Word: bmw
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Dates: during 2000-2009
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That's not to say there's no pressure on costs. Reithofer is a process engineer by training and set up the customized-production system. He's insisting on efficiency gains of at least 5% annually, "an iron goal," as he puts it. Every year BMW sits down with its suppliers to discuss specific savings targets, but it also canvasses them for creative ideas about possible cost cuts they can undertake together. Klaus Richter, a former McKinsey consultant who's now BMW's procurement man, says some 10,000 such suggestions have been made in the past three years...
Drop in on BMW's Leipzig plant, and you can see what he means. It's the firm's newest, having opened just two years ago, with a luminous open-plan central building that houses white-collar workers and managers. It was designed by London-based architect Zaha Hadid, and its most striking feature is a conveyor belt that meanders inside the building just below roof level, carrying a steady stream of cars from the body shop to the paint shop. You can see it from almost everywhere in the building, including the cafeteria...
Robots do most of the work in the body shop, welding, riveting and bonding hundreds of components together. Robots also apply the four layers of water-based paint to each car. But it's on the assembly line that BMW differentiates itself from even its Japanese rivals. To be able to customize each car requires highly sophisticated logistics. Workers stationed at regular intervals on the line reach back for components in wire baskets that have been rigorously sorted into the right sequence. The complexity is visible to the naked eye: halfway along the line, just past the section where...
...changeover or addition. Several key suppliers are based in the plant, rather than in a nearby supplier park. Jörg Baumheuer says that makes for easy communication when problems arise. He's a manager at the French auto-parts firm Faurecia, which assembles cockpits and seats for BMW in Leipzig and some other plants. The advantage for Faurecia is that it doesn't need to truck in finished parts; it simply assembles them on the spot. That cuts inventories and improves speed and reliability; the firm needs just 20 minutes' notice to put together a customized cockpit. "It cuts...
...degree of customization that is required means BMW isn't as ruthlessly efficient as Toyota in some respects, including the number of cars produced per worker per day. But there's a trade-off. "BMW is not prepared to sacrifice its ability to give consumers the car they want. The alternative would be reduced costs but not the ability to charge a premium for customized cars," says Garel Rhys, an auto-industry expert at Cardiff University. In the end, he says, BMW's marginal revenue from customization is higher than the marginal cost advantage it gives...