Bmw Series

BMW: THE 7-SERIES

PROJECT

mary lou

Brief History of Bayerische Motoren Werke:

BMW, a German company is a producer of automobiles and motorcycles. Designed as an aircraft manufacturer and originally founded in 1913 by Karl Fredrich Rapp, the company was commissioned to build the V-12 engine for Austria-Hungary. In need of extra financing, Rapp reconstructed the company as the Bayerische Motoren Werke. In 1917, Rapp left the company and it was taken over by Austrian Franz Josef Popp who later named it BMW. BMW continued their endeavors in producing for the German panzer (airplane) and the motorized division of the German airforce.

It was not until after the World War that BMW was banned from manufacturing for three years. In 1952, they began manufacturing automobiles. In 1959 BMW found themselves in a tough financial situation, as they almost had to sell their interests to Daimler-Benz, the number one auto producer as well as their number one competitor. However, with the opposition of the workforce and labor unions as well as an individual named Herbert Quandt, shares were increased by 50% and the company did a turn-a-round.

As recently as 2004, revenues for BMW were $44 billion dollars with an employee base of 105,972 (HBR 2004). Today, BMW accounts for 10% of the market share with 70% of their sales from Europe and 30% of sales from United States and Japan. These figures equate to the success of BMW and have helped them gain brand recognition as the "Ultimate Driving Machine."

1. What are the causes and consequences of BMW's quality problems with newly launched products? What should be done to improve "launch quality"?

The development and launch of a completely new or redesigned model line was a complex, time-consuming, and expensive undertaking for BMW. Stylists in BMW's design studios began exploring various alternatives for the car's exterior appearance six years before the scheduled introduction. BMW typically spent two years in styling (with less concentration on quality), longer than most other automobile companies, and far longer than the six months typically spent by the Japanese luxury carmakers. It can be said that some of the causes of the quality problems originated with the competition of Japanese automakers. When Japanese entered the market they concentrated on quality and excellent reliability (more practical for everyday use) for their automobiles along with a lower price tag and shorter production time. In fact, BMW is known to spend $40-50 million dollars on design quality for only one of their models, while Japanese car maker Toyota distributes $20 million on design quality for all their models.

From 1970 to 1990, sales volume of BMW grew by a factor of 15, and car production grew from 160,000 to 500,000 units/year. As stated in the study guide, the world's 16th largest carmaker held 1.5 % of the world market: "By the late 1980s, new competition began to challenge the European high-end producers." In 1986 Honda introduced Acura, in 1986 Toyota (Lexus) and Nissan (Infinity). By 1990, Honda's Acura and Toyota's Lexus were consistently topping the J.D (Power Surveys on Customer Satisfaction and Initial Quality in text book). Also, Japanese automakers increased competitiveness in the U.S. luxury car market. Between 1986 and 1989 their share jumped from 1.9% to 11.8%, while European share fell from 29% to 22% (textbook).

After clay models and drawing were evaluated, BMW's management would give final approval to the overall style and product concept. Product engineers then translated the product concept and style into a vehicle with the specified characteristics. A vehicle under development was divided into 30 major modules. An interfunctional team from design, product engineering, production engineering, prototyping, vehicle testing, procurement, manufacturing, and other functions was responsible for each module of the car from start to finish. Because the product-engineering phase was so complex, it proceeded through a series of cycles, each of which involved design, the building of prototype cars, and the testing and evaluation of prototypes. New products typically passed through three to five design cycles.

Between three and five batches of full prototypes were constructed during the entire developmental cycle. Prototypes were hand-built by highly skilled craftsman in BMW's prototype shop at the Design and Engineering Center. Rarely were any prototype parts made from actual production grade tools, which could cost from five to ten times more than pre-production grade tools. BMW's approach provided maximum flexibility within the design cycle. Design changes were made relatively late in the cycle if top management believed those changes were desirable.

BMW carefully managed the transition from final prototype to high volume production through three phases: 1) pilot production in the Engineering Center's pilot plant, 2) pilot runs in the factory, and 3) gradual ramp-up to full-scale manufacture.

Nine months prior to launch, pilot assembly began in the Research and Engineering Center's small pilot production facility. During pilot production, worker's learned about the assembly process and uncovered problems with tooling, parts, and assembly procedures. Thousands of minor problems would be uncovered and investigated. In response, procedures, tooling, and part designs had to be modified.

Once the process was debugged, pilot production was transferred to the factory where the new model would be produced. An initial run of 25 cars was made, followed by a final pilot run of 60 cars. This was supposed to be the last opportunity to fine-tune the process, change tooling, and trouble-shoot.

If no major problems were uncovered in the final pilot runs, commercial production would be authorized. To better utilize the high fixed costs of the plant, BMW decided, for some models, to maintain production of the old model until production of the new model could be brought up to full-volume. During this six-month transition, new models would be interspersed with old models along the assembly line.

While the mixed-model ramp-up permitted better utilization of fixed assets, it caused greater confusion and made logistics more complex. Further complicating ramp-up was the fact that not all potential production problems were discovered or solved during pilot production. BMW's response was to assign additional engineers