BACKGROUND

In 1913, Rapp manufactured aircraft engines in the Munich district of Germany. To meet the financial needs of the contract for manufacturing aircraft engines for the Austria-Hungarian army, Rapp entered into partnership with Camillo castiglioni and Max friz. The company soon faced problems and had to be sold to Austrian industrialist,Franz Josef Popp. After the war ,the ban on producing aircrafts compelled the company to shift to manufacturinng railway brakes.In 1922, AG an another small company merged with the Bayerische motoren werke to form BMW AG.BMW started manufacturing motorcycles in 1923 and R32 was the companys first model. In 1928, BMW acquired the rights to manufacture a small car called DIXI which was BMWs first car and was marketed as BMW 3/15.During the Second World War the companys plants were heavily bombed and car production was stopped until 1952.

BMWs fortunes turned with the launch of the BMW 700, a sporty exterior with an air cooled realmounted engine. In 1960s and 1970s the company consolidated its reputation for sporting cars with the launch of the BMW 1500, wide range of cars including sedans,convertibles and coupes.During 1970s, BMW also stated focussing on export markets through distribution subsidiaries,extending production network and setting up new plants in US, Asia and Australia. In 1980s BMW face lot of competition from Mercedes Benz but in 1992 BMw outsold Mercedes for the first time in Europe.In 1994, BMW merged with MG ROVER to gain ownership of successful brands like Mini,Land Rover,Triumph.However, the venture was unsuccessful and so in 2000 they sold MG ROVER to the Phoenix Consortium. In the 2000s, the company consolidated its position in entry level , coupe &convertible segment.In 2004 ,BMW launched 3 car brands-BMW ,MINI and ROLLS ROYCE and earned huge profits and great reputation

SYNOPSIS

The case study is about BMWs new plant in Leipzig which implemented mass customisation as its major feature. BMWs reputation was build on cars that combine great styling with exceptional performance. In 1990s the company was levied with criticism that all BMW cars look alike,which led BMW to introduce customisation program. BMW identified POST PURCHASE CUSTOMISATION was a big business in Europe & US and they tried to cater to this huge market. COSP was launched where production process at any time was defined by the car purchaser and not by the company, a interactive website was launched to facilitate online ordering

Potential customers visited company website and explore the brochure which listed the various options, colors and combination available so that they can meet the customers requirements. Customers could directly approach the dealer and ask him to suggest the various options.

Advantages

Customer satisfaction. Increased BMW profit to a large extent. Enhanced company image. Improved manufacturing process and efficiency. Company cut its inventory, reduced order processing time, eliminated parts storage at line. Improved supply chain. Provides flexibility while meeting the customers needs.

The car was manufactured within 2 days and required 10-12 days to deliver it to the customer. Flexibility, Interchangeability and Differentiation were important features of the BMW plants. BMW treated its buyers as Investors and not as Customers The BMW market was majorly focused in Europe because in US consumer protection laws allowed the customers to break the car deal at any time before delivery.

STRENGTHS

Mass Customization BMW reputation Automation Good relationship with suppliers Excellent logistics management Use of systems like ERP and COSP Flexibility

WEAKNESSES

Inability to enter mass market Longer time to deliver in US markets Too many choices available which can affect its brand image

OPPORTUNITIES

To enter into BRIC countries

THREATS

Laws and policies governing the country Time taken for an order to process Integrated customer preference Changing customer needs Intensive focus on supply chain management

WHAT IS MASS CUSTOMIZATION?

Involves mass producing vehicles with highly customized parts. Certain parts of vehicle mass produced and combination of final elements customized according to individual preferences. Makes sure customers receive exactly car they want and which matches their requirements exactly. Economic advantage of mass production with differentiation and exclusivity of customization

CONTD

Flexibility in manufacturing process to support customization program. Flexible work program at plants to operate at different capacities. Flexible shifts to meet different level of demands. Flexibility ensured delivery of customized car in approx 12 days. Buyers as investors and not just customers.

MASS CUSTOMIZATION AT BMW

To avoid compromise purchases by customers. BMWs dealers-emphasis on showrooms and not on stocking large amount of inventory. In 1998 BMW launched Customer Oriented Sales and Production system and introduced interactive website and online ordering system. Alternative option of ordering through dealers. 10^32 options with BMW product range. Heavy investment on sequencing technology and Enterprise Resource Planning. High automation and extensive use of robots to do heavy manual work whereas in assembly process use of manual skills.

BMW offered 10 raise to 32 variations for customisation. Advance planning was an important aspect in Supply chain management which helped in maintaining adequate inventory. BMW invested hugely in Enterprise resource planning technology by SAP,which helped suppliers interact with the company. The suppliers were located within 20 miles of the manufacturing plants. Each plant was designed keeping flexibility in mind,Leipzig plant was constructed in circular design,where most of the buildings surrounded the central building. As no two cars manufatured were similar, accurate sequencing of the indiviual parts on the assembly line was crucial. 50% to 75% of the work was automated. The assembly line were designed to allow shifting between the models when demand fluctuated.

THE FUTURE OF MASS CUSTOMIZATION

Mass customization was majorly done in manufacturing of autos and computers. Companies like Ford and GM had already announced build-tobuild order programs by the early 2000s. Besides computers and cars, other industries like consumer durables, packaging equipment, window frames and collective dolls were also using it to improve their production systems proving that all industries could benefit from leaner inventories and lower production times

THE FUTURE OF MASS CUSTOMIZATION (CONT)

However, there was another school of thought that said mass customization was overrated. They found many negative points of mass customization such as fluctuating production which led to in efficiencies and bottlenecks. According to analysts, the answer to the debate between mass

customization and mass customization was virtual customization.

WHAT IS IMPORTANCE OF DIFFERENTIATION AND EXCLUSIVITY FOR MAKERS OF LUXURY CARS?

BMW understood that as the maker of the luxury car, it had to offer extra value to the customers to be able to make an impact on the market. The average price of the BMW is close to US $40,000.For that wed like to make sure that customers receive the car as the wanted and avoid the compromise purchase through its customization program. Mass customization at BMW involved mass producing vehicles with highly customized parts. The combination of final element was customized according to the individual preferences. Therefore mass production essentially combined the economic advantages of mass production with differentiation and exclusivity of customization.

Differentiation was an essential attribute for a manufacture of luxury car, why people were willing to pay high buy a luxury car when they can get a mass produced car a lower price. This was the reason why BMW looked on its buyers as investors and not just as the customers. The company differentiated because the customers bought cars that were on lot immediately and investors were choosy about and made specification for the car and they were willing to wait a reasonable amount of time to obtain the vehicle. PROMOTION BMW launched Customer Oriented Sales and Production-The principle was that the production process was any time defined by the customer wanted and not by the car the company wanted to manufacture

BMWS RELATION WITH SUPPLIERS

BMW had various customization options in their range of cars Different parts were required at various levels of production A strong supplier base who can supply their requirements was a must Advance planning formed a very important part of BMWs Supply Chain Management BMW prepared a detailed material requirement plan for each of its component This plan was prepared in coordination with all manufacturing plants & Supplier for that plant Therefore BMW implemented strong supplier communication system which ensured that the orders are placed with the suppliers on time

BMW had a Sequencing technology & an ERP system provided by SAP This software ensured the communication with Suppliers on Real Time basis Because of the sequencing of material requirements & real time communication with the suppliers, it was easy for BMW to get their requirements on time The suppliers also found it convenient to supply the materials due to the systematic process

ROLE OF IT

IT in manufacturing process is very essential as it streamlines the process to ensure smoothness Ensures the advance planning for production Ensures that all the requirements are placed with the suppliers Sequentially Makes available the materials required for production at the right time Ensures that no excess of materials are stored thereby reducing the warehousing cost Removes the stoppage or delay in production due to non availability or delay in receiving the materials from suppliers Ensures the JIT mehtodolgy in production