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Operations Management Of

BMW (Bayerische Motoren Werke)

Submitted by:
Ashok Garg

Guided by:
Mr Bipin Kandwal
 Headquarters.
BMW Group activities worldwide are co-ordinated
from the corporation's head office in Munich. A
city landmark, the "four-cylinder" tower at the
Olympic park is the nerve centre for an
organization which covers over 150 countries.

 The BMW Group currently has 15 production and


assembly plants, in seven countries:
Berlin plant, Dingolfing plant, Eisenach plant,
Goodwood plant (GB), Hams Hall plant (GB),
Landshut plant, Munich plant, Oxford plant (GB),
Regensburg plant incl. Wackersdorf, Rosslyn
plant (South Africa), BMW Brilliance Automotive
Ltd. (Shenyang, China), Spartanburg plant (USA),
Steyr plant (Austria), Swindon plant (GB), TRITEC
Motors Ltda. (Curitiba, Brazil).
History of BMW
• To find the origins of BMW as a company, we have to go
to 1913. That was when Karl Friedrich Rapp, a
distinguished engineer who had been director of an
early German aircraft company, set up business to
manufacture aero engines. He established his company,
the Rapp Motoren Werke, in the Milbertshofen suburb of
Munich, capital city of Bavaria. His choice was made
primarily because one of his major customers - the
Gustav Otto aircraft company - was situated nearby.

• Rapp's ero engines were a success, but he continued to


look for more work to keep his company busy. In 1916,
he secured a contract to build a large number of V12
aero engines on behalf of Austro-Daimler, which was
finding that it could not build enough to meet escalating
demand. Rapp sought a backer to finance his company's
expansion and in March 1916 the Rapp Motoren Werke
• Unfortunately, Rapp had made the mistake of expanding too
quickly. Within a year, there were problems. Rapp left the
company and in his place came industrial tycoon Franz Josef
Popp. It was Popp who laid the foundations of the BMW.

• Inspired by the company's increasing success during the first


half of the 1920s, BMW's head, Franz Josef Popp, started to look
at ways of expanding its manufacturing interests some time
around 1925 and it seemed that motor cars would be a logical
addition to the BMW range of aircraft engines and motorcycles.

• Not long afterwards, in 1927, a new economy car appeared on


the German market. Badged as the Dixi 3/15, it was actually the
British Austin Seven, built under licence in Eisenach. As it
happened, Popp knew the owner of the industrial group to which
Dixi belonged and he lost no time in proposing a deal under
which the company and its manufacturing licences should pass
to BMW. And so in September 1928, BMW bought the Dixi
company and the famous blue-and-white roundel began to
appear on a car which was now called the BMW 3/15.

• Design modification, initially minor, soon began to make the


3/15 a very different car from its Austin relative and by the time
it ceased production in 1932 it was almost as much the work of
BMW's chief engineer Max Friz as it was of Sir Herbert Austin.
• Not long afterwards, in 1927, a new economy
car appeared on the German market. Badged as
the Dixi 3/15, it was actually the British Austin
Seven, built under licence in Eisenach. As it
happened, Popp knew the owner of the
industrial group to which Dixi belonged and he
lost no time in proposing a deal under which
the company and its manufacturing licences
should pass to BMW. And so in September 1928,
BMW bought the Dixi company and the famous
blue-and-white roundel began to appear on a
car which was now called the BMW 3/15.
Design modification, initially minor, soon began
to make the 3/15 a very different car from its
Austin relative and by the time it ceased
production in 1932 it was almost as much the
work of BMW's chief engineer Max Friz as it was
of Sir Herbert Austin.
 At 4:00 p.m. on a Friday afternoon, when most German workers
have long departed for the weekend, the mini-cafés sprinkled
throughout BMW's sprawling R&D center in Munich are jammed
with engineers, designers, and marketing managers deliberating so
intently it's hard to hear above the din. Even the cappuccino machine
is running on empty. It's an atmosphere far more Silicon Valley than
Detroit

 At lunch and breaks everyone is discussing ideas and projects all the
time. It's somewhat manic. But it makes things move faster," says
BMW chief designer Adrian van Hooydonk.
The intense employee buzz at BMW is hot management theory in
action. Top consultants and academics say the kind of informal
networks that flourish at BMW and the noise and borderline chaos
they engender in big organizations are vital for innovation—
especially in companies where knowledge sits in the brains of tens
of thousands of workers and not in a computer server. Melding that
brain power, they say, is essential to unleashing the best ideas.
 HANDS ACROSS DIVISIONS: Cross-functional teams look
messy and inefficient, but they are more effective at problem
solving," says James M. Manyika, a partner at McKinsey & Co. in
San Francisco who has studied the effectiveness of such networks.
Companies such as BMW that leverage workers' tacit knowledge
through such networks "are widely ahead of their competitors,"
Manyika adds.

 BMW is one of a handful of global companies including Nokia


(NOK ) and Raytheon (RTN ) that have turned to networks to
manage day-to-day operations, superseding classic hierarchies.
Those pioneering companies still turn to management hierarchies to
set strategic goals, but workers have the freedom to forge teams
across divisions and achieve targets in the best way possible—even
if that way is unconventional.

And they are encouraged to build ties across divisions to speed


change. "Good companies have this lateral ability to communicate
across divisions and silos, not just up and down the hierarchy. That's
what makes BMW tick," says chief financial officer Stefan Krause
 LIGHTNING-FAST CHANGES: Speed and organizational agility
is increasingly vital to the auto industry, since electronics now make
up some 20% of a car's value—and that level is rising. BMW figures
some 90% of the innovations in its new models are electronics-
driven. That requires once-slow-moving automakers to adapt to the
lightning pace of innovation and change driving the semiconductor
and software industries. Gone is the era of the 10-year model cycle.

 By shifting effective management of day-to-day operations to such


human networks, which speed knowledge laterally through
companies faster and better than old hierarchies can, BMW has
become as entrepreneurial as a tech startup, consultants say. "Not
many large companies take on lateral communications the way
BMW does. It's a knocking down of barriers, like Jack Welch did at
General Electric (GE ) to make a boundaryless corporation," says
Jay Galbraith, a Breckenridge (Colo.)-based management
consultant.
 MOBILE-PHONE MESSAGES.  BMW's ability to
drive innovation even pervades its marketing division.
"People talk about innovation in products, but what's
underestimated is innovation in processes and
organization," says Ernst Baumann, head of personnel at
BMW, which has its share of radical new ideas.

To reach a younger crowd of potential buyers for its new 1


Series launch in 2004, BMW used mobile-phone messages
as the main source of buzz, directing interested people to
signups on BMW's Web site for pre-launch test drives in
August that year—something unheard of in the industry at
the time. The experimental tactic worked: BMW sparked
responses from 150,000 potential customers—and sales of
the 1 Series took off when it was launched in September,
2004.
 FORGET OLD-SCHOOL RIGIDITY.  Making sure the
system works without a hitch requires savvy workers who
continually suggest how to optimize processes. "Networks
can do things that hierarchies cannot, because hierarchies
lack the freedom. With a network you get the powerful
ability to leverage knowledge quickly to bear on solving
problems," says Karen Stephenson, management consultant
and Harvard professor. "A network is the only way to
effectively manage BMW's kind of complexity."
 KNOW THY CONSUMER.  BMW managers, by contrast, even talk about the
"physics of chaos" and how to constantly nurture innovation and creativity by
operating on the very edge of chaos without getting out of control. "Discipline
and creativity are not a paradox, there is a borderline case of self-controlling
systems," says Gaul. "Where you break rules you have to be very disciplined."
That's the industry's next kaizen—the art automakers will be forced to master in
the 21st century.
The novel advertising scheme developed back in 2001 is a good example. Jim
McDowell, then U.S. vice-president of marketing, was confident the project,
dubbed "Big Idea," and kept under tight security in "War Room" No. 6 at BMW
USA's Woodlake (N.J.) headquarters, would create just the kind of consumer buzz
that BMW wanted—and would ultimately be more cost-effective for BMW than
Super Bowl advertising. The idea was to give film directors a BMW car around
which a compelling short film was to be made. Many of the tales centered on life-
and-death chase scenes, but several were humorous or even melancholy.
McDowell figured if The Hire, took off and the films were downloaded from
BMW's Web site by 1 million to 2 million viewers, BMW would chalk up the
same number of eyeballs as a snappy advertising campaign aired during the Super
Bowl, but would reach a higher percentage of BMW-type customers, progressives
with a nose for cinema, technology, and high bandwidth. "If you really understand
your consumer, you can be very clever about how to communicate. You can
change the whole paradigm," says McDowell, who is now executive vice-
president at Mini.
 How does BMW manage discipline with creativity and keep
the anarchy of networks from careening out of control?
 Workers at the Bavarian automaker are encouraged
from their first day on the job to build a network or web
of personal ties to speed problem-solving and
innovation, be it in R&D, design, production, or
marketing. Those ties run across divisions and up and
down the chain of command.
When it comes to driving innovation, forget formal
meetings, hierarchy, and stamps of approval. Each
worker learns quickly that pushing fresh ideas is
paramount. "It's easier to ask forgiveness for breaking
the rules than to seek permission," says Richard Gaul, a
33-year veteran at BMW and former head of
communications at the $60 billion automaker.
BMW's complex customized production system, the
polar opposite of Toyota's (TM ) standardized lines, is
easier to manage if workers feel empowered to drive
change. Like Dell Computer (DELL ), BMW configures its
cars to customers' orders, so each auto moving down
the production line is different.
 It give importance to their customer.
 Production is product and process
oriented.