Executive Summary
BMW
is an automobile manufacturer whose headquarters are located in Germany. It has
been in operation since 1917. In 2010, the company produced 1,481,253 vehicles.
There was an increase compared to the previous year where the production level
stood at 1.3 million. The organization’s business model is more of consumer orientation.
This means that the organization usually manufactures cars that are being
demanded in the market. Through its supply chain management, BMW tends to
choose suppliers that have already built a name for themselves. These are those
companies with great recognition and reputation. It becomes easier to build
trust with end consumers by using such suppliers. The production process on its
part involves several chronological processes that must be followed in all the
manufacturing plants. There are shops developed to cater for this process. A
similar approach is used in all the plants for standardization purposes. The
company has instituted a diverse distribution channel. Through its channels the
company can sell directly to consumers. It can also sell to consumers through
retailers or wholesalers. Having diverse distribution channels has enabled to
reduce the bargaining power of distributors.BMW views end consumers as vital
elements to the company. They are the ultimate reason for the organization
being in business. For this reason the company tries to bring efficiency to
their side by producing what they demand. Efficiency is also enhanced through
the distribution channels that the company utilizes. The company has been
making decisions that are favoring the success of the organization. However,
some of the decisions need to be revised for future prosperity. Aspects of
e-commerce are also vivid in the organization’s activities.
Table
of Contents
Page
1.0 Introduction…………………………………………………………………………………4
2.0 Supply
Chain Management………………………………………………………………….5
3.0 Decision
Making…………………………………………………………………………….7
4.0 E-Commerce………………………………………………………………………………...8
5.0 Recommendations…………………………………………………………………………...9
6.0 Conclusion…………………………………………………………………………………...10
7.0 Bibliography…………………………………………………………………………………12
Introduction
BMW is an automobile, engine
manufacturer and motorcycle company whose headquarters are situated in Germany.
The company was founded in 1917, and through the years it has made several
acquisitions. In 1994, the company acquired the Rover Group. The acquisition of
Rolls-Royce then followed in 2003. This has helped in strengthening the
organization’s market base. The market share seems to be increasing with recent
ventures. The product that the paper aims at putting a stint focus on is the
company’s cars. In 2010, the company produced 1,481,253 vehicles. There was an
increase compared to the previous year where the production level stood at 1.3
million. In 2009, the Company had more than 23 assembly and production plants (Buckley, 2010).
The plants are located in more than 13 countries.
BMW’s car production is favored by
the market condition that exists in the industry. There is the aspect of
product orientation and consumer orientation. BMW is more concerned with
consumer orientation since they tend to produce what their consumers want. This
includes the features and quality levels to be included in each motor vehicle. The
company tends to concentrate on high income earners based on the quality and
pricing of its vehicles. It strengths emanates from brand reputation, corporate
social responsibility, skilled workforce and quality products among others. Opportunities
for BMW cars are presenting themselves based on the fact that people are now
developing positive attitudes on “green” vehicles. Changing consumer needs and
an expanding brand portfolio also provide great opportunities to the
organization
(Domansky, 2012). The company’s supply chain management
has contributed significantly to the success of the company’s vehicles. This
has been supplemented by various decisions made in the organization.
Supply Chain Management
BMW’s cars supply chain compromises
of suppliers, production process, middle men (retailers and wholesalers) and
consumers. The management of the supply chain has been effective hence
contributing to the success of the organization. There are strict guidelines
used when choosing the suppliers. It has been the tendency of the organization
to work with highly recognized entities in various operations. These companies
must have built a reputation for themselves during their years of operation (Cranswick, 2010).
Using such an approach was arrived at based on the fact that successful
companies usually provide more quality products to their consumers. The reputation
of the suppliers can also be used to convince end users of the quality aspects
of cars being manufactured. A good example of how BMW uses highly reputable
suppliers is its involvement with Vodafone. The company has chosen Vodafone as
its M2M supplier. BMW vehicles are fitted with special Vodafone SIM chips that
link the company to its vehicles. This is aimed at providing consumers with innovative
in-car services such as online services, 24/7 personal concierge service for
drivers and emergency call function (Vuskane, 2011). BMW has also
chosen Dana to supply the company with drive units. Dana supports the company
with design and production of rear and front differentials.
BMW
manages its suppliers on various aspects. Among the common techniques is
subjecting its suppliers to contracts of ensuring quality supplies. There is an
agreement stipulated to each supplier based on the quality levels that the
organization expects from them. Failure of meeting the set standards results to
termination of the contract between the two companies. BMW cannot afford to
entertain any form of laxity from the suppliers due to the competitive nature
of the industry. Any shortcoming might result to a gain on the side of the
competitors.
Most of the cars are produced when
the demand for them arises. The production process commences with suppliers
delivering the relevant materials required for manufacturing. Some of the
components are in-built. Production process is initiated in the press shop. Here,
all the metals that are going to be used in the manufacturing process are
pressed to desired shapes and sizes. The
design is usually dependent on the vehicle that the metals are going to be
fixed. Machines are used in this so as to come up with standard units. After
the raw materials have been converted to desired sizes and designs, they are
then moved to the body shop. At this shop, the parts are coined together to
form the outer shell of the vehicle. The car’s design is dependent on the
material derived from the press shop (Lewin, 2009). The only
function of this shop is to assemble the materials from the press shop. After
the body has been affixed, the body shell is then moved to the paint shop. It
is passed through computerized conveyors. At some points, the body shell stops
and revolve on turntables for checkups. From the paint shop, the car then goes
to the assembly point. At this point, all the relevant equipments are integrated
in the car. The systems are placed according to the stipulation. The marriage
process then follows where the car’s engine system is put in place and its
effectiveness is tested. From this point, the car is ready for use.
Completion of the production process
is followed by the distribution prospect. The company has instituted a diverse distribution
channel. Through its channels the company can sell directly to consumers. It
can also sell to consumers through retailers or wholesalers. Having diverse
distribution channels has enabled to reduce the bargaining power of
distributors. If a single distributor is involved the bargaining power would be
high hence making it difficult for the company to maximize on its profits (Maguire, 2006).
Intermediaries such as retailers and wholesalers also help the company in
various ways during the distribution process. They help in stimulating the marketing
flow of the vehicles. The retailers have already invested in storage facilities.
This helps the organization in the financing aspect as it does not have to
incur this cost. Some retailers also offer some financial plans purchase
agreements to the consumers. These plans enable them to buy the company’s
products even when they do not have sufficient funds through some arrangements.
Such an attribute helps BMW in increasing its vehicle sales levels and expand
the market share. In the long-run user convenience is enhanced.
The end customer is very important
to BMW. This is because they are the ultimate reason for the productions taking
place in the organization. They determine many aspects of the supply chain
being used by the organization. BMW is more of consumer oriented. It goes with
what consumers are demanding for in the market. This comes along with quality
of the cars and equipments that they desire to be installed. On recent years,
consumers that are conscious of the environment are being taken care of by the
organization. The company is now producing hybrid cars that enhance
environmental sustainability. This is going well with those consumers that term
themselves as “green”. Failure to manufacture such vehicles would have resulted
to loosing this group of consumers to the competitors. Using a consumer
oriented approach is being viewed as a corporate social responsibility. The
more concerned the company is towards its end users, the more its profits are
likely to increase (Maguire, 2012).
Decision Making
The decision making in BMW’s supply
chain is made efficient due to working in partnership of the relevant
stakeholders. Among the decisions that the company has had to make regarding
the supply chain is the production process. The warehouses are becoming small
based on the quantity of cars that the organization is required to manufacture.
Increasing the number of warehouses will not be a good idea for the
organization. This is because the company will incur more holding costs hence
reducing the profits prospects. Based on this effect, the management has made a
decision of using some aspects of Just In Time production. Here, the production
initiates once order have been placed by the relevant stakeholders. The people
placing the orders might be the end users, or the company’ distributors. This
is a very effective approach since it reduces the cost of holding inventory.
Another critical decision that has
been made by the organization is targeting high income earners in the supply chain.
The approach might be favorable but the organization is losing a lot in terms
of market share based on this strategy. There are low income earners that
cannot afford this cars butting are willing to be associated with the company. The
company should put such consumers under consideration since they might help in
boosting the profit aspects of the company (Kiley, 2004).
There has also been the decision of using
a three-step process for risk management in the supply chain. The first process
includes the sustainability risk filter. At this process all the risk aspects
of the supply are eliminated. This is then followed by a self-assessment
questionnaire. The questionnaire is used in assessing how effective the
organization has been in its aspects of managing risk in the supply chain. It
becomes possible to assess the shortcomings at this stage. Sustainability audit
is then conducted as the third process. The audit is conducted by an
independent body hence providing room for a critical review.
E-Commerce
BMW has not concentrated more on
E-commerce based on the production of cars. This is because their supply chain
has been more reliant on dealership with the distributors. B2C form of e-commerce
has been affected more on this aspect compared to the B2B. When dealing with
its suppliers more e-commerce activities have been experienced compared to when
the organization is dealing with end consumers. However, this aspect seems to
be ending since the organization aims at taking advantage of all the avenues
that are available. The competitors are highly embracing this ideology hence
prompting the company to be more rigorous than it was there before. Currently,
BMW is using Intershop Software for its platform. This approach is believed to
enhance consumer experience, management of multiple brands through a single
platform and integration of available IT infrastructure (Heneric, Licht &
Sofka, 2011). Most of the cars being involved with e-commerce are
the hybrid cars. For efficiency, BMW has had to sign contracts with e-commerce
specialists like iForce. The outsourcing aspect tends to increase the supply
chain stakeholders.
BMW also claims to be the first
automobile company in UK to sell through eBAY. Through this platform, the company
sells accessories and parts. This includes car care products, brake discs among
others. Previously these components
would only have been acquired from the organization’s dealership (Shah, 2012).
Recommendations
BMW has several things that it would
do to help improve its supply chain management. The aspect of the supply chain
is to ensure that the organization has been able to derive the maximum profits
that it can. One way that the company can improve is by changing its strategy
on the end consumer. The company’s supply chain only targets the high income
earners based on the nature of its cars. BMW should try and practice some
aspect of market segmentation. Here, it will be able to offer its products to
both the high end and low end consumers. The company will continue with its
current operations, but develop another market segmentation of consumers that
are not able to keep up with their current prices. They will develop cheaper
products to these consumers. Marketing on this segmentation will not be a
problem since the brand name is already recognized (Olson, 2012).
Many low end consumers would like to have an opportunity of associating
themselves with the company’s products but have never had the opportunity. This
will help in improving the market share hence boosting sales.
Another aspect that might improve
BMW’s supply chain is introduction of limited edition cars in the production
mix. These are those cars which are produced and sold at one period of time and
are never presented on the market again. Using such an attribute would attract consumers
that like the aspect of being unique (Plunkett, 2009).
They would be willing to pay huge amounts of money so as to quench their
desires. This would be an opportunity for the organization to increase its
sales. It also helps in building consumers loyalty along the supply chain. This
is because the distributors will also have the share of the loyalty hence
promoting favorable business for the company.
Conclusion
BMW seems to be among the top three manufacturers
of luxury cars in Europe. The success has emanated from the decisions that have
been made all through. Supply chain management has contributed immensely to
this realization. Favorable operations and decisions have been on how the
suppliers are selected and the aspects of managing them. They are key
contributors to the organization’s success hence they should be analyzed in the
best way possible. The process of production from the company is quite clear
and is standardized in all the manufacturing plants. Lack of complexities has
contributed to the high quality of cars being manufactured. Having a
diversified distribution channel has also helped in eliminating distributor’s
bargaining power. This increases the profitability prospects of the
organization. However, the company needs not to focus solely on the high end
consumers. The low income consumers would also help in improving the supply
chain if effective market segmentation is implemented. There will be an
increase in make share hence increase the ability of immersing more profits.
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