Analysis of the BMW/MINI Supply Chain
A manufacturer of automobiles, motorcycles, and engines, BMW/MINI (Bayerische Motoren Werke AG) was a German company first introduced to the market in 1916. The company has been transformed into a globally recognized brand thanks to its core products, BMW/MINI, MINI, and Rolls-Royce (Hazlehurst, 2021). The automaker is one of the top three German luxury car manufacturers, along with Audi and Mercedes-Benz, considered the most successful sellers of luxury cars in the world (Hazlehurst, 2021).
BMW/MINI cars are characterized by exceptional design, lightweight construction, and environmentally friendly features such as electric drive. This type of quality, along with continuous improvement and innovation in various supply chain processes, has made BMW/MINI the premium market leader in many markets worldwide. Several key processes and components are involved in the supply chain.
Customer Aspect
A company’s supply chain begins and also ends with customers. The company uses a build-to-order system and a mass customization strategy that allows it to deliver cars with the correct specifications to its customers. All customer requests are stored in a central database (African Union Commission/OECD, 2022). Fixed inventory management is done using software such as mySAP. It captures specific details, including customer preferences and associated costs, and reports real-time lead times, effectively shortening orders to delivery time (Hazlehurst, 2021).
External Risks
Despite impressive sales records, BMW/MINI also suffers from exchange rate fluctuations. The company has reduced this risk by establishing factories in the countries where they sell their products and thus using the currency of those countries. BMW/MINI sources raw materials from local markets, a strategy that helps the value-creation process (BMW Group, 2020a). BMW/MINI’s expansion strategy has positively impacted supply as it allows the company to source a huge percentage of its components from emerging markets such as India. The advantages of domestic sourcing are better prices and faster response times because resources are available locally, factors that make a company more competitive in the market.
Technology Aspect
BMW/MINI uses many sophisticated electronic search technologies, including ASTRAS and eRFX software. No less important is the central interface, known as the M portal, through which all processes of the organization are managed, which manages all processes in the organization. The electronic search consists of several stages (BMW Group, 2020a). The first is preparing the request, in which documents are prepared with all the specifications.
Distribution
Next, specifications are received, and bids are invited from interested suppliers (BMW Group, 2020a). Bids are evaluated and grouped according to requests and cost analysis. Distribution strategies for the company are mainly demand-driven, whereby they unload at ports with the largest number of customers to reduce turnaround time (BMW Group, 2020b). The materials management department constantly communicates with the company’s facilities, suppliers, and procurement departments.
Thus, cars can be supplied directly to the customer through dealers or various distributors, which is the primary aspect of internationally sourced supplies or related markets. In North America, BMW/MINI uses a central storage facility (BMW Group, 2020). With this clause, cars destined for different dealers are first entered into the central pool but have yet to be dispatched. However, “Full-year deliveries were down 4.8%, with Europe and China hardest hit by supply chain troubles that curbed output, particularly in the first half of the year” (Reuters, 2023). Given that they have to pay for storage costs, the company saves on floor planning as well as costs associated with transporting replacement cars. The company can also save on transportation costs.
Thus, dealers will be able to choose from a more significant number of cars and better satisfy the needs of their customers. BMW/MINI also has cross-docking centers, a strategy that lowers transportation costs and reduces factory traffic. Analyzing the source markets, “Deliveries in the United States were more stable, falling by only 1.3% for the year, with a boost from fourth-quarter growth at 11.1%”. (Reuters, 2023). In other regions, such as South Africa, assembled cars are first delivered to a distribution center and warehouses and then transported to various dealers where customers can pick them up.
Manufacturing
BMW/MINI’s manufacturing strategy is a pull system that regulates the production cycle driven by customer demand rather than forecasting. Such a system is achieved through a bespoke strategy that includes just-in-time and just-in-process components. A competent supply chain maintains good relations with all participants, ensuring better efficiency and supply quality (Altmann, 2019). The process also minimizes storage and transportation costs. The company uses mySAP, an advanced inventory optimization system, which allows it to track and control the inventory on its premises (Liu and Liu, 2021). Suppliers have access to all of the company’s systems to receive up-to-date, real-time information on delivery time, parts needed, and parts quantity needed.
SWOT Analysis of the Brand
Strengths
Strengths include strong control over product creation, instant repair, service, and shipping. The company has a constant supply of raw materials through 31 production and assembly plants around the world. Most of the raw materials come from a reliable supplier in Germany. Operational stores of the company are present all over the world. Basically, “31 product-oriented service stores operate in 15 countries” (BMW Value Chain Analysis, n.d.). Car production is scattered around the world in 140 countries, of which 31 countries are controlled by partners and shareholders (BMW Value Chain Analysis, n.d.).
The rest of the dealerships work under the supervision of BMW and its subsidiaries. Outbound logistics are developed, and distributors and sellers are spread all over the world. The supply chain works in the way that brand has the highest build quality and exceptional pre-sale service that encourages customers to buy. Digital and web channels do the other part of the job by creating active advertising.
Weaknesses
The company’s supply chain has few weaknesses compared to strengths. First, the company needs more market coverage of its premium luxury products. Most developing countries need help to afford the price of such products, which limits the market for such products (Gibson, 2023). Secondly, the company needs help with debts that sometimes exceed earnings. Such borrowing actions can be explained by the huge investments that have been made in various countries for the distribution of electric cars and automated control machines (Miller, 2022). The company is quite slow to form decisions about the supplier and the purchase and the prospects are not always advanced.
The purchasing and procurement of building materials from suppliers depends on ISO 9000 and ISO/TS 16949, which ensures that quality guidelines are followed throughout the production network, so speeding up the decision-making process has made the supply chain more flexible. Most of the segment, such as door panels, front and rear axles and frames of the exhaust system, are delivered by suppliers not always on time and in the required sequence. Emphasis on supplying the segment in sequence would not only help the firm save space and minimize inventory, but also help reduce the overall cost of generation. It would be equally important to diversify their offers; still offer vehicles, but in the lower to the mid-range range. Currently, if a person cannot afford a luxury car, BMW will not offer anything. The purchasing needs of consumers will change, and instead of luxury, they will look for cheap and experimental cars.
Opportunities
The company also has many opportunities. The company has a platform for infrastructure development. However, it is possible to expand production lines from two to four. One of the directions of the company is the motorcycle segment, and the other is the automobile segment. However, the company has enough resources to expand. In addition, a dedicated finance section for to manage monetary features is better to expand its areas of influence. A company can also improve human resources by increasing employee diversity.
However, the development of direct purchasing is related to outbound logistics, and enhanced process would help BMW’s value chain to maintain a constant supply of raw materials. The company is a good platform to create better inventions and new models that will better serve their customers through technology. The organization can adopt a smart marketing strategy that targets people with low incomes. In this way, the company can produce cars that are affordable for middle-class people (BMW Group, 2020b). The company also has the advantage of a shift in interest as people move toward more luxurious cars, which is good news for BMW/MINI (Dudovskiy, 2016). Such a move will allow the company to produce and sell more of its products.
Threats
In addition to opportunities, the supply chain also faces threats. The biggest threat is fierce competition in the automotive business. Competition is mainly between brands such as Mercedes, Audi, Toyota, Honda, Porsche, and Daimler; they have more developed supply chain. During the pandemic, the company was also limited in exporting products, which affected its development as it faced huge losses. Another challenge is the tightening of car regulations in some countries, which is creating a real challenge for the company and rising fuel prices (Dudovskiy, 2016). This decision affects the company’s sales of gasoline cars.
Reference list
African Union Commission/OECD (2022). Integrating value chains in Southern Africa and the automotive industry. Africa’s Development Dynamics 2022: Regional Value Chains for a Sustainable Recovery. Web.
Altmann, F. (2019). Sustainable supply chain management & raw material sourcing. niels angel head of sustainability and innovation management supplier network Peter Zisch senior manager chemicals and battery raw material purchasing. Web.
BMW Value Chain Analysis. (n.d.). Edrawsoft. Web.
BMW Group (2020a). BMW Group supplier sustainability policy version 2.0. Web.
BMW Group (2020b). Our responsibility our future. Web.
Dudovskiy, J. (2016). BMW SWOT analysis – research-methodology. Research-Methodology. Web.
Gibson, A. (2023). BMW SWOT Analysis 2023: An Ultimate & Detailed Report | SWOT Hub. Web.
Hazlehurst, J. (2021). BMW’s supply chain makes a quantum leap. Supply Management. Web.
Liu, Y. and Liu, Y.L. (2021). ‘A critical analysis of how BMW designs a collaborative and value-adding supply chain’. International Journal of Business Performance and Supply Chain Modelling, 12(4), p.414. Web.
Miller, K. (2022). BMW SWOT Analysis with respect to the current scenario. Crowjack. Web.
Reuters (2023). BMW Sales Recover in Fourth Quarter as Supply Chain Issues Ease. NADA. Web.