BMW - Role of Supply Chain and Quality Management - Case Study Example

Operations Management BMW GROUP BS2108 Semester 1: 2012/2013 Table of content 1.0 Introduction 3 2.0 Operations function 5 2.1 Operations strategy 5 2.2 Design operations 6 2.3 Role of supply chain 7 2.4 Quality management 8 2.5 Future operational challenges 10 3.0 Conclusion 12 4.0 References 13 BMW 2012, “The design process at the BMW Group”, Car body design, http://www.carbodydesign.com/2012/03/the-design-process-at-the-bmw-group/ 13 Brown, A, Eatock, J, Dixon, D, Meenan, B. J, & Anderson, J 2008, “Quality and continuous improvement in medical device manufacturing”, The TQM Magazine, Vol. 20, No. 6, pp. 541-555. 14 Telegraph Media Group 2011, “BMW: facts and figures”, Telegraph Apr 2011, http://www.telegraph.co.uk/finance/newsbysector/transport/8439134/BMW-facts-and-figures.html 15 1.0 Introduction BMW is an automobile company that whose first manufacturing operations began in 1923 in Germany. The group manufactures products based on three brands: BMW, MINI, and Rolls-Royce Motor cars. Being a worldwide organisation, BMW has a long and established heritage of premium products manufacturing. In UK, BMW began its operations in 1980 where it currently employs more than 8,000 personnel. It is in the UK only that the group manufactures all its three brands (BMW, MINI, and Rolls-Royce). As the automobile industry can be very volatile and any mistake in the process of making decision may lead to extreme costs. The group has proved that through careful management, there can be great reduction in the number of errors. The operational management of the group is of high standard. Its production system is design to allow production of new parts in small amounts and results to moderate costs only (Telegraph Media Group, 2011). The group took a new strategic decision in 2007 where up to 2020, it intends to strengthen its position in regard to global motor vehicle market through increasing the sales of its automobiles to more than 2 million annually. In addition, it intends to develop new as well as profitable areas of activity. At the same time it will invest in new vehicle concepts, future technologies and pioneering drive systems. Its new strategy referred to as Number ONE stand for ‘New Opportunities’ and ‘New Efficiencies’, meaning becoming more efficient as well as making best use of new opportunities to ensure a competitive advantage and active shaping of the future of the company. In regard to operations and production, a great number of associates are employed in the group to ensure that the customers get the best quality products and services (Telegraph Media Group, 2011). Every organisation is involved in transformation process in some way. The organisation takes inputs such as capital among others and turns them into outputs such as products and services. In most situations, the out is a combination of goods and services. The main aim of the transformation process is to add value. That is, creating outputs, which are worth more than inputs. During this process, profits occur as the revenue generated by sales exceeds the cost of provision of the product. The nature of transformation process greatly varies in different organisations such as involving manufacturing or provision of services or it may be labour intensive or capital (Jick, & Peiperl, 2003). However, irrespective of the nature of the business, managers are continuously seeking for new ways of value addition either through provision of products and benefits that the customers are willing to pay or through combination of resources in a more efficient way in order to reduce costs. Various ways in which managers can achieve an increase in efficiency include investing in new technology, changing working practices, changing the way different items are produced, and inspiring and motivating employees in a more efficient way. One of the important developments about manufacturing is lean production that seeks to reduce wastage as well as reducing stock levels. In this way, an organisation is able to reduce the costs involved in protection and storage of stock (Dangayach, & Deshmukh, 2001). This article involves a research on operational functions of BMW Group by focusing on operations strategy, design operations, role of supply chain, quality management, and future operational challenges. 2.0 Operations function 2.1 Operations strategy As BMW Group makes products, it relies heavily on operational processes in order to come out with effective products and deliver them efficiently on time. The operational functions are responsible for the process of transformation where the input which include the right people, right materials, machines, and technologies are used to produce the output, that is, final product (a variety of BMW, MINI, and Rolls-Royce) in a way that adds value to its customers. The operational functions within the organisation include production, marketing and sales research and development and customer support (Porter, 1996). Since value is the reason why customers prefer the products from this group, its performance dimensions for operational strategy is based on quality and flexibility where the group is synonymous with a high quality image and the ability to increase or decrease production in order to meet the demands of the customer. The operation strategy of BMW is mainly focused on quality and its future transformation to the organisation means new car, new dimension of efficiency as well as new plant structure. This shows that the degree of variety as well as demand variation is very essential in order to match the products to the demand levels of their customers. Understanding the needs of the market may be complex in such an environment where the degree of variety and variation in demand is high. This means that the operations strategy of the organisation must balance the capacity planning with meeting the demand of the customers (Brown, 2000). This calls for effective management of its operations. This introduces the two essential factors for effective operation strategy which are flexibility and efficiency. Thus, the operation strategy of the organisation must have flexibility and efficiency in extending and contracting their supply in case there is occurrence of frequent demand from the customers. It can be concluded that the needs of the market will improve the development of operation strategy, as it will lead to prevention of tying up unnecessary money inform of idle labour as well as high costs of holding inventory. 2.2 Design operations Design in operations in such a manufacturing organisation is characterised by various key elements, which include creative thinking, communication, teamwork, use of CAD systems and design for manufacture. In the design process, generating of ideas is essential since it generated new and unusual possibilities, making and expression of new and meaningful connections and elaborating alternatives in order to come up with the most efficient and quality product. Teamwork will enhance the ability of team members of a variety of expertise to successfully create or develop the required products. The design process cannot be effective unless there is clear and logical communication of ideas, data and information. Computer aided systems in design will allow the personnel to define a new product through assigning of material, mass, and geometry as well as creating images in order to come out with the best design before implementation (BMW, 2012). The design process of BMW Group is focused on creation of quality products with increased efficiency. The process undergoes three phases in achievement of its goals. The first phase of the process involves creative thinking and communication of ideas where the designers produce proportional models of the new automobile. In this phase the company focuses its strategy of making best use of new opportunities and being more efficient to produce a quality product. This involves integration of design and technology to ensure efficiency and effectiveness (Brown, 2001). The second phase addresses on competition where the designers compete in order to come up the best interior and exterior innovative design of the automobile. Various time and cost-intensive clay models are developed to allow desired modification where the most competitive design is selected. The final phase involves detail work that involves design team of experts who fine-tune both interior and exterior elements to ensure that the product lives up to its quality claim. In this process, efficiency is optimised and precision is ensured. In this way, the transformation process of the Group enhances making changes in the physical characteristics of materials in order to meet customer demand thorough value addition in two ways: increasing efficiency and generating quality or premium outputs that the customers are willing to pay. 2.3 Role of supply chain In this organisation, the supply chain plays a crucial role by ensuring that supplies are available in suitable quantities and when they are required. Efficient manufacturing is enhanced by ensuring careful timing of supply materials, having enough on hand in order to ensure that the current demands are met, and ensuring that there is no cluttering of storage areas. In this way, there will always be sufficient supply of materials when planning schedules of production. In addition, too much inventory will be avoided to ensure that the materials they need are available in order to prevent delaying of production schedules. Inadequate provisioning can lead to forced interruption of manufacturing processes and in turn compromising the economies of scale as well as forcing the personnel to waste valuable time. This will also affect the time of delivery leading to more costs as well as customer dissatisfaction. To prevent such circumstances, BMW developed a quality assurance procedure in order to ensure that the quality of standards of materials and all components in all products will continue to satisfy customers, ensuring the that the responsibilities are understood throughout the supply chain, and assisting all those involved to complete their tasks in line with time and in a professional way. In selection of suppliers, BMW Group looks for the best suppliers for product quality, product innovation, capability of delivery process and on-time delivery, value creation chain, robust production processes, and project management. Just in time, production in the organisation is very essential, as it will reduce the stock levels given that the only materials in which the organisation will order will be used when they needed them. This will protect overstocking. In a similar way, the automobiles that they produce will be on order leading to immediate dispatch instead of waiting. As a result just in time production will reduction storage and stock protecting costs. In addition, due to the previous recession, the organisation will be able either to increase or decrease production according to customer demand in various markets. This will also ensure the flexibility of the market as the organisation will be able to react to flexible changes in volume by accessing the only required materials while at the same time, meeting the varying demand. In case of a higher demand that the originally planned, the flexibility of supply chain and production process will ensure increase in daily production system in order to meet the new demand. 2.4 Quality management Total quality management is very essential in making decision in manufacturing process given that it is one of the important competitive priorities about manufacturing. Quality, equipment and the cost of products are closely related and they form the basis of competition in manufacturing industry. In the contemporary world, achievement of customer satisfaction is the most important organisational objective and quality management proves to be the most effective way of achieving such objective (Brown, et al, 2008). With appropriate concepts applications and methods, quality management provides direction for organisational transformation enabling a manufacturing organisation to benefit from improvement in quality performance as well as competitiveness. In such a competition in automobile industry, it is essential for an organisation to learn faster in order to lead the best practice concerning business excellence (Zhang, 2000). BMW has a clear understanding that it is always essential to improve their quality performance in order to stay competitive in this industry. With intense competitions of automobile companies throughout the world, BMW has focused on the quality of its products as the key issue of their success. Total quality management within the organisation ensures consistency of its products at a high level of quality. This has been achieved by ensuring efficiency right from the suppliers, to the operations, equipment and delivery of the final product to the customers (Tari, 2005). The organisation has focused on effective dynamics a factor that has made it possible to reduce the consumption of fuel as well as CO2 emissions while at the time increasing the driving performance of the organisation as well as meeting the expectations of the customer. Through quality management, BMW Group has been able to transform its manufacturing processes to becoming more flexible as well as more customer-oriented. This even led to fine-tuning of the production system that is customer-oriented. This leads to early and swift preparation for any severe business condition through taking the necessary immediate steps in order to bring the volumes of production in line with lower demand. In turn, the inventories will be at a better level of management while the organisation will also be in a better position of succeeding in the subsequent years. Quality management will always endure that the firm launches new, more efficient, flexible and quality products thus maintain its competitive advantage in international world. In addition, the infrastructure is very essential is ensuring efficient operations hence expansion and redesigning the plant is crucial in order to align to its operations strategy of ensuring quality and flexible products (Cummings, & Worley, 2001). Based on quality management, the expansion of the plant ensures enough capacity to be more efficient through introduction integration of new model with the focus on creation of high efficiency between assembly and efficiency. With the creation of more facilities such as an integrated paint process, the firm will be in a condition of doing away with one complete step as compared with its existing process of painting. This means that there will be a reduction on capital investment leading to considerable savings in regard to running costs while at the same time, the energy efficiency will also be increased. This will in turn lead to increase in the quality of its products with a promising higher volumes and new models in future. 2.5 Future operational challenges The automobile industry has proved to be experiencing rapid changes. The industry has been defined by the new product ideas, innovative solutions in order to increase the performance. Regulatory mandates such as those for fuel efficiency, safety, cost reduction as well as emission standards continue to be the main challenges (Rhoades, 2005). The manufacturing output in UK has been stable for the last decade while there had been declining profitability. This has been attributed to various factors that include presence of alternative low cost sources of supply. Such supplies affect every economy that has been developed. This means that may face future challenge concerning the presence of other sources of supply that may lead to production of quality vehicles at lower costs. As a result, manufacturing in such economies needs to move up the value chain and base their competition on other factors (Porter, & Ketels, 2003). Many competitors are basing their manufacturing on product-service oriented system. This means that more companies are focused on the offering of the product service rather than the normal pure product. Thus, many manufacturers will be increasing their sales in future based on services. This journey based on combination of products and services may be a future challenge to this organisation. This is because although BMW is more focused on the quality of the product, there may be more competitors imitating their products but offering them at lower prices. Product-service systems cannot be easily replicated and will be important for this company in future. This means that there will be a need for the company to focus on integration of services to ensure sustainable competitive advantage as well as profitability (Neely, 2008). Although technological progress through creation of products and services with better performance, more convenience, and lasting longer will continue to lead in this industry, there is a major shift towards the issue of economy and sustainability. This means that sustainability and economy will drive product categories, investments and performance in the next decades. With the holistic factors that have currently preoccupied the industry, corporate social responsibility will be of increasing importance and will influence the operational strategy of the organisation. This means that the cost of input will increase due to more regulations on social and environmental responsibility leading to reduction in profitability. As a result, the price of products will be expected to increase further forcing most customers to opt for parallel emerging companies that will offer lower prices (Bonvillian, 2004). 3.0 Conclusion The transformation process of BMW Group is based on two factors: increasing efficiency and generation of outputs in which the customers are willing to pay. Its operation strategy is mainly focused on quality and its future transformation to the organisation means new car, new dimension of efficiency as well as new plant structure. By increasing its efficiency, the firm ensures does not change the input but improves in research and design in order to come up with more efficient products based on the same input. On the other hand, the firm also improves the quality of its products by changing the input in order to satisfy customer demands. Its design operations involve teamwork, creative thinking, and clear communication among other factors that ensure that efficiency is optimised and new and better products are generated. The firm’s supply chain plays a crucial role by ensuring that suppliers are available and provide the right materials, at suitable quantities and at the required time in order to ensure that the current demands are met, and ensuring that there is no cluttering of storage areas. Just in time, production in the organisation is very essential, as it will reduce the stock levels. In addition, the organisation will be able either to increase or decrease production according to customer demand in various markets. Thus, it allows flexibility of the market as the organisation will be able to react to flexible changes in volume. Quality management in BMW provides direction for organisational transformation enabling it to benefit from improvement in quality performance as well as competitiveness. Quality management in BMW is based on efficient supply, well-coordinated personnel with diverse expertise, improved plant and other infrastructure and more focus on customer satisfaction. The automobile industry has proved to be experiencing rapid changes that may create future operational challenges. These include availability of alternative sources, more emphasis on social and corporate responsibility, and increased competitors based on product-service system with more focus on lower prices achieved through imitation. Finally, BMW Group has been involved in a successful transformation process with focus on redefining car manufacturing with one of the most efficient network of production. It is improving its operational function by increasing the efficiency of its operations as well as seeking for new opportunities that lead to quality, more efficient, and products that are more flexible. 4.0 References BMW 2012, “The design process at the BMW Group”, Car body design, http://www.carbodydesign.com/2012/03/the-design-process-at-the-bmw-group/ Bonvillian, WB 2004, “Meeting the new challenge to U.S. economic competitiveness”, Issues in Science and Technology, vol. 21, no.1, pp. 75–82. Brown, A, Eatock, J, Dixon, D, Meenan, B. J, & Anderson, J 2008, “Quality and continuous improvement in medical device manufacturing”, The TQM Magazine, Vol. 20, No. 6, pp. 541-555. Brown, S 2000, Manufacturing the future – Strategic resonance for enlightened manufacturing. London: Financial Times/Pearson Books Brown, S 2001, “Managing process technology – Further empirical evidence from manufacturing plants”, Technovation, vol. 21, no. 8, pp. 467-478. Cummings, TG, & Worley, CG 2001, Organizational Development and Change, 7th edition, South-Western College Publishing, Ohio, pp 513. Dangayach, GS, & Deshmukh, SG 2001, “Manufacturing strategy: Literature review and some issues International”, Journal of Operations & Production Management, vol. 21, no. 7, pp. 884-932. Jick, T & Peiperl, M 2003, Managing Change: Cases and Concepts, 2nd Edition. New York: Irwin/McGraw-Hill, pp. 218. Neely, A 2008, "Exploring the financial consequences of the servitization of manufacturing", Journal Operations Management Research, Vol. 1, No.2, pp. 103-118 Porter, M E 1996, “What is strategy?” Harvard Business Review, 61-78. Porter, M, & Ketels, C 2003, UK Competitiveness: Moving to the Next Stage, Department of Trade and Industry, London, UK. Rhoades, JR 2005, “Celebrating Manufacturing Technology: The Transformation of Manufacturing in the 21st Century”, National Academy of Engineering, vol. 35, no. 1. Tari, JJ 2005, “Components of successful total quality management”, The TQM Magazine, Vol.17, No.2, pp.182-194 Telegraph Media Group 2011, “BMW: facts and figures”, Telegraph Apr 2011, http://www.telegraph.co.uk/finance/newsbysector/transport/8439134/BMW-facts-and-figures.html Zhang, Z 2000, “Developing a model of quality management methods and evidence their effects on business performance”, Total Quality Management, Vol. 11, No. 1, pp. 129-3 Read More