Organization Name: BMW
Industry: Luxury Automotive
Contact: CEO
Web References: BMW Corporate, Kinaxis, SCM World, Logistics and Supply Chain, SCM303 Blog, Sound Cloud
About BMW
Once you’ve owned a BMW, you truly appreciate the long-standing BMW slogan: “The ultimate driving machine”. In use since the 1970’s, the statement is more than an advertising slogan, it is a promise. It is a promise of quality, of reliability, and ultimately, a promise of driving pleasure.
As one of the world’s leading luxury automobile manufacturers, BMW’s ability to keep that promise alive is a monumental task. It is not merely the responsibility of BMW’s brand and marketing team, it extends to all employees within BMW. In particular, the supply chain management team at BMW is tasked with ensuring that all components of “the ultimate driving machine” meet strict standards of quality and sustainability, while the logistics teams ensure a continuous supply of parts to the manufacturing team. In turn, supply chain management is also responsible for ensuring that BMW’s cars and motorcycles are delivered to customers in a timely manner.
The Challenge
BMW has more than 12,000 suppliers globally. With such a vast supplier base, the automobile manufacturer must contend with risks all along the supply chain. Supply chain disruptions include those caused by geopolitical issues and natural and man-made disasters, all of which are beyond the control of the company. These disruptions have the power to threaten production and distribution, inflate costs, overextend budgets, eat into revenue and disappoint customers.
In this Reuters video interview, BMW Board Member Ian Robertson discusses how the company addresses its supply chain issues.
A Bespoke Solution for the BMW Team
According to BMW’s corporate web site, the company recognizes that “volatility has long become a constant in our everyday business.” Its corporate strategy, known as “Strategy Number ONE”, stipulates that the company must manage change. The strategy drives BMW to achieve two targets: to be profitable and to enhance long-term value in times of change.
With volatility clearly identified as a risk to the company, BMW’s supply chain management team designed and created their own social media aggregation system system that they named Enterprise 2.0. Alexander Scholz, former head of the “WEISE” Programme, Procurement Department, at BMW worked with Tom Kirchmaier, Lecturer in Business Economics & Strategy, Manchester Business School to develop the system.
BMW’s Enterprise 2.0 system assesses unstructured information from social media sites, wikis, blogs, forums, chatrooms and other online sources from both inside and outside the organization. The company estimates that this information represents 80% of all the data available to them at any one point in time. The data from all these sources is analyzed during a two-stage process, based on the work of Nobel Prize winning psychologist Daniel Kahneman. There are two main elements of Enterprise 2.0: E-Listening and Geo-tagging.
With The E-Listening tool, all relevant social media data is aggregated and analyzed via a self-learning algorithm. BMW employees are supplied with iPads and an app which allows them to conduct keyword searches on a range of topics. Without the need to search across multiple web sites or social media properties, supply chain managers use Enterprise 2.0 to gain immediate, actionable intelligence to assist with rapid decision-making on a daily basis, and most importantly, when risk factors are in play.
BMW recognized the value of social media to enhancing its understanding of the risk factors associated with its supply chain.
The other component of the Enterprise 2.0 system is Geo-tagging. With this system, supplier locations and manufacturing facilities are tagged and matched up with surveillance and geographical information. This provides a visual snapshot of the location of potential threats to BMW’s supply chain. The data is monitored at a network operation center to allow employees to collaborate in real-time on the potential risk, and to keep BMW aware of nature disasters that may affect suppliers.
An Alternative: Supply Chain Operating Networks
While BMW chose to develop its own custom software solution, many other solutions are available today. Often known as Supply Chain Operating Networks, several commercial systems offer Facebook-like communities for supplier engagement. Some of the more well-known systems today include:
- Ariba (Ariba Exchange: SaaS solution- Integrated online user community)
- Descartes (Descartes Community: on Demand SaaS solution- Business Partners network)
- GT Nexus (Cloud based solutions)
- Elemica (Integrated messaging and analytics)
- E2open (On-demand cloud based solution: Partner Network)
- Oracle iSupplier (Online collaboration for supplier communication)
Listen to this Supply Chain Radio interviewfor informative tips on choosing the right supply chain technology:
Success Performance Indicators
Given the highly competitive nature of the automotive industry, it is no surprise that BMW does not publicly share any supply chain metrics from their Enterprise 2.0 system. It does however share some of the success of the system related to the purchasing function. According to a Kinaxis report, “As well as allowing BMW’s purchasing function to be more proactive around developments such as supplier consolidation, the system is also providing greater visibility of suppliers at tiers 2, 3 and 4, both in terms of who they are and where their production plants are located. The aim is not only to manage risk better, but also to share information and collaborate across the extended network – for example, in scouting for new innovations. Indeed, BMW has already used the system to identify a new materials supplier for its i series electric cars that was previously unknown.”
Lessons for Others
Take the road less travelled. While many in supply chain management still view social media only from the socializing (non-business) aspect, BMW recognized the wealth of data available on multiple social channels. It created its own system for harnessing that data into meaningful, actionable intelligence for their supply chain.
Provide easy-to-use tools for employees. BMW took the extreme complexity out of monitoring multiple sites. It created a system that employees could use via a simple app on an iPad. Aggregating data into a simple tool allows employees to make sense of data in a format that is easily accessible and understood.
Know where you’re going. BMW’s corporate strategy helped to create a logical path for the supply chain management team to follow. With clarity from executive staff on the need to manage risk, the team at BMW was able to develop a system to help them manage the data from multiple sources and multiple suppliers.
Conclusion:
Unlike many other organizations, BMW has accelerated its approach to risk management within the supply chain. It harnesses the big data available from multiple social media channels to create an up-to-the-minute profile of global political and economic activity, customer sentiment and uncontrollable events that might impact its supply chain. With the company surpassing 2,000,000 vehicles sold in 2014, and record profitability, BMW is a driving force in the automotive world. In the highly competitive luxury vehicle market, it is clear that a strong and well-managed supply chain is critical to BMW’s success.
Submitted by: kcress, University of Waterloo
To contact the author of this entry please email at: kcress1009@gmail.com