BMW Operations Management

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1. Executive Summary

This report will describe a named organisation in terms of a general introduction and background of that organisation. For the organisation described, there will be a detailed account and critique of quality management and capacity management issues within the business. This will then be backed up with relevant academic theory and models; in addition to this there will be a description of their relevance in the business environment, citing examples of their use. The report will then finish with a conclusion and possible recommendations for the chosen organisation in regards to their operational management style and how it could be improved.

2. Introduction

2.1 Background

BMW is primarily a German automobile company.

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It also has operations in aircraft engine production; electronic systems and hardware production; finance; and service. It had revenues of more than $27 billion and net profits of nearly $700 million in 1990, with about 65,000 employees.

Bayerische Maschinen Werke GmbH as it is otherwise known was the surviving entity of a merger in 1955 between BMW and Allegemeina Flugzeug Werke (AFW).

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BMW has a history dating all the way back to the early 1920s when it was founded as a machine shop on the outskirts of Nuremberg. The AFW part of the company was founded in 1910 and was one of the major contributors of military aircraft during the First World War.

The automobile industry can be very volatile and mistakes in decision making can prove to e extremely costly. BMW has proved over time that through careful management the number of errors a firm makes can be greatly reduced.

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BMW's operations management is also of a high standard; it designed a production system where new parts can be produced in small amounts and only result in a moderate cost.

2.2 Methodology

Research will have to be done in developing the report before any reflection can be made on its contents. There are a number of sources available to get the relevant information from; a many number of books are accessible that go into great detail on each subject within operations management. These will provide a range of academic theory and models which can then be applied into business terms. The internet also provides a vast amount of information that can be used as a reference in the writing of the report, it not only refers to academic theory but also other authors reflections on certain topics which can then be used to draw ideas and apply them to the report.

2.3 Structure of the Report

3. Findings

The operations management task is defined as the day-to-day production of goods that continually requires decisions to be made and the implementation of changes. Operations Management is different to that of other management topics such as strategy, marketing or finance. Whereas these fields are based on theory such as economic, social, and mathematical factors; Operations Management is much more difficult to pin down to a specific aspect. It takes into account a vast array of academic and practical applications that when communally put together produce a basis from which decisions can be made.

Operation managers that work inside an organisation work on the foundation of balancing the quality of the service that they provide against the resources they currently have available to them. They are required to be highly skilled in managing their current capacity output so that it can cope with the ever changing levels of demand placed upon their organisation. There are many ways that managers cope with the levels of demand; a manufacturing manager such as BMW would attempt to influence the demand through an assortment of different marketing techniques.

In any organisation there will be a relationship between their capacity management, quality management, and their resource productivity. There are a number of issues that arise when trying to manage the organisations supply and demand. Managers must keep to their productivity targets without adversely affecting the quality of the product that they produce; striking a balance can prove difficult especially in the automobile industry where mistakes can prove to be very costly.

3.1 Capacity Management

Capacity management is finding the balance between the demand from customers and the capability of the organisation in satisfying that demand. There is a great need for managers to forecast what they think the demand might be in the future so they can sufficiently change their capacity to cope with the change. Where the capacity of the organisation is limited the focus will be on influencing the demand to be in line with the available capacity, this is referred to as level strategy. The opposite of this is chase strategy; this is where the supply can be changed to meet the fluctuating level of demand.

Managers can direct their operational control by altering the capacity of the organisation, hold items in inventory in case of a sudden increase in demand, oblige customers to wait for their product, or attempt to influence the demand themselves. In the automobile industry it is possible for an organisation to produce cars in advance of demand and hold it in inventory. Operations managers must at all times be wary of their current capacity, to what degree it can be changed, the costs involved in changing that capacity, and the speed in which the change can happen. This is most important in organisations where profitability is linked to that of capacity and the prices charged for their product or service.

BMW is already a leader in the niche car segment of the automobile industry. To retain that status BMW built a $660 million Research & development centre and plans to invest more than $1 billion each year in finding new ways to exploit their position as a market leader. BMW are aware of the fact that they are not one of the biggest companies in the industry and can't mimic the bigger companies who have far greater capacity and financial power. BMW try to innovate new ways to stay ahead of their competitors. They designed a new manufacturing plant where the cars would move down the assembly line on an independently powered gantry. The new technology would produce sound waves so that collisions can be avoided, thus reducing the need for more workers and also reducing the risk of unwanted accidents in the plant.

The output achieved by any capacity management system depends on a number of factors that relate the resources currently available to the actual output of the organisation. It is sometimes inevitable in the niche car segment that an organisation will run out of capacity to cope with the ever changing levels of demand. If this problem occurs then the management can carry out two possible courses of action:

o Allow the quality of the product to decline

o Attempt to influence the demand so it doesn't affect the organisation in the long term.

In the scenario where the capacity of the organisation is in excess of the demand, this can lead to lower efficiency and a lower quality service to the customer.

3.2 Quality Management

BMW believe that quality is of key importance in every stage of the manufacturing process, from product conception to customer feedback. They base their working principles around consistency and complete coverage of all requirements throughout the development and production process. Quality control within BMW is achieved through a system of quality audits at every stage of the manufacturing process; the productions of parts, components and in the assembly plant are all thoroughly maintained. These same quality control principles also apply to their suppliers of materials and components, with all of BMW suppliers agreeing to work to specific specifications of quality. Once cars arrive in the distribution centre, they take on a quality check and have a full pre-delivery inspection before being delivered to the customer.

Quality driven organisations are more likely to integrate human resource management into their strategy as employee participation can be seen as key to bolster quality. The BMW management structure allows for teams, comprising of employees from all levels, to react quickly if a fault is found and work together immediately on a problem if one should occur. BMW also benefits from excellent personnel management that allows them to motivate their employees and create a friendly working environment. It provides its workers with a highly competitive pay package and supplies special contracts that allow certain workers to work four-day weeks. Every member of staff is fully responsible for the quality of their work and this well help lead to job enrichment for every member of the workforce.

The company has never lost its focus or attempted to spread itself across the entire automobile industry. This is an example of quality management because if the management had been slack, BMW would have lost its focus and attempted to make products for everything and everyone.

Manufacturing firms, such as BMW, are always searching for new and innovative ways to cope with global competition in the ever changing business environment. One such process that has been implemented at BMW is that of a focused factory. The complexity that comes with an automobile manufacturer can provide a barrier to managing these facilities, thus the creation of a focused factory solves this problem.

The focused factory is a "plant established to focus the entire manufacturing system on a limited, concise, manageable set of products, technologies, volumes, and markets precisely defined by the company's strategy, its technology, and its economics."( APICS Dictionary 1992). Manufacturing companies implement this technique to improve the organisations productivity, quality, and responsiveness. BMW can focus their equipment, employees, and technology one specific tasks rather than using the same technique for all of their different projects. Implementing focused factories make it easier to manage production systems, reduce inventories, and reduce manufacturing space and investment requirements.

As BMW have a strong quality emphasis with more attention being given to the performance of the organisation, the use of appraisals is crucial to the requirements that lead to producing a quality product. They place customers at the centre of attention as it is in any organisation that takes quality so seriously. The appraisal process necessitates the employees to evaluate each of their peers so that it encourages them to produce quality work and so to satisfy their customer-supplier relationship.

4. Conclusion

Successful automobile manufacturers in the future will need to maximise efficiency, eliminate waste, adapt to change and implement strategies that stay in line with their customer requirements. BMW will need to keep modernising their internal operations to keep up with the constant changing in the automobile industry. Streamlining their plants will facilitate the balance between supply and demand while keeping the quality of their product high. Decisions within BMW are now made throughout the organisation, from the factory floor up to the chief executives. This has increased the communication between all levels of the organisation making it more flat and thus increasing the quality of the automobiles. Jobs have become more diversified with the need for new knowledge and skills becoming more crucial, as the global competition increases, more needs are placed on the company to provide products that meet consumer desires.

The main link between the customer and organisation has always been the shop floor assistant. Performance feedback, audit results, and customer opinion surveys are the ways in which organisations know if they are doing there job to satisfactory standard. BMW make sure that the assembly workers are aware of the consumers' requirements by providing suitable training and sound environment so that those requirements can be met. Organisations that cut down on investment in employee development will suffer a decrease in employee performance due to the close relationship between the two, and this will ultimately filter down to the consumers.

Operations management in relation to automobile manufacture is crucial in defining priorities and identifying possible problems. One possible problem that might be confronted in the near future is that of overcapacity in terms of passenger cars. It is seen that other cars such as sport-utility vehicles don't suffer from overcapacity as they are usually custom made to the consumers' preferences.

Passenger cars are normally batch produced on a production line in their thousands and organisations have a wealth of stock kept in their inventory. Automakers usually add capacity in the 100,000s so the market is never satisfied precisely; there is either a demand lag or a saturation of the market. Costs remain vitally important in making strategic product-line decisions. Regardless of the preferred quality or productivity quota, BMW must stay concerned with the continuous improvement of the business by improving quality, productivity, customer service, and delivery.

5. References

Quality management: How four European companies succeeded?

Nguyen, Andrea, Kleiner, Brian H. Business Credit. New York: Nov/Dec 1994.Vol.96, Iss. 10; pg. 32, 3 pgs

Chrysler and minivans: Are we there yet?

Vido, Adrian. CMA. Hamilton: Nov 1993.Vol.67, Iss. 9; pg. 11, 6 pgs

The 'coping' capacity management strategy in services industry

Armistead, Colin G, Clark, Graham. International Journal of Service Industry Management. Bradford: 1994.Vol.5, Iss. 2; pg. 5, 18 pgs

Continuous improvement through the focused factory

Elmore, Robert C, Natarajan, R, Rezaee, Zahihollah. CMA. Hamilton: Feb 1995.Vol.69, Iss. 1; pg. 21, 4 pgs

The two worlds of operations management research and practice: Can they meet, should they meet?

Nigel Slack, Michael Lewis, Hilary Bates. International Journal of Operations & Production Management. Bradford: 2004.Vol.24, Iss. 3/4; pg. 372

Tools and Techniques - A Current Responsibility