Bmw Case Study

Introduction

BMW is facing quality problems and competition from Japanese entrants. Japanese automakers offer luxury cars at a lower price and higher quality with shorter lead times for new product introduction. The higher quality of Japanese cars has also redefined industry standards and customers are starting to expect higher quality in cars.

To improve quality, BMW proposed a prototyping approach where prototypes are built with technology, equipment and workers that resemble the factory. Engineers will design pre-production tools and use them to create the prototypes. Prototype parts will be procured from production suppliers instead of prototype suppliers.

Analysis of Current Prototyping Approach

The main advantage of the current approach is the flexibility it offers to the design process. Design changes can be made very late in the design cycle and at low cost since specialized tools are not required. This allows BMW to be more responsive to changing consumer tastes and include new state-of-the-art technology into their design quickly.

The major disadvantage, however, is that handcrafting the prototypes without considerations for manufacturing, results in scalability problems during production. If there are any assembly or production problems, designers have to modify the design and change the production processes, resulting in long lead times. Refer to Exhibit 1.

Causes and consequences of quality problems

The quality problems BMW faces are a result of the inefficiency of the current prototyping approach. One reason is the lack of time to identify and solve the many minor quality problems. This is because most of the time is spent on identifying and solving the big problems in the prototyping and pilot production stages. As such, minor quality problems get overlooked and neglected. Another reason is the low predictability of the compatibility between parts. Suppliers are not involved in prototyping, resulting in incompatibility between supplier parts and BMW parts, and compromising quality.

Quality problems require large costs to solve and long time to achieve full production volume. A lot of rework is needed, resulting in decreased motivation among workers. Despite the extra time and costs, minor quality problems are still overlooked.

Analysis of Proposed Approach

The advantage is that scalability problems are identified before actual production begins. The approach will help BMW in two aspects:

1) Improved product quality

All the major quality problems associated with the current approach will be mitigated since they can be identified and solved much earlier. Parts will be more compatible and processes will be smoother. The approach will also speed up pilot processes and ramp-up, allowing more time to conduct quality checks and solve the minor quality problems that are currently neglected. Time-to-market can also be reduced.

2) Reduced costs through less scrap and rework and lower warranty costs

Higher quality production means that less scrap will be produced. Since production problems are identified one phase earlier, in the prototype stage rather than the production stage, the amount of rework will be significantly reduced. Labor costs due to rework will also be saved. Warranty costs will decrease since there are fewer defects.

The disadvantage is the loss of flexibility in design since design commitments have to be made 32 months prior to launch compared to 18 months under the current approach. The new approach also costs a lot more at a total of DM 8.5 million compared to the current DM 1.8 million. Furthermore, if there were any major design change, the pre-production tools would have to be scrapped and redesigned.

Recommendations to improve quality

BMW has to trade off between flexibility in the current approach and quality in the proposed approach. In lieu of changing consumer expectations, we believe quality is of greater importance. We propose a process that combines