Mass Customization: The BMW way
BMW’S New Plant:
• In May 2005 at Leipzig area ,Germany
• Gerhard Schroder, Germany Chancellor
opened Plant with Helmut Panke,the
Chairman of Company.
• BMW invested € 1.3 billion.
• Manufacture BMW 3-Series car’s.
• Max annual capacity: 650 cars/day
• Expected to create 5500 jobs in that area.
The ceremonial process of
signing the Plant Establishment
Contract.
BMW history
• In 1913 in Munich,Germany,Karl Friedrich
Rapp established the Rapp-motorenwerke.
to manufacture Aircraft Engines.
In 1916
• During First World War Company secured
contract to manufacture aircraft for Austria-
Hungarian army.
In 1917
• In 1917 Rapp needed additional financing
to complete this contract .
• The partnership with “Camillo Castiglioni.
• The new partnership company named as
Bayerische Motoren Werke Gmbh
• The company soon get into difficulty due to
over expansion.
• Sell it to Australian industrialist,Franz joseph
Popp,in 1917
In 1918
• Bayersche Motoren Werke manufactured
its first aircraft engine.
• It reached upto an altitude of 5000 metres
in 29 minutes, creating a world record.
In 1919
• Treaty of versailles banned Germany from
producing Aircraft.
• The company shift to manufacture Railway
brakes.
In 1922
• 1922, Bayerische flugzeugwerke AG.
• Manufacturer of small aircraft merged with
BMW to form BMW AG.
In 1923
• BMW started manufacturing Motorcycle
R32-500 cc Bike designed by Max Friz.
• Company started producing car in late
1920’s.
From late 1920’s to 1950’s
• In 1928-BMW setup a car manufacturing
unit in Eisenach region of Germany.
• There they manufacture DIXI cars and
sold under their name.
• By early 1930 they started designing their
own cars.
• And introduced many successful carr’s like
327 saloon and 328 roadster
Saloon 327 & Roadster 328
Cont…
• During second world war BMW again
concentrated on manufacturing of aircraft
engines and motorcycles for German army
• At the end of war they were heavily
bombed .
• During 1950’s BMW tried to enter in
premium segment market but failed.
Late 1950’s to 1990’s
• In1959 launched BMW 700 of “sporty
exterior” which was the main selling point.
• They launched other models based on
BMW 700 and won many competitions.
•
Cont…
• In1961 BMW launched another successful
model BMW 1500
• With powerful sporty sedan with its front
disk brake and four wheel independent.
Cont…
• In 1970 BMW moved its headquater to
Munich.
• The building looks like the four cylinder of
cars.
Cont…
• From 1970’s to 1990 they focussed on
exports market’s.
• Like US ,south Africa, Australia, Asia,
Japan, Austria and Bavaria.
• In1992 BMW outsold the Mercedes for the
first time in europe.
• company became the first european car
maket to operate in US market.
Cont…
• In1994 BMW attempt to enter in mass
market by bringing British Car m/c MG
Rover.
• The purchase gave the company
ownership of many successful brands like
Mini, Land Rover, and Triumph etc.
• But some of the models were clashing with
the BMW’s model
From 2000 to 2005
• In 2000 BMW sold the MG Rover to
Phoneix consortium for a nominal £10.
• Mini and Triumph Hold by the BMW and
Land Rover and Range Rover sold to
Ford.
• In Early 2000 BMW launched its 1-series
and 6-series.
• For launching this car model company
faced many criticism.
1-Series & 6-Series
Cont…
• In 2004 company added three 3 car
brands-BMW, Mini, and Rolls Royce
• In 24 cities,12 Countries on 4 different
continents.
• Company employed 70,000 people
• Customer deliveries increases from 1.2
millions unit.
• Revenue in 2004=US $ 60.47 billions
• Profit=US $ 3.03 billions.
Rolls Royace & Mini
Operation Strategy Model
Corporat
e
strategy
Operatio
ns
Strategy
Results
The Mass Customization
• What is Mass Customization ??
– Meeting particular customer’s need on a large
scale.
– Basically combining the concepts of mass
production with customization.
Contd…..
• Drivers of the Idea :
– One of the criticisms against B.M.W. Was
that most of its cars looked alike.
– As a maker of luxury cars it had to deliver
value to its customers.
– In older system customer had to do away with
whatever limited options they had.
– Total customer satisfaction became the new
buzzword.
Impact on Operations strategy
• As a result of customization program there
was a stocking more in showrooms.
• COSP – Customer oriented sales and
production.
• Production process was defined by the car
ordered by the customer.
• This was supplemented by the online
ordering system launched by the company.
Some interesting facts
• There were 1032 options available within
the B.M.W. product range.
• The B.M.W. & series alone offered 1017
variations.
• The B.M.W. X-5 sports utility vehicle had
1000 bumper variations, 4000 instrument
panel choices.
The Insiders
• Advance planning was the key reason for the
excellent management for BMW’s supply
chain management.
• B.M.W. had a very efficient ERP solutions
provided by SAP.
• It connected the supply chain management
very well.
• Once the data entered it reached
automatically to the production areas.
The actual Supplier Situation
The Solution
BoM
BoM System 2
System 1
PDM
PDM System 2
System 1 BoM BoM
PDM PDM CAD
CAD
System 2
System 1 CAD CAD
System 1 System 2
Product ------
-- -
structure
data BoM Administrative
BoM data
BoM BoM
System 3 ------- System 4
PDM ----
----- PDM
PDM CAD CAD PDM
Document data
System 3 System 3 System 4 System 4
CAD CAD
System 3 System 4
© PROSTEP AG 2002
Comparative analysis
revenue
250000
200000
150000
100000
revenue
50000
0
or
s
or
s
or
s en ler m
w
ot ot ot ag
r ys b
m m m sw ch
ral ta rd olk r
ne
o f o v le
e t oy aim
g d
profit margin
general motors
toyota
ford
volkswagen
daimler
bmw
The operating leverage concept
Statement Dec 04 Dec 03 Dec 02
revenue 60472.9 52122.2 44315.8
Quantity sold 1.5 1.30 1.07
E.B.I.T. 4847.7 4022.9 3455.6
Operating leverage =(%change in
E.B.I.T.)/(%change in quantity of goods sold)
So we get degree of operating leverage as 0.76
Synopsis
• Mass customization- endless possibilities.
• Customer satisfaction and loyalty.
• Innovation generation.
• Idea feasibility and implementation
through operational strategy.
