Supply chain management and competitive strategy
Bayerische Motoren Werke AG or BMW is a Germany originated company. In 1916 BMW was established at Bavaria, Germany. It has been a well-known name in the automobile industry. It generally manufactures luxury cars; motor vehicles etc. in the year 1917, another company named as Rapp Motorenwerke ltd. merged with it and became a big automobile company of that era. Later on, it turned out to be as one of the largest public limited automobile companies of the world. Over the years, many changes have done to its manufacturing process and designing, but still kept the unique symbol and colour combination of their products (BMW Group, 2012).
Some of the historical facts regarding BMW are quite significant. It is a fact that the First World War had a massive impact on its production. Intercontinental treaties imposed number of stipulations on its production. It is true that during that time BMW was not famous for the production of cars, but it was well-known for building aeroplane engines. However, such hindrances made their life much difficult. As a matter of fact, the company had decided to shift its production facilities from aeroplane engine to automobiles. Add to this, Second World War had created more problems for the company. Plenty of its manufacturing units had destroyed due to the war, or many of them had occupied by military troupes. As a result of that the production of the company had hampered severely (Bacon, R., 1995).
It has identified that after 1951 the company had seen a rapid growth in the market. And since then this growth still continues. Some of the crucial facts about the BMW are as follows:
- In 1959 Daimler-Benz furnished the proposal to reorganize the BMW company
- Conversely, BMW has dealt with many obstacles, still it has able to boost their business and stay self-sufficient
- Subsequently, as their manufacture place in Munich started to work with huge authority, BMW started on budding what would turn out to be their biggest set in Dingolfing, Bavaria
- Seeing that the quantity of manufacture plants improved along with large funding, and thus “BMW Kredit GmbH was developed as a latest BMW supplementary to supply investment for the corporation’s own dealings and most significantly for the improvement in its trade-ship.
- In 1972 South Africa turned out to be the primary overseas site for BMW, concluding in the company’s way in into the US marketplace after 17 years.
- In 1994 the company also had obtained the Rover Group of UK.
- BMW had integrated with Rover, MG, Triumph and Mini, Land Rover.
- In addition, in 1998 U.K. ventures had trailed as soon as it obtained Rolls-Royce Motor Cars
- Subsequently, the company has managed to be converted into as the apex supplier of first-class cars and other motor vehicles.
As discussed earlier, the company BMB is headquartered in Munich, Germany. Some of the famous products of the company are- BMW, Rolls Royce, and MINI etc. There are limited numbers in the company, but they offers vast range of size, accommodations, facilities, equipments in those limited cars. Over the years, the brand BMW has emerged as name for class, comfort and luxury. And there has been increasing numbers of sales in each year. In recent times, it has truly become the number one car of the world. According to the recent studies, the sale figures have increased from 1.25 million to 2.78 million within a decade of times. Most importantly the company has speeded almost every part of the world. Major expansions are observed in US, UK, and Australia. But some of the Asian countries like India, Srilanka, Pakistan and South Africa also has considered as the growing market for BMW. In variety but The BMW Group, with its head office in Munich, Germany, manufactures and sells BMW, MINI, and Rolls Royce cars. Its products cover the full range of size classes and car types but consist exclusively of premium-class cars (Blanchard, 2013). In this regard, some of the important points are given below:
- At present, BMW manufactures cars in eight units in United States, United Kingdom, South Africa, and Germany.
- And its outside associate, Magna Steyr, has collaboration with BMW in Austria.
- In addition, BMW makes engines at four additional locations, and other effective associations have occurred in six different places of the world.
- The invention procedures of BMW are increasing progressively.
As, highlighted in different business reports, investment decisions in manufacturing business are very important. Each and every thing has to be considered before taking any investment decision for production. It includes some unavoidable costs, which companies have to put across. It is a long and enduring process. Each part of the process has to be customized accordingly. It is a fact that products are made for specific target customers only. So, inputs which are going to be included in the process have to be taken into consideration and observed whether they are actually fulfilling the requirements of the customers or not (Chopra, S. and Meindl, 2016).
As mention above, car manufacturing is a continuous and interlinked process. A specific chain of procedures are required. It includes numerous small sections of processes such as creation of engines, different parts of the body, assembling, testing, etc. This regard, the assembling and installation process are very crucial. It has to be appropriate and most of the customization has been done during this process. It has identified that BMW has invested huge amount of fund in its productions process and this has been a significant step toward the massive growth in upcoming years.
According to the annual report of the company, it has expanded its business in almost 34 counties of the world. It not only establishes supply units but also able to build production units in some of those counties. It shows company’s true management and financial strength. Supplying car in such range of nations is not an easy task. For this an effective and strong supply chain management system has to be in place. It is a fact that BMW has able to develop such supply chain management system in such short span of time (Bacon, R., 1995).
As highlighted above, BMW has established many manufacturing units across the countries. But it is also true that the company does not have such facilities in all the countries. For those places it completely depends upon the supply chain management system. In this regard, the oversees manufacturing centres have to vary its production style according to the target market for the specific country. It is true that different countries have different traditions regarding setting arrangements, gear facilities etc. So, all those factors need to be kept in mind when manufacturing process is in progress.
In this regard, few important facts are as follows:
- Despite the fact that BMW is renowned for manufacturing comfort cars, the concern hubs on novelty and pulling off improved recital with the intention of please their consumers.
- In the year 2000, the company has commenced its well-organized Dynamics expansion scheme.
- It aided the business to initiate innovative products that abridged both oil burning up and carbon dioxide release, at the same time as offering a higher yardstick in production.
- The well-organized Dynamics scheme capitalized on customer participation to build up practical and ground-breaking product traits
- In addition, BMW initiated its Connected Drive System or CDS which contains car night vision equipment that shall be quite helpful at times, in night.
- Furthermore, the organization offers a facility that can convey map-reading information from cell phone and USB links to the in-build steering coordination.
- In the midst of these improvements the BMW has emerged as the world’s first company which provides unlimited internet facilities with its cars.
The company- BMW is a Germany based organization. But is has expanded the business activities in almost 150 countries of the world. It has created employment opportunities in Germany as well as other countries. As a matter of fact, Munich, the place where the company has its main office, is one of the wealthy places of the world. So, there has been a local market for the luxurious cars. And BMW is the most common car, which people of Munich are using ever since its invention (Fleischmann, 2006).
Strategic planning is a complicated process for any manufacturing corporation. It needs to be cooperative with other business factors such as present market scenario, situation of the supply chains, conditions of the sales and production etc. Supply chain management is certainly a key part of the strategic planning, but it has to be well equipped with all associated factors as mention before. Profit is the definitive goal for any organization and every organization is running behind it. Strategy is the fixation that has to be faultless if organization desires to achieve such goal. Strategic management is the incessant path of forecasting, examining, scrutinizing and assessing of all that is required for a business, to carry out its goals and objects. It also consists of exploration, examination and evaluation of the critical trade decisions just before its implementation (Simchi-Levi, 2015). The mainstay essentials of strategic management consist of:
- Critical analysis of SWOT.
- Developing effective action plans.
- Implementation of action plans.
- Appraisal of achievements and failures of the action plans.
The whole idea of strategy based on proper planning, which shows an organization’s capacity to set goals to find out the decisions and actions that are needed to achieve the ultimate goal- profit.
Competition is another crucial factor which causes manufacturers to build innovative products at regular intervals. The automobile in is the field of business where level of competition is relatively higher than any other industries. That’s why the BMW always focusing on building innovative products for the customers. Different features such as dynamic stability control, integrated driving system are the example of such invention. Natures and requirements of the customers vary with names of the countries. As BMW has created a global market for its product, it has to be more customers specific, and build product accordingly. Though the company is not able to form manufacturing units for each county, but still it has to develop strong supply chain systems which can able to fulfil specific requirements of the customers. The supply chain must be equipped with efficient communication system, which can provide accurate information about the customers, and in contrast, deliver such product, consequently to those customers (Chopra, S. and Meindl, 2016).
As highlighted by a report, BWM is famous for proving premium cars for wealthy classes of the societies. And it has developed huge market in Germany, America, United Kingdom and other parts in Europe. In most of the cases it has its own manufacturing facilities. But other countries such as countries of the Middle East, Asia, Africa it does not have such production facilities. Where supply chain management system is the only effective option to avail such product for the customers of such countries (Kim, 2014).
There are quite a few essential aspects, concerning BMW’s strategic supply chain management, which are given below:
- Long-term strategic planning of products and production is an elementary undertaking.BMW had an effective strategic-planning progression when it going ahead the initial development in 2000.
- In this planning procedure, the scope widen to 12 years duration, and separated into annual interlude assessments, so that it holds the complete life cycle of the goods opening in the subsequent five years.
- Planners combined the stuffs to the rank of the offshoots of the manufactured goods, for instance, sedan, sports car on the road car, or malleable.
- They amend the 12-year strategy quite a few times a year, and the higher management of the company must endorse of the grades.
- As expected, within the preparation procedure, BMW plans its goods and sale earlier than preparation manufacture capacities.
- Many times it has been seen that BMW has decided on the set of potential stuff and, for each active or upcoming creation, and during the year or half yearly it has achieved the desired sales target in many geographical locations.
- Some times there are essential requirements for raw materials which are only available to some specific locations. In this type of situations the efficiency of the logistic system are crucial. It is a fact that the company some time require the assistance of some third party to supply such raw materials in time.
- Generally the company prepare its strategic supply management data in computer bases operating system. All the data such the total number of car produced and delivered in a day, the number of car that has been manufactured, and the order that has been in queue, etc.
- All the strategies must comply with the general policies of the company.
- Every supply chain has to be associated with alternative production locations
- According to the annual report of the company, some of the factors which are considered as significant for development of the supply chain of the company are- proper load assessment, cooperation among the suppliers and customers, develop specific model which is linked with definitive software system.
As we all aware of the fact that profit is the ultimate goal of the organization. Excessive costing in supply chain can reduce the profit margin. So, there are essential requirements for reduction of cost in supply chain. For this all the strategies of supply chain management should be highly cost effective. Supply chain is a long and extensive business chain. It has interconnection with different sections of business like purchase, production, storage, carriages etc. If the company- BMW wants cost reduction in this supply chain, then it has to scrutinize each interlinking sections of supply chain and change them according to the business environment. The key to cost reduction is the selection of an approach which is focusing on customer satisfaction. Some of the internal factors like company policies, legislature issues, taxation issues, and labour issues may have some impact on costing of supply chain. But management has to cope up with all these minor barriers, and should give more focus on customisation of the entire supply chain. It will definitely give some cost effective results for the company (Bacon, R., 1995).
It has identified that key competitive advantages of BMW is its capabilities to manufacture innovative products for the customers and avail them through strong supply chains. The focus has always been remaining on customers’ demand. Its applications of modern technologies and utilization of skilful workforces has been an added plus point (Parker, 2004). Some of the more significant factors in this concern are as follows:
- At the conclusion of September 2015 the company had augmented its labour force by 5.9 % from 2014,and which turns out to be around 121,316 employees. This incorporated 1500 trainee, 1200 of which werefunctioning in German services.
- In the course of such reserves in its labour force BMWholds the assets that make possible it to build up innovative models,
- The company has made their 5th successive sales records in the year 2015.
- In 2015, BMW Group’s yearly sale total was 2,247,485 units, which indicates a sharp increase of a 6.15 % over 2014.
- Inside its brand name, BMW sales particularly improved by 5.2%, other products such as MINI’s sale increased by 12%, and Motorrad sales has improved by 10.9%, and the company’s monetary services section also has shown improvement by 7.7 %.
- But product like Rolls Royce faced a surprise decline of 6.3 %. However, it was still competent to produce returns with a sale figure of 3,785 units
- The latest data shows that the 15 innovative and simplified models, for instance the Gran Tourer, BMW 2 Series Active, and MINI Clubman have a major contribution in this augmented sales figure.
- In addition, progressing investments in machinery for example iPark equipment incorporated into BMW car to find unpack parking mark for drivers, is likely to be a contributing factor.
- Last but not least, the BMW possessed a net profit margin of €1,579 million acquires only from its automobile section. It is a data from annual report of 2015, which highlighted the company’s competencies in production and supply chain.
The UAE is identified as one of the profitable business destination of the world. The UAE and more importantly Dubai has shown enormous economic prospects in last two decades. Emerging tourism industry and well established oil industry has been the centre of attraction. Most of the economic activities are somehow associated with those two. Nowadays the life style of people has moderately changed. It is a fact that most of them are having high-class and expensive life style. Given this scenario, car has become a common mode of transportation. BMW is focusing on this growing market of UAE. It has observed that most of the rich communities of the country prefer to have luxurious car like BMW. There is certainly a huge demand of BMW in UAE market (Govil, 2002).
The United Arab Emirates or UAE is a coalition of seven autonomous realms situated in the south-eastern part of the Arabian neck of land. It is in an incredibly strong political and economic development zone. The politics of the province consists of divergences in geological nomenclature. It is true that the “Persian” or “Arabian Gulf” margins the province to the north, at south and west it is Saudi Arabia and Oman at the east. Prior to the detection of lubricate materials in the period of 1950s; the UAE was a cluster of small-earnings unions underneath the shield of the Britain government. Lubricate industry fetched hasty expansion and transformation to the region, and these little unions turned out to be self-governing states and named as the UAE subsequently.
The major codes of foreign policy of the UAE consist of intercessions, international relations and empathy. The country completely executes its promises to maintain provincial safety, constancy and concord. For that reason, it looks for to set up relationships involving diverse nations, uphold conversation and corporation.
The administration of the United Arab Emirates preserves impartial, successful foreign policy. The UAE is intensely attentive of the consequence of reasonable associations among the countries and holds to the belief of non-intervention into their autonomous dealings. Add to this, the United Arab Emirates be inclined to resolve disagreements cordially. The UAE maintains intercontinental associations in conformity with the pre-decided contract and standards, and always work for improvement of regulations of international law. It is true that the United Arab Emirates is a component of the different international associations such as ‘the League of Arab States’, ‘the UN’, etc. The UAE is legitimately one of independent nations and upholds “absolute neutrality”. This permits the country to keep a central relationship with the East and the West, both (Weele, 2015).
In last few years, there has been a radical change in the automobile industry of the world. Automobile companies were more often favouring the developed markets, where they can easily sell their products and gain profit. But this idea has been changed. In recent times many companies like BMW, General Motors, Ford, Volkswagen, Toyota, Honda, and Daimler Chrysler have shown their interest in developing economic markets. They are mainly targeting the cost effective market scenario of those countries. According to a business report, developing countries’ contribution in global exports of cars has enhanced from 11 % in 1999 to 18 % in 2006. And it is expected that within a decade this emerging economy shall contribute near about 2/3 of the growth in automobile industry.
As highlight earlier, growth of automobile industry largely depends upon production capabilities and strength of supply chain. The importance of supply chain is openly accepted by all the automobile companies. It is true that those companies are largely depends upon assembling. In the process of assembling, different motor parts have to be conveyed in right place and at right time. Here comes crucial role of supply chain management. After assembling when final product is ready to vend, they may be transported to some different locations for selling. For this, adequate transportation facilities have to be arranged (Simchi-Levi, 2015).
Even if the practical proficiency remains in place, executing supply chain management involves building the conversion from a serviceable association to one focused on industry development first within the company and then across companies in the supply chain. Some instances of actions that might subsist at each one link of a supply chain are essential to emphasize. Supply chain consist a series of activities, such as customer relationship, research and development, logistics, production, purchasing, and financing. Each of them is somehow interlinked and works all together. In this context, proper cooperation and sharing accurate information across the supply chain is quite important (Chopra, S. and Meindl, 2016). Some of basis prerequisite of those activities are as follows:
- Customer relationship management- practice marketing and financial credit management proficiency
- Research and development- stipulation which describe the needs
- Logistics- acquaintance of customer service needs
- Production- manufacturing approach
- Purchasing- supply tactic
- Finance- client profitability
If the accurate synchronization machinery is not in place across the diverse activities, the supply chain procedure may be neither efficient nor well-organized. By taking a procedure centre, all activities that handle the manufactured goods or endow with important business data must work together. For instance, purchasing activities relies on sales and marketing reports which are developed through the production activities. And all production activities are related with some specific order and its timely delivery schedules. In this context, it is imperative to highlight that nowadays outsourcing has become an important part of production. The more industry depends on outsourcing the more requirements of efficient supply chain management grow. In this regard, role of the suppliers are very crucial. An adequate communication and interrelation between production units and supplier is essential. Any outsourced parts needs to be supplied in time.
The requirements for flourishing performance of supply chain administration consist of:
- Managerial support, guidance and dedication to transform.
- An indulgent of the level of transformation that is needed.
- Conformity on the supply chain management ideas and the major development.
- The essential assurance of resources and empowerment to accomplish the fixed objectives.
According to the Global Supply Chain Forum, there are eight main processes that comprise the nucleus of supply chain management (Govil, 2002). Which are, as follows?
- Customer Relationship Management
- Customer Service Management
- Demand Management
- Order Fulfilment
- Manufacturing Flow Management
- Product Development and Commercialization
A brief description of these is given below:
|1. Customer Relationship Management|| The customer relationship management process offers the arrangement for how the association with the customer is widened and uphold
Management recognize main customers and customer assemblage to be besieged as part of the company’s trade mission.
Customer teams adapt manufactured goods and Service conformity to meet the requirements of major accounts and sections of other customers sides work with main accounts to perk up the processes.
Eradicate demand unpredictability and non-value-added actions. Recital information is intended to calculate the effectiveness of individual customers as well as the organization’s pecuniary contact on those customers.
|2. Customer Service Management|| The customer service management development is the organization’s phizog to the customer.
It provides the particular basis of customer information, for example item for consumption accessibility, delivery dates and charge position.
Real-time data is presented to the customer through crossing points with the organization’s gathering, like manufacturing and logistics.
Customer service management is accountable for managing the PSA.
|3. Demand Management|| The demand management process needs to poise the customers’ desires with the company’s supply potential.
This comprises forecasting demand and coordinating it with making, assembly, procurement, and allocation.
According to a report, “Demand Management coordinates all acts of the business that place demand on manufacturing capacity”
The procedure is also involved with budding and carrying out emergency plans when procedures are broken up.
|4. Order Fulfilment|| A key to successful supply chain management is to convene customer needs along with order fulfilment.
Effectual order fulfilment necessitates combination of the organization’s industrialized, logistics and promotional plans. The organization should build up joint venture with key constituents of the supply chain to gather round customer needs and decrease whole delivered cost to trade.
|5. Manufacturing Flow Management|| The manufacturing flow process copes with creation of the goods and setting up the manufacturing suppleness needed to mete out the target marketplace.
The process comprises all actions essential for managing the manufactured goods run through the industrialized facilities and for attaining, put into practice and controlling the suppleness.
|6. Procurement|| The term “procurement” is a cause of disorder.
According to renounced authors Novak and Simco procurement is “…the act of buying… all those activities necessary to acquire goods and services consistent with user requirements”.
Other authors employ alike meaning. For the reason that these definitions do not sufficiently symbolize the supply chain procedure, it also commonly defined as “supplier relationship management”.
Moreover, for additional elucidation some of the authors have transformed the name of the returns process to returns management.
But still it is considered as one of the key factors among the eight key business processes.
For an organization the essential areas of business are promotion, research & development, funding, assembly, purchasing and logistics.
Actions in these processes exist in within a practical framework of the organization but a whole procedure will not be contained inside single task. Therefore, measures need to be taken for each.
|7. Product Development and Commercialization|| Product development is significant to the progressing achievement of the organization.
Producing innovative products swiftly and launching them to the market in an able manner is a main constituent of business success.
Instance to marketplace is a decisive purpose of this process. Supply chain management embrace putting together all customers and suppliers into the invention and development procedure with the intention of trim down instance to marketplace.
As creation time reduces, and each product has short life span the right products must be manufactured and fruitfully initiated in the market with efficient timeframes so as to stay ready to be utilized.
|8. Returns|| Effective returns management is an important element of supply chain management.
Though many organizations ignore the returns procedure since management does not consider it is as vital, it is reported that this process can help the organization in attaining a sustainable economical gains.
Helpful administration of the returns process allows the company to recognize efficiency development opportunities and advanced assignments.
The Company – BMW has to develop a supply chain management system in UAE, which can able to recognize different parts of the supply chain and interlink those parts into one mechanism. Each process in the supply chain map has to be given specific importance. It has to be remembered that each processes are interrelated with each other. If one process becomes ineffective, the entire system may hamper. The purpose of supply chain management is to craft the elevated significance for the whole supply chain arrangement, as well as for the customer. Flourishing supply chain administration engages the harmonization of actions within the organization and among different components of the supply chain. Therefore, supply chain process assimilation and rearranging programmes should be accepted as major concern. There should be sufficient monitoring systems which shall assess and verify the entire supply chain arrangement of the company (Stacy, 2007).
If we are planning to develop a supply chain map for the BMW, all the above eight process and their interrelations has to be prioritised. A supply chain map should posses these eight processes and the significances of each process may alter according to the business environment. While management of all firms in each supply chain should consider these eight processes, the relative importance of each process and the specific activities included may vary. As discussed earlier, BMW in UAE needs effective supply chin for its product distribution. The assembling units shall require important parts and materials in right time and in right place. For this BMW’s supply chin has the crucial responsibility. As mention earlier in this report, UAE market is growing rapidly, and there is a huge demand for the luxurious cars and other motor vehicles. BMW should explore this profitable situation and expand its business throughout the UAE.
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