Logistics and Supply Chain Management at BMW
Supply chain management comprises management and planning of all activities concerned with procurement and sourcing. On the one hand, it relates to a dynamic and complex demand and supply network. On the other hand, logistics management is part of the supply chain of a company, and it is involved in the implementation, planning and controlling of efficient and effective flow of goods and services and information from the origin point to the consumption point.
The supply and logistics management at BMW is focused on customization of needs. According to Gunasekaran and Ngai (2005), the activities of BMW Group are coordinated by the head office. Apparently, more than 70,000 employees of BMW Group are trained to insure that each and every customer of this company receives vehicles that are tailor-made for their needs, without compromising the quality. However, the company is complaisant since it allows company outlets to be flexible enough to insure that their customers’ needs are maintained. For example, the plant in the United States plays considerable emphasis on operational flexibility.
On July 23, 2014, the company contracted Penske Logistics to manage its inbound supply chain. Specifically, Penske Logistics was mandated to handle the supply chain and general logistics of the company as well as its production parts, emanating from some United States as well as Mexican suppliers to Spartanburg County branch. The branch is renowned for models like Z4 Roadster, the X5 Sports Activity Vehicle, Z4 Coupe, M Roadster and M Coupe. The fact that BMW Group is a build-to-order manufacture has made it possible for the company to produce solely quality models for the customers. The demands are high, and the prospects of this company to overcome stiff competition are good, owing to the efficient and effective supply chain and logistics management.
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Sourcing and Supply Management at BMW
At BMW, a critical area that has aided in sourcing and supply management is the Corporate Social Responsibility (Aberdeen Group, January 30, 2012). In 2012, the BMW Group was voted as the most sustainable company in the automobile sector in the world in Dow Jones Sustainability Index. In fact, the company has been selected for seven years in a row, underpinning the popular idea that the BMW Group is an efficiently managed company. Essentially, the supply chain network at BMW has aided in adding value to the company’s products. In this company, more than 75% of all sourcing volumes are done by JIS and the JIT, while 10% are performed by the JIT and 90% by the JIS.
The focus on value-added has been a key to the company’s success in the market. As explained by Aberdeen Group (January 30, 2012), partaking in the CSR activities has made it possible for this company to maintain a constant presence in the market. In fact, this has all been part of the sourcing management of this company. Essentially, in order to improve the supply management as well as strategic sourcing, it is crucial for suppliers to get concerned with their environmental and societal impacts. Apparently, this is mostly portrayed by BMW Group in their advertising strategies.
Another focus of the BMW Group is in the diversification of the supply chain risks. Aberdeen Group (January 30, 2012) notes that the BMW Group sources its parts overseas, and this helps it go closer to the foreign markets. The movement of production to the foreign markets aids the company in the reduction of foreign exchange exposure. Moreover, this helps it be close to the customers. Thus, the company’s goal is to insure that the sourcing and the supply chain management are effective, efficient and has value-added.
Customer Service and Demand Management at BMW
Customization of products at BMW has become a key factor in the overall success this company has achieved in the automobile manufacturing sector. Kiley (2004) qualifies the BMW is the most admired automobile company in the world. In fact, this is very true in every sense of the management of BMW. Apparently, at this company, various persons are tasked with management of customer services and more so at the corporate sales to insure that the customers are always satisfied and the demand for the products continues to rise. The fact that more than 70,000 employees are trained to insure that the customers get tailor-made vehicles means that the company is highly focused on providing high-quality products and a high level of customer satisfaction.
In the year 1998, this company introduced a number of measures that would help it satisfy their customers’ needs and, essentially, increase their levels of sales. As written by Kiley (2004), one of the measures was in devising an internet-based ordering system. The purpose of this system was to give the dealers the option of showing the end users their customized cars on their computer screens as well as confirm delivery issues instantly. Consequently, this to a large extent helped the company to move closer to its customers.
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The BMW Group also has a strategy that insures that the production in this company satisfies market demands in the world. In the company, the demand management is geared to fulfill the wishes of the customers. According to Kiley (2004), the fulfillment of specific demands of customers by use of comprehensive fleet consultation has become a very decisive factor in the achievement of the company’s success. Currently, the company offers products that can meet mobility issues the next day, which is a key to success of this company.
Inventory Management at BMW
As a way of achieving a high level of efficiency at BMW Group, the company switched its inventory system from Stat Control to STASAM. As written by Walter (2010), this switch was meant to satisfy even the auditors who may be critical of its management. The management of inventory in any company is a sure way to help the company to meet its goals. The inventory management also makes the company more transparent, especially in lower tiers of chains, which means that the company is able to manage its problems better in the supply chain.
At BMW, the introduction of many inventory management systems has not always been pleasing to customers. For example, when the company introduced the SAP, the BMW drivers fumed. The reason was that this style of management insured that the delivery of the cars to the end user was taking more time as opposed to when the company used other styles of inventory management. Walter (2010) notes that an inventory management system should have all sectors of management geared to satisfy market demand, putting the company in a good position in regard to efficiency and effectiveness of its management.
Before switching to STASAM system of inventory management, the company for 25 years was accustomed to using homegrown software (Walter, 2010). Apparently, it was a physical form of inventory management. Owing to the fact that auditors asked for a good solution to the problems they experienced while using Stat Control, the company opted to use the more effective STASAM method. In fact, this method is amongst the most recommended, and by adopting it, the company intended to manifest itself as one of the most effective and managed companies.
Transportation Management at BMW
In the evaluation of the success stories, one area that has been highly focused on effective management is the transportation system of this company. The SAP management style prevalent in this company was designed to boost efficiency in all sectors of management. In fact, this system of management triggered transparency, especially in freight costs. According to Lightfoot (2004), the SAP TM system included all sorts of functionalities and introduced a good and highly integrated transport system to this company.
The concept developed by this company was meant to have five points of freight management for this company, namely order handling, transport planning, bid for transportation, actual transportation and the freight cost billing. As applicable to BMW, the system was to offer a possibility of having a consistent and effective document flow concept and high-level interfaces. Lightfoot (2004) writes that the choice of transportation management system based on SAP was aimed at achieving good freight cost management. The reason is that this system is fully integrated in the then-existing SAP solution landscape used for planning, billing, purchase, and transport services.
The workings of this system was that while minimizing various efforts put in invoice verification, the services were to be billed using the credit item procedure (Lightfoot, 2004). In some selected cases, the invoices were meant to be transmitted to the suppliers, using a platform for download and then financial processing. Arguably, this system changed the way freight management is done in this company and triggered effectiveness in the overall transportation system of this company.
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Distribution Management at BMW
BMW Group is one of the companies in the world with a build-to-order style of management. Therefore, all its operations are based on a timeframe and eventual satisfaction of the end user. According to Parry (2008), the build-to-order style of management has aided in practical as well as conceptual aspects in the achievement of goals of the BMW Group. Moreover, this style has given the company an opportunity to satisfy the market demand, making it one of the most admired in the whole world. The distribution management of this company is effective and one which insures that the final product from a series of value-added pleases the final customer that is why the models are always tailor-made to fit particular market demands.
There have been delays in the delivery of items due to the fact that there are always a 10% of the parts that are not available immediately in Dingolfing, the central warehouse. The reason is that the company has adopted value-added systems in all sectors of operational management. Thus, the distribution management of the company plays a crucial role. However, with the introduction of new management styles and the adoption of the SAP TM style, the company has expedited distributions of the vehicles while at the same time insuring that the vehicle meets the demands of the market.
The company has also expanded its branches and established more distribution centers. With the introduction of a U.S. distribution center, overall, the company has more than 100 distribution centers. The demand for good and sustainable warehouses by the customers continues to grow, especially with regard to large multinational companies that have global brands. At BMW, new facilities and distribution styles are geared to fit the market demand.
Supply Chain Relationship and Outsourcing at BMW
The supply chain management at BMW has been managed by various companies. In 2004, TNT was mandated to insure that the company’s supply chain is good. According to Ward (2004), companies in the world have always outsourced functions, especially in warehouse management and freight transport management. By using TNT for its supply chain, the BMW Group wanted to trigger effectiveness in the overall management as opposed to relying on internal mechanisms with the same purpose. Outside outsourcing companies and supply chain managers have mandates to place the companies in good positions in the markets.
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The BMW Group has occasionally changed its supply management, which is directed by the need to comply with the market demands. Apparently, the supply chain relationship at BMW is good. Essentially, the supply chain relationship should be focused on making the managers have closer and longer relationships with various parties concerned with the delivery of the product and vehicle parts to the company. Talking about BMW, the relationship with all of its outsourcing suppliers is very close. However, the arrangement in regard to outsourcing of companies to manage the supply chain at BMW has not been unique in the market. In fact, more than 80% of renowned European as well as North American companies get their parts from outsourced companies.
It is a global trend that in-house management of automobile companies is limited to less than 50%. The reason is that automobile companies are highly dependent on interrelationships. At BMW, TNT and other companies which have been outsourced to supply automobile parts have all strived to achieve product novelty and component interactions. The work of in-house managers is to monitor activities from their computer screens such as the delivery of the parts by outsourcing companies.
Supply Chain Performance Measurement at BMW
In the evaluation of measurement of the supply chain performance at BMW, into critical consideration should be taken the involvement of TNT execution technology. In fact, this technology has been vital in this company and overall since it has aided in supporting the material management processes of BMW. It has also aided in the provision of real-time management status, especially with regard to proactive information that is critical in the production schedules of the company. TNT in North America handles the management of its supply chain from the origin point to the point of installation of the parts.
The goal of the supply chain performance of BMW is to achieve the customer satisfaction. Importantly, the company has emphasized the importance of customization of the vehicle models. BMW has introduced the integration of production as well as the logistics systems in virtually all locations as a way of forming an international network of production. Consequently, this has aided in offering advantages to their customer. While qualifying the effectiveness of this integration, Brandenburg (2012) notes that BMW has stood the test of time, in spite of the high levels of competition in the market. In essence, one of the strengths of this company is that it has maintained its customers overtime, and even with the emergence of high competitiveness in the market demand, customer retention to this company is very high.
The stability of the supply chain of this company has given it a good reputation as it focused on producing high-quality cars and has a reputable customer service. The challenges experienced by this company concern letting the customers have change in choices, but this has not in any way affected the demand for the company’s products. Thus, customer-oriented production processes has been key to performance of this company.
Strategies for Logistics and Supply Chain Management at BMW
Being one of the best auto makers in the world, BMW has to reinvent itself to fit the changing nature of the competitive market. For BMW, all the strategic goals in its business plan aid in the development and improvement of its supply chain. One of the biggest strategies that this company uses in the management of supply chain and logistics is the Efficient Dynamics Strategy. In fact, this strategy is based on the objective to have emission-free mobility. Apparently, this is related to the point of origin of the vehicle parts and production at the company. Essentially, vehicle models such as BMW ActiveE portray the use of this effective strategy.
As written by Harps (2004), efficiency in a strategy is not only measured in the final product, but it also valued with regard to the effectiveness of the overall supply chain and logistics of the company. In fact, this is attributable to BMW Group, which has developed strategies that are not only geared to win the customers, but also have a long-term objective of value-added in all operational chains, especially the supply chain. Talking about this strategy, it is not static and continues evolving, based on changes in market environments.
The outsourcing strategy of this company qualifies effectiveness of the efficient dynamics strategy. The use of the strategy has triggered the production of an all-round product that is efficient and has dynamic performance. While devising the strategy, the company had in mind various factors that influence the supply chain and logistics of the company. Hereby, the most critical factor related to economy, the customer requests and the cultures. With regard to economy, the focus is on the management of scarce resources, and concerning culture, it is on assuming social responsibility. In turn, customer requests are all about tailor-made products.