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BMW Owners Waiting for Repairs on Supply Chain Breakdown

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by

Pete Navagonzalez

on 24 October 2013

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Transcript of BMW Owners Waiting for Repairs on Supply Chain Breakdown


BMW Owners are having to wait
for Spare Parts
for weeks due to a
Supply Chain Breakdown



Presented by
Pedro A. Navagonzalez

BMW may lose the loyalty of its high-end customers and premium reputation due to a new supply-management system causing a supply chain breakdown in the production of spare parts.
Analysis:
Problem Statement:
BMW the world’s biggest maker of luxury cars, is struggling to deliver spare parts on time because of a new supply-management system, forcing customers to wait for repairs.
About 10% of the parts are not immediately available in the central warehouse in Dingolfing, Germany, due to the changeover. BMW has workers on extra shifts to help shorten the wait, and aims to have the new system working properly by early September.
Analysis Cont:
Analysis Cont:
The delays, which started more than two months ago with the switch to the new logistics system, have caused ripple effects globally because orders for BMW’s 40 parts-distribution centers originate at the Dingolfing facility. The warehouse also directly supplies about 300 repair shops in Germany.
Special order BMW parts are in major delays in the U.S. due to the supply chain breakdown and also in China where some dealers are facing the same issue. Missing one part can mean that the entire repair is delayed for weeks.
Prior to the system changeover BMW’s distribution centers increased their inventory allowing for normal delivery of most and a very high percentage of BMW dealers worldwide don’t have any spare parts problem
Employees in Dingolfing have been working extra shifts since the beginning of June to get the spare parts to the distribution centers as quickly as possible and are already clearing the backlogs.
Continue to use ATLAS for Advanced parTs Logistics in After Sales from SAP AG
This will require employees to work extra shifts to get the spare parts to the distribution centers as quickly as possible to clear the current backlogs.

This course of action will continue to affect our loyal customer base adversely and might dismay new customers from joining the BMW brand.

If this continues a loss of even 5% would result in $84,000 million dollars in pre-tax profit.

Introduce a lean process that can increase
production while cutting back on waste:
In this case the “waste” is mostly in the time of production and distribution to the customer.

This will take time and only emphasize the issues that can be changed to mitigate future supply chain breakdowns, but will not address the issue at hand.

This will also allow the possibility of a loss; again even a 5% loss would result in $84,000 million dollars in pre-tax profit.

Implement the Advanced Planning and Scheduling (APS)

It provides ability to make products in the most cost-effective location based on:
Local demand
Manufacturing and transportation and inventory costs

Also increase its flexibility in responding to changes in:
Demand
Products will be made on more universal data, in the plants that optimize overall profitability

This will give BMW Group a greater flexability to handle factory downtime and to meet changes in demand.

BMW Group should stop using the Advanced parTs Logistics in After Sales (ATLAS) from SAP AG and implementing the Advanced Planning and Scheduling (APS) systems.

Looking at the cost the most expensive APS systems generally cost about
$500,000
to install, where half to two thirds of the cost is consulting fees to customize the system to a particular process.

In 2012, BMW Group reported a profit before tax of
$84,000 million
and total revenues of over
$75 billion
.

Analysis Cont:
Analysis Cont:
Analysis Cont:
Alternative #3:
Alternative #1:
Alternatives #2:
Recommendation:
Full transcript