Lean Management and Value Stream - An Example of BMW - Essay Example

Lean Management and Value Stream - An Example Of BMW Introduction: Management processes all over the world are being directed towards reducing wastage in the production system rather than increasing the production process itself (Cao, Clarke and Lehaney, 2008). Most of the business houses involved in manufacturing is trying to gain control over their production system so that demand and supply of the products can be aligned. The concept of lean manufacturing specifically focuses on this notion and also tries to develop a streamlined operational process for business firms (Hoyle, 2010). With competition and technology growing hand-in-hand, automobile firms are trying to keep up with the market changes and shifts in consumer behaviour by designing an adaptive manufacturing process. Based on this consideration, the research will focus on the utilisation of lean manufacturing and value stream mapping in BMW. Value Stream Mapping: As defined by Vokurka (2006), value stream mapping is implemented for identifying the state of the current status of the operations process and conniving a better process for future operations of the company. Wilkinson and Dale (2007) noted that most of the firms often misdirect their value chain process by focusing on the rectifying the mistakes in the existing operational process which also effects the layout designed for future process. The manufacturing process of BMW is basically run on a centralised structure which allows the company to manage the functions in all its subsidiaries. The international business of BMW is receiving its supply from only manufacturing units established all over the world (BMW, 2014). The manufacturing process of BMW is co-ordinated with by creating a holistic approach in all the manufacturing units of the business. BMW maintains their manufacturing process by creating demands for their luxury products and reducing the supply of the products (BMW, 2014). The growth of their product line has however now transformed from a luxury brand and has expanded their consumer base from niche market to the mass market also. However, Ballou (2007) criticised that often organisations tend to lose potential market space and consumer base by reducing their supply which hampers the brand availability of the firm. The manufacturing process of BMW mainly is formed on the basis of innovation in production, designing and presentation of their products to the mass market. The process of production can be better explained by observing their Value Stream Mapping. Figure 1: Value Stream Mapping of BMW (Source: Germain, Claycomb and Droge, 2008, p - 562) The above diagram reflects the value stream mapping of BMW production and logistics process. The entire process of the firm has been developed on the basis of a rigid routine which maintains the continuity in the entire supply chain of the business. The procurement process of the business is conducted on daily basis based on the requirements of the firm. The raw materials are transported to two separate locations namely production process and assembling unit (Lakhal, Pasin and Limam, 2008). Once the goods are produced and assembled, the firm transfers them to the inventory management and shipping department of the business considering the demand in the market which again is provided by the suppliers directly to the production section of the business (Kaufmann and Carter, 2006). The lightening blasts reflect the key gaps in the supply chain of the company. As entire process is based on a steady schedule, the scope for adjusting with the changes in the market demand is limited. Also regular transportation increases the cost of logistics of the business. The blasts have been identified with the help of specific lean management aspects which can increase the efficiency of the supply chain process and also create an appropriate layout for the future supply chain management of the business. Literature Review: Lean Management: Lean management is commonly known as TPS or Toyota Production System. Initiated by Japanese automobile giant Toyota, lean management was implemented as a process of ensuring continuous improvement in the business functions. Lean management is one of the most debated topics in the academic and the corporate sector that reflect upon its merits, demerits and validity in the existing context of business scenario (Hines, Holweg and Rich, 2009). The following segment will focus on the different aspects of lean management in relation to value stream mapping and its utilisation for improving the operational functions of the business processes of the firms. Lean management and supply chain management: Lean management was developed to ensure contentious improvement in the business process and also develop a systematic approach for sustainable growth that is based on quality and efficiency of the firms (Talluri, 2002). Min and Mentzer (2004) stated with the rapid changes in the business process and market needs, firms are more focused on developing a framework which enables them to adapt rather than improve. This is one of the most valid arguments presented against lean management, however Fine (2009) considered lean management as an outline which can encompass the changes in the external environment and also implement the necessary changes in the internal work process of the firm. Lean management helps the firms in establishing order in the production process by reducing over production (JIDOKA) and increasing time management and supply of products (JIT) (Badran, 2010). These concepts are supported by processes such as Kanban, Kaizan, Heijunka, etc. According to Berg and Ohlsson (2005), lean management process has been developed in a manner that allows the managers to incorporate changes and customise the process according to the individual needs of the business. Also because of the segregated nature of the lean management process, managers can implement any individual variable of the lean management process such as for reducing the wastage in the business process only Kaizan can be introduced or Kanban card can be introduced in order to enhance the communication between the internal departments of the firm (Rathi, 2009). Figure 2: Lean Manufacturing Process (Source: Min and Mentzer, 2004, p - 354) Focusing on the primary pillars and other aspects of lean management, it can be observed that the original concept has been developed on the basis of processes that are sustainable and necessary for business growth under any circumstances. The entire lean structure has been designed in a manner which allows an organisation to identify the wastes in the value stream and remove them (Liker, 2008). On the other hand, Gripsrud (2006) explained that the primary aim of lean management process is to assess the factors creating customer value. The factors identified are then implemented in the steps of the supply chain process so that overall process can be aligned towards one direction. In the words of Liker (2008), lean management has helped many firms in organising their business processes but with the growing changes in consumer behaviour the validity of lean management can be questioned in the contemporary scenario. Implementation of Lean Management in BMW: The supply chain management process of lean management is based on a flexible routine which allows the company to reshape their supply chain process on a daily basis. BMW being a luxury segment car has mainly considered maintaining their brand value and demand in the market by reducing the supply of products in the market. However, as consumer purchasing power is increasing the firm has converted some of their most prominent models such as BMW X3, 3-Series, 5-Series into products for the mass market (BMW, 2014). The existing process of BMW management has been connected with the help of database entry in every step of their supply chain which enhances the communication process of the business. However, the gap in this system is that an update is not informed to the preceding or succeeding departments and hence misunderstanding can occur in the production process (Hines, Holweg and Rich, 2009). Also daily transpiration is another major flaw in the supply chain which enhances the cost of the logistics and the overall expenditure of the business. Implementing the supply chain process in the existing structure of BMW will be based on the gaps identified in the value stream mapping of the company. The Value stream mapping reflected four possible scopes for implementing the lean management process within the supply chain management of the business (Enaghani, Arashpour and Karimi, 2009). The first scope of introducing lean in the manufacturing process of BMW is for reducing the logistics cost. This requires proper estimation of the customer demand and assessing the daily requirements based on the trends of the market. Furthermore, it is also essential to ensure that a first communication process is being established for enhancing inter-departmental communication. Kanban has been reflected in the lightening blast in this context. The excessive costs incurred in the logistics segment of the business will have to be managed with Kaizan and JIDOKA. JIDOKA will be the primary factor that focuses on managing the production process and enables the operational executives to control the production of the process (McGrath, 2007). This will manage over production, however in order to reduce the wastage of resources at every functional level, BMW will have to be implement Kaizan in their production process. Kaizan will focus on utilisation of resources and reduce under utilisation or over utilisation of resource. Apart from this, the assembling process and the shipping of the final products connect all the departments with the production control system and thus have been considered for developing the overall layout of the lean management process. Another important aspect of implementing lean management in the organisational work process of BMW will be considering the changes in the needs of the organisations and their implementation in the lean manufacturing system of the business. McGrath (2007) mentioned that lean management although creates a continuous improvement process in the work structure of a firm it is quite stringent while considering the future changes and may not be compatible with the organisational objectives. Hines, Holweg and Rich (2009) argued that lean management process can be implemented in the work process of the firm in a manner so that future changes can be accommodated in the business process of the firm. Assessing the existing scenario of the automobile industry, Liker (2008) observed that with growing population and infrastructural development the demand for smaller cars will grow and the sedans and SUVs will transform into the luxury models. Considering this, BMW will have to face a major challenge as most of their products are a sedan and can put them in stale position in the industry. In this regard, the entire product design and development framework will have to be changed and can result in vast expenditure of the business. Another change that can take place in the lean management framework of BMW will be if the company focuses on vertical integration for better resource utilisation and development of the business process. Vertical integration renders Kaizan as a negligible aspect in the supply chain management of the business (Burrill and Ledolter, 2008). As entire system is being controlled by a central authority the scope of miscommunication is limited, also as the entire system is connected the business process of the firm can also initiate technological resources that will help them in improving the Kanban Card concept. Application of Lean Management for improving Value Stream: Implementation of lean management in the supply chain of Value Stream has been theoretically explained in the preceding literature review segment. The practical implementation of the process will also be based on the theoretical framework which will allow the researcher to analyse the validity of lean management and its compatibility with the existing structure of the BMW’s supply chain. Figure 3: Lean Integration in Value Stream of BMW (Source: Created by Author) The entire value stream has not been restructured for =BMW; the focus was on developing a sustainable process for future and not on improving or rectifying the existing gaps in the system. The new value stream has been however amalgamated with lean aspects. For instance, the process of shipping will not be conducted on a daily basis but will be based on the requirements of the production sector and will be informed by the operational department to the suppliers (McGrath, 2007). This way the production remains in control without curving the supply and losing potential buyers of the firm. BMW is already an established premium level brand in the automobile segment. The small triangles reflect the Kanban connection between the different processes and the production control of the company. The production process of the company also has been segregated into three different units which will allow clarity in operations and develop a transparent business process (Burrill and Ledolter, 2008). The Kanban card distribution will be forward and backward moving that will help each functional units to remain updated regarding the status of the production. This will also help the preceding and succeeding departments to foresee their tasks and activities. The time line of the business process reflects the total lead time consumed for production and delivery of the products. Apart from this supply chain management process of BMW will also focus on the ability to help them in preparing for the future challenges of the business and in the supply chain process of the firm. Lean Management as stated in the literature segment can adapt to any framework because of their individual variables. Change Management and Cost Benefit Implications: The financial implications of the implementing the lean management has been evaluated considering the cost of the changes that will follow as a result of the restricting of supply chain (Burrill and Ledolter, 2008). The BMW process is accustomed to changes which reduce the cost of implementation but the effect on the output and logistics department can be major. On the other hand, concepts such as Kanban card will be implemented with technological resources which will again result in expenses. The key points of income for BMW will be the ability to serve to their potential customers without the reducing the supply of products against the demand in the market.   Year 1 Year 2 Year 3 Cost 5000000 5000000 5000000 Sales Revenue 4780000 5120000 5350000 Figure 4: Cost benefit Analysis of Lean Application in BMW (Source: Created by Author) Conclusion: Implementation of lean management in the supply chain process is a common practice in the manufacturing department. The BMW process has been based mainly on their market study and analysis which allows them to restructure of their operational process and adapt quickly to the market scenario. However, regular changes in the supply chain and excessive control on the demand also resulted in losing potential customers as well as increased logistics expenses. The implementation of lean process has focused on creating a sustainable business structure for the supply chain of BMW so that they can adapt a better operational process in the future. The cost benefit analysis also reflected a positive implication in the financial growth of the company. However, considering the continuous improvement framework, BMW has to ensure that the supply chain is always aligned with the organisational objectives of the firm. Reference List: Badran, L., 2010. The Lean Manufacturing Philosophy for the Manufacturing and Service Organizations, Master thesis, Damascus University. Ballou, R. H., 2007. The evaluation and future of logistics and supply chain management, European Business Review, 19(4), pp. 332-348 Berg, A. and Ohlsson, F., 2005. Lean Manufacturing at Volvo Truck Production, Master Thesis, LuleaUniversity of Technology. BMW 2014. About Us. [Online]. Available at: [Accessed on 28th December 2014]. BMW 2014. Key Facts and Figures. [Online]. 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Impact Analysis of Large Scale Lean Manufacturing Initiatives Upon Manufacturing Process Innovation In Irish Companies, Master thesis, Waterford Institute of Technology Min, S. and Mentzer, J.T., 2004. Developing and measuring supply chain management concepts. Journal of Business Logistics, 25, pp. 63-99. Rathi, N., 2009. A Framework for the Implementation of Lean Techniques in Process Industries, Master thesis, Texas Tech University Talluri, S., 2002. Enhancing Supply Decisions through the Use of Efficient Marginal Cost Models, The Journal of Supply Chain Management, UK, pp. 4-1 Vokurka, R.J., 2006. The relative importance of journals used in operations management research: A citation analysis. Journal of Operations Management, 14, pp. 345-355. Wilkinson, G. and Dale, B. G., 2007. Integrated Management Systems: An examination of concept and theory”, TQM Magazine, 11(2), pp. 95-104. Read More