great competency and the organization produces most of the car by themselves. BMW is not reliant on any other organization that could force them to utilize products that are not according to BMW standards.

Many car producers work together with regards to research and development but BMW has announced their independency and want to keep their business developments to themselves; therefore, BMW gets left out of the opportunity in reducing costs as well as synergy effects. A trend is emerging in the automobile industry which is to use the same elements in different types of products or brands. Also here, BMW varies from the market average since they customize their cars after each model themselves. Even though BMW has not collaborated with any organization, it is still apparent that BMW is trying to acquire new market shares.

In addition, higher interest rates could impact the revenue results negatively since 41. 1% of the purchased BMWs are financed by BMW Financial Services. Causing the successful growth of BMW are the constant investment in innovation; the latest technologies and knowledgeable employees. BMW should keep its sustainability because it’s influenced by the operations management decisions. It should keep on introducing new products into the market and diversify. It should also create new technologies in order to produce cheaper cars, to meet the increasing customers’ demands.

Moreover, in planning and operations processes, pollution should be taken into consideration. BMW should accelerate the production of the BMW i3 and BMW i8 that are pollution-free as well as making it cheaper. It should use resources efficiently in order to decrease the cost, and therefore making more profits. Thus, demand will increase and customers will be more interested in the purchase of the car. Customer satisfaction is what elevated BMW to such a high pedestal which means they should maintain the operations management decisions that have been successful for them.

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