Steering BMW into the future

BMW Member of the Board of Management, Development and Purchasing, Dr Burkhard Goschel, talks to Nick Palmen of Automotive Industries about the road ahead:

Automotive Industries (AI): After the introduction of the 1-Series, is there another segment that you would like to go into?

Goschel: At the 2005 Geneva Motorshow we have announced two additional model lines: With one of these new models we want to offer a completely new feeling of space. At the same time the concept naturally reflects the core values of the BMW brand, meaning that it will be a dynamic and individual car – quite simply, a typical BMW. The other model will be a new kind of crossover vehicle, characterized by its Coupe like silhouette interacting with a high, commanding seating position for four passengers.

(AI): Does the success of the 1- and 3-Series put pressure on your production capacity?

Goschel: Within our flexible production network and its breathing structures we are able to adjust the production numbers according to the current market situation. With our new Leipzig plant and with substantial investments in our existing production sites in the previous years we are able to meet the high demand of our new BMW 1 Series and 3 Series. The production volume of the 3 Series for example can be flexibly aligned between our plants in Regensburg ? where we also produce the 1 Series ? in Munich, in Leipzig, and in Rosslyn/South Africa. Further more we produce the BMW 3 Series in Shenyang/China for the Chinese market.

(AI): How do you keep the balance between active/passive safety and passenger comfort (technology that customer can notice and experience)?

Goschel: BMW is pursuing a strategy to offer a maximum of active and passive safety. New and outstanding passive safety technologies in most cases can be experienced by the customer only in the event of an accident. Comfort and active safety features, instead can be experienced right away. Since the potential of passive safety systems has been almost fully exploited, we focus more on active safety and accident avoidance.

(AI): What is the major difference between your supplier base in America and Europe?

Goschel: There is no major difference as we work together with the best suppliers world wide. We buy about 72% of our production material in Western Europe and about 13% in the NAFTA region. For example: With the establishment of the BMW plant in Spartanburg our key suppliers, based on the European continent and involved in the development and the production of the BMW X5 and BMW Z4, followed us and established their own facilities close to the BMW plant in South Carolina. So we cooperate with the same well-known supplier base around the globe. The suppliers who followed BMW to the US have become established partners of premium manufacturers in the American market. But the proportion of local suppliers in the US is also steadily growing.

(AI): Reduction in complexity, reduction in cost, and increase in quality are the main goals for modular outsourcing. How far down the line, are the suppliers involved in the integration of functions and parts?

Goschel: Reducing complexity, enhancing quality and cost efficiency are ongoing targets in our daily work. Of course, we integrate our suppliers and partners as early as possible in new projects and in the integration of functions and parts. Most important for us is to keep core competences in-house, independent from complexity, costs, or quality issues.

(AI): What are the biggest challenges you experience working with modules?

Goschel: N-tier management needs to be established as one of the core competencies of the 1st-tier supplier. The degree of the n-tier-management of the OEM depends mainly on the overall risk situation along the value chain which allows the OEM to involve directly 2nd- or even 3rd-tier suppliers.

(AI): How early were the suppliers involved in the development of the 3-Series?

Goschel: Describing the point in time of first involvement of the suppliers in the product development process of the BMW Group, we need to take a closer look at the very component. For example, for complex and technically advanced and challenging components, major modules or even innovations, partners have to be involved at a very early stage in the process. For already well-described and basic components, suppliers are involved at a later point. In general we coordinate innovation and pre-development processes with our most important suppliers even before we have allocated a new technology to a specific future model line. This is what we understand by partnership.

(AI): What efforts do you make in order to optimize your purchasing process?

Goschel: We have enhanced our management and direct approach of second and even third tier suppliers. Through electronic web-based platforms and early integration in the product development process we share information with second tier and even third tier suppliers.
Our various sourcing strategies enable us to analyse and cluster the procurement market in a way to optimise purchasing activities in the long-run. For technically challenging components and innovations, we involve our suppliers already at a very early stage of the product development process. During the further development process we ask our suppliers to approach us with new ideas regarding development and manufacturing processes and re-designed parts and components.

Further more, we have strengthened our purchasing department with additional engineers who are going to screen the whole value chain of the suppliers. In this context we ask our suppliers to give us some more insight in their cost structure in order to identify cost drivers that can be eliminated. The key to our purchasing success is the combination of the know-how at the market through networking suppliers of the entire spectrum from partnership to competition.

(AI): How do you share the responsibility for quality with the suppliers?

Goschel: It is one of the major aims of the BMW Group and its suppliers to provide the market with reliable and technically highly advanced products. Therefore, we have different stages of quality checks along the product development process. Already during the concept, design and development phase of vehicle components, we have established a constant monitoring of the emerging components and processes. Before we decide on a specific supplier, a cross-functional team of the BMW Group – from purchasing, development, logistics and quality division – analyses and evaluates the supplier and its processes. This procedure can even lead to on-site visits in the very production plant of the supplier. We want to make sure that supplier parts and components are not only functionally all right when they are delivered to our assembly lines. For our customers we also want to ensure their life-time reliability.

Before parts are delivered to one of the plants of the BMW Group, suppliers assure the proper quality of the component through their own quality check before delivery. It is in the very interest of the supplier to meet the high quality standards of the BMW Group since the BMW Group sets high quality targets the supplier has to comply with. In case of any inconsistencies during series production, a quality team of the BMW Group is present in the plant in order to clarify the situation.

(AI): Is there a connection between rising cost of materials and product quality?

Goschel: Rising costs of raw-materials like steel or oil has no impact on the quality of our products, or in other words: we will keep up the same quality level our customers are used to, regardless of such circumstances. Of course, suppliers are faced by such cost pressures first. It is obvious that in order to break even they have to balance their cost structure in other respects. Therefore, it is our goal, to resolve this issue in partnership. For us the total costs of a supplied component exists of production costs and quality costs. This enables our suppliers to balance between these cost elements within the scope of agreed targets.