Introduction
The text describes BMW’s concept-to-production strategy, which involved hand-building and assembling prototype cars in its in-house prototype shop.
BMW faced a crucial decision regarding whether or not to explore a new method of constructing cockpits. This involved outsourcing the fabrication of cockpit prototypes to external suppliers who would utilize more advanced tools. In addition to this decision, BMW identified three overarching strategic issues: increasing product variety, enhancing the frequency of product introductions, and improving the quality of newly launched models. By examining the pertinent details of the case, we can further categorize these problems into specific challenges, which are outlined below.
Prototypes were manually constructed with common tools.
The prototypes and mass-produced vehicles differed greatly in construction. Therefore, any design problems that arose during the prototype phase were not detectable until pre-production testing. However, this issue could be avoided by constructing the prototypes using the same tools as those employed in pre-production.
The production tools and final engineering details were obtained when the final design was settled 16-18 months before the planned product launch. As a result, the suppliers had less time to resolve any issues encountered during pre-production.
BMW’s quality complaints in comparison to competitors may be due to not allocating enough time for suppliers during the pre-production phase. To address this issue, BMW should freeze the final design well in advance of the scheduled product introduction.
During the ramp-up phase, both the old and new models were being manufactured, which created a challenge in implementing dual quality norms. This situation prolonged the ramp-up time, consequently causing delays in the launch.
The reason for implementing the mixed model ramp up was to offset the high fixed costs of the plant in the initial phase when production of the new model was not very high. However, this ramp up strategy resulted in confusion and increased complexity in logistics, making the products more susceptible to defects. Exhibit 7 of the case shows that the mixed model approach took 1.5 months longer than the sudden changeover approach to achieve full volume production during ramp-up. To address this issue, it is evident that BMW should discontinue the use of the mixed model ramp up strategy.
If avoiding it is not possible, there should be dedicated manpower for producing old and new models separately to prevent any confusion in terms of quality standards and logistics.
BMW used to take approximately two years to perfect their styling, while the Japanese luxury car manufacturers only took six months. However, BMW has recently altered their design strategy to prioritize faster product development. In order to meet their new objective of releasing a new engine, series, or redesigned series annually, BMW will need to reevaluate their current two-year styling timeline.
Upon close analysis of exhibit 2, it is evident that in 1989, there were 511,476 units of automobiles produced and 523,021 units were sold. This indicates that there was a surplus inventory of at least 11,545 units, which is notably excessive for a luxury car manufacturer. The statistics for 1990 show similar patterns. It is perplexing why such considerable inventory levels persisted despite offering personalized products.
BMW Differentiators:
Key characteristics of BMW cars as perceived by the customers are:
- High Performance Engineering
- Latest Technology High Style Quotient
The customizability of BMW is crucial in maintaining its perceived image. This will greatly impact the strategy to be implemented by the company. The analysis focuses on the process of prototype development, specifically hand-built prototyping.
- Useful where design is not frozen
- Flexible
- Better Inter-functional co-ordination
- Lower lead times
- Design changes are cheap and quick
- Allows greater creativity
- No specialized tooling costs
- Masked design and manufacturing problems
- Defects hinder the high volume production.
- Takes six months to ramp up production instead of three.
- Suppliers unable to foresee production problems
- Requires Highly skilled labor
The cost for this option used to be approximately DM 1.8 million. The proposal suggests outsourcing the final stage of prototyping to an external vendor who will utilize “pre-production” tools to create the prototype. This will result in a more automated and production-like prototype production process.
- Design and manufacturing issues, which earlier cropped up only in the latter parts of the production cycle, would be obvious in the prototyping phase
- High savings for each product launch after commercial production
- Assembling the cockpits into prototype cars in the pilot plant would give final assembly workers firsthand experience
- The design needs to be frozen 12 months in advance – thus less flexibility. High initial costs – thus design changes very costly
- Coordination between design team and prototype vendor can be a bottleneck
- High-skill culture of BMW may get hit
The cost for cockpit prototyping is estimated to be DM 8.5 million, with DM 7 million allocated for tools and the remaining amount dedicated to materials, labor, and overheads. The development of the 7-Series cockpit prototype presents a significant challenge for BMW due to the extended lead time and the high number of customer-reported defects. This has resulted in low quality rankings in the J.D. Power survey.
The use of hand-made prototypes in BMW’s design process may be the main reason for these problems. Although this strategy offers more flexibility, it also leads to longer development time for creating pre-production and production tools. Moreover, any issues at the production level are only discovered later on, which prolongs the ramp-up period and allows hidden problems to emerge during production. Therefore, by using pre-production tools during the prototyping phase, many of these problems could be avoided.
The use of pre-production grade tools in all car parts can result in savings of up to DM 100 million per model launch. This strategy is cost-effective but also carries significant risks. Late-stage design changes would require a complete redesigning of numerous pre-production tools, limiting flexibility for design engineers who must freeze the design 32 months before launch.
Moreover, the potential failure of this approach could have significant financial implications for both the E7 series project and the overall brand reputation of the company. In addition, if the suggested new prototyping strategy is not effectively implemented, it will lead to irreversible damage. Nevertheless, BMW is already facing challenges in keeping up with other high-end car makers. The purpose of revamping the cockpit using advanced precision techniques was to address this competition by providing a distinctive product in their 7-series model.
After the above discussion, it is evident that there are advantages and disadvantages to the proposed change. Since it is a drastic change that may take time to be fully implemented, our suggestion is to continue with the current methodology while also attempting to integrate the new strategy. Keeping the regular strategy in place would provide a fallback option without significant time constraints. Additionally, BMW customers are eagerly anticipating the release of the 7-series.
Any disruption in the successful launch of the company would severely harm its reputation, especially considering that customer satisfaction was already below market expectations. However, if the cost to maintain both processes is excessive, it is not wise to proceed with the new prototyping strategy. Instead, BMW should concentrate on reducing lead time and enhancing customer satisfaction by addressing quality complaints. Suggestions for enhancing launch quality.
BMW should establish a freeze on design changes, enabling the determination of quality standards before the production ramp up. It is crucial to define technical specifications well in advance during the product development cycle. This approach not only aids in freezing design alterations early on but also helps in cost-saving. BMW should employ production tools during the prototyping stage for parts that have historically encountered issues, allowing for early identification of quality and design problems associated with the production line. Integrating prototyping activities within the pilot production plant at BMW would further enhance the learning process.
Following are a few additional recommendations to reduce development lead times and improve production quality. One suggestion is to co-locate prototyping and pilot production runs. Currently, these processes are conducted in different locations. To ensure the prototype is made using pre-production grade tools, both processes should occur at the company’s main pilot plant. This will accelerate the development of production tools and enable early identification of any car design-related production problems.
Modularity is a concept that BMW should embrace, as mentioned in the case. It entails contracting an external vendor to supply fully assembled sub-assemblies such as the cockpit, thus enabling efficient identification and resolution of errors. Furthermore, individual models can be upgraded or substituted as needed. BMW can delegate the construction of specific functional modules to trusted suppliers/vendors while focusing on critical design modules internally.
