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Introduction: A supply chain is a network between a company and its suppliers to produce and distribute a specific product to the final buyer. The supply chain process has essential role in development of a company. This network includes different activities, people, entities, information, and resources. The supply chain also represents the steps it takes to get the product or service from its original state to the customer. To understand this process, a review of supply chain process in BMW Group (automobile MNC company) discussed in this article. Supply Chain Management (SCM) Supply chain management takes a broader view of influences that will impact our supply chain, and when we discuss supply chain management, we must start to understand the strategic decisions that influence the supply chain activity. Defined as “a network of connected and interdependent organizations mutually and co-operatively working together to control, manage and improve the flow of materials and information from suppliers to end users”. (Christopher, 2011) There are many tools that can support the building of the supply chain strategy, value as perceived by our consumer must have full consideration when building any strategy. Value is usually delivered through differentiation of our product or service offering through innovation or cost. Cost or differentiation will form part of the main corporate strategic objective. Within supply chain management as a topic, we will go further into strategy, identifying the importance that organisational strategy plays on our operational supply chain activities, along with the role that other functions within the organisations play in supporting the decisions made within the supply chain to ensure alignment to the corporate and operational strategy. The goal of supply chain management is to look holistically at the entire supply chain from supplier through to the consumer, and review three core areas of people, process and systems in order to maximise value from all activities. BMW Group Organization Background. in 1916 Bayerische Flugzeugwerke Aktiengesellschaft (BFW AG) was initially founded a and becoming Bayerische Motoren Werke Aktiengesellschaft (BMW AG) 2 years later in 1918, the company is headquartered in Munich, Germany.

It is one of the Germans leading automotive

manufacturers operating on a global scale spanning 150 countries. BMW AG is the mother entity of the 1

BMW Group of which it is wholly responsible in terms of control and respective management. The company primarily manufactures and sells engines, vehicles, accessories, but also renders services related to its various business segments. The company employs a workforce of 126,016 of which 113719 (90.2%) is employed in the automotive segment, 3503 (2.8%) in Motorcycle segment and 8684 (6.9%) as of the 2019 reporting period (BMW Group, 2019). With the three brands, BMW, MINI and Rolls-Royce Motor Cars, the BMW Group has its sights set firmly on the premium sector of the international automobile market. The BMW Group can be categorized in to 4 segments namely Automotive, Motorcycles, Financial Services and Other Entities segment (BMW Group, 2017). Regarding the production of automobiles and motorcycles – major revenue source -, BMW operates 31 production and assembly sites in 15 countries, the majority being in Germany. In addition, distribution is managed by around 6000 dealerships in over 150 countries. Concerning the financial services segment, the BMW Group is represented in over 150 countries. (BMW Group, 2017). Product Responsibility To sustain in market that product responsibility is most important. In response to the changes in the marketplace, BMW is following a proactive strategy. Rather than react to a changing environment, the company plans to pioneer and drive the transformation process. BMW describes this proactive strategy by using combination technique of revolution and evolution. “Revolution” means that refers to carbon-free mobility with new types of drivetrains and determined targets in the area of new materials, resource-efficient production, and mobility service innovations (BMW, 2014). The revolutionary part is materializing primarily with the launch of the BMW i family, succeeding its aim of positioning BMW as an innovation leader in the area of e-mobility sector to take the integration of sustainability along the value chain to a new level. The company’s discrepancy is based on the claim of being the only premium manufacturer that offers, since 2013, purpose-built vehicles for electric drivetrains using a carbon body technology that significantly reduces vehicle weight. Beyond those technological differences, a service concept called ‘BMW i services’ is creating sustainable mobility on the premium level (BMW, 2014). The evolutionary part of the sustainability strategy is what the company is branding as ‘efficient dynamics’. Here “Evolution “means that the added development of the combustion engine technology like as construction of lightweight cars, hybrid drivetrains, and increased resource efficiency in the production processes. This means that the organization is working continually to improve the range of 2

combustion engines featuring the so-called TwinPower turbo technology. The efficient dynamics family of engines, comprising 3-, 4-, and 6-cylinder power units, reflects the output of a systematic development process. Higher aluminum content plus the use of the lighter magnesium has enabled BMW to reduce the average weight of its latest range of engines. The first of a new generation of engines is a 1.5-litre, 3-cylinder petrol engine which found its first release in the BMW i8. BMW also presented the first 4-cylinder versions of the new engine family in 2014. The rapid technological advancements in digital mobility results in major value chain transformations resulting in automobiles becoming increasingly connected with the mobility world. BMW will continue to focus its primary activities on developing, producing and selling vehicles, but its current product portfolio will be complemented with mobility services. The company’s main business drivers revolve around automation, connectivity, electrification and sharing. Supplier Management BMW’s global supply chain network plays an important role in the success of the group’s involvement to value creation, quality, and innovation to reach the company’s sustainability goals. The company management focuses on managing and minimizing risk as well as utilizing opportunities and leveraging potential. Sustainability is also improved in the supplier network by providing sustainability trainings for purchasing managers. Another contributor to sustainability is related to internationalization of sourcing to increase local sourcing (BMW, 2014). Supply Chain Strategies and Practices In 2001, BMW developed its influential “KOPV” Customer Orientated Production and Sales System which has exerted great influence in automotive built-to-order (BTO) production processes (Wheatley, 2013). This production process allows customers to have some form of customized products built into their “personalized” vehicle. Major benefits of the BTO production strategy are: ➢ Increased planning certainty for suppliers and BMW; ➢ Increased reliability of component and parts deliveries resulting in smaller required inventory levels; ➢ Optimized production costs due to better planning; ➢ Increased reliability of suppliers´ sequence deliveries. To optimally serve major markets such as North America, South America, Europe and Asia, the BMW Group adopts their so called “production follows the market” strategy in which vehicles are locally 3

produced and thereby minimizing the risks of increasing trade barriers, especially given a growing number of trade disputes (BMW Group, 2017). This strategy permits BMW to produce regionally and optimally in the different markets. For example, with respect to the recent trade dispute between USA and China, BMW made a strategic decision regarding the production location of the BMW X3 model. Initially BMW has produced this model in the USA and shipped it to China where it is being sold. Although the company decided it is more feasible to produce this model in China, thus eliminating existing tariffs and any additional tariffs arising from this dispute (Reuters, 2018). BMW´s SCM team have developed a social software assessment tool evaluating unstructured information from various internal and external sources like as (social network sites, blogs, forums etc.) to aid in supply chain development by increasing the visibility of the supply chain. The software uses a self-learning algorithm which collections and evaluates actual information instantly therefore helping with daily decision making. BMW employees use a tablet and respective application to access the gathered “structured” data. Information sharing, and collaboration opportunities are fostered given the increasing level of transparency. Geo-tagging of manufacturing sites and supplier locations provide a visual map of the location of potential threats (University of Waterloo, 2015). Purchasing and Supplier Network BMW´s global supplier network is grave to the overall performance of the company as suppliers are responsible for a important share of innovation, quality and value creation. BMW sources automotive parts from 12,000 suppliers in 70 countries. The company primarily sources production material from Germany (37.6%), Eastern Europe (21.5%) and Rest of Western Europe (17.7%). Given the global orientation of BMW´s supplier network, major activities relate to the sustainable obtaining of raw materials and production materials, as well as respective quality assurance. Supplier selection is based on quality, innovation, flexibility and cost. BMW strictly respects and commits itself to international accepted guidelines and principles and expects from its suppliers and their suppliers to align their due diligence process with the “UN Guiding Principles on Business and Human Rights” (BMW Group, 2017). BMW sources principal parts and components from about 40 major suppliers such as Thyssen Krupp, Bridgestone, Brembo and BorgWarner. The supplier working relations index conducted annually by Planning Perspectives Inc. assesses the perception of suppliers regarding their relationships with OEM ´s. An original equipment manufacturer (OEM) traditionally is defined as a company whose goods are used as components in the products of another company, which then sells the finished item to users.

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The index is based on 5 main areas namely OEM Supplier Relationship, OEM Communication, OEM Help, OEM Hindrance and Supplier Profit Opportunity. Each main area includes 2 – 3 variables and the final score is calculated based on the weighted average of all the variables and represented in a Likert type scale (Planning Perspectives Inc., 2018).

Supplier Working Relations Index, (PR Newswire, 2015)

Outcomes and Impacts In looking at the outcomes of BMW’s sustainability strategy from the viewpoint of an independent third party, the data of the industry-independent International Council on Clean Transportation (ICCT) will be used. The

Co2

emissions in the EU are defined based on the 2014 edition of European

Vehicle Market Statistics, a statistical portrait of the passenger car, light commercial, and heavy-duty vehicle fleet in the EU from 2001 to 2013. Enhanced combustion processes and turbocharging allow producers to extract extra power from smaller engines. In the case of BMW, this has led to a decrease of engine displacement of 11 percent from 2,368

cm

3

in 2007 to 2,130

industry average decreased only 7 percent from 1,729 cm3 to 1,616

5

cm

3

in 2013, whereas the

cm3 (Mock, 2014).

Another outcome from the recent introduction of the “i-series” is that BMW became the market leader in e-mobility in Germany with 2,231 units of i3 sold in 2014. Worldwide, BMW ranks third in emobility sales after Tesla and Nissan Leaf with 16,000 units of i3 and 1,741 units of the Plug-in-hybrid sports car i8 sold. A key market in 2014 was the US with 6,000 units of i3 sold. In Norway (a country with less than 5 million inhabitants), BMW sold about the same amount of BMW i3 as in Germany due to tax incentives (no value-added tax) and cost-free charging infrastructure. Concerns and Challenges BMW’s strategy of present purpose-built electric and hybrid vehicles has to prove commercially viable. Other car companies are concentrating on a manufacturing strategy that offers the production of different drivetrain technologies on the same production line. The advantage of such a strategy is that it can flexibly react to market demands for the various drivetrain technologies like as petrol, diesel, hybrid, electric. In comparison, BMW has created dedicated manufacturing facilities for the i series and its materials and components, which implies the risk of low-capacity usage of those facilities. Another challenge for BMW in meeting the EU emissions target is the ongoing strong demand for large, powerful, and heavy sports utility vehicles. Even if the company is changing their offering towards more energy-efficient and smaller vehicles, the final decision is taken by the customer. This is even more so if e-mobility is not yet cost-competitive with regard to total cost of ownership of such a product. To be a pioneer in certain technology always involves some risks of choosing the wrong approach or of entering the market too early. BMW is challenged those risks by following a combined strategy of evolution and revolution, which ensures economic stability by revenues and cash flow from the traditional car business while at the same time pioneering into future markets like e-mobility. A highlevel SWOT (strengths–weaknesses–opportunities–threats) analysis briefly summaries BMW’s current situation with regard to sustainability.

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Sustainability SWOT Analysis for BMW (Christopher, 2018)

Conclusion: Supply chain management for a global firm such as BMW group will require effective long term planning about the manner in which the interests of all shareholders can be managed. This review gives an idea for the supply chain in BMW group. The new technology is more important for enhanced the supply chain management. The trust of product main important for demanding in the market. The supply strategies is based on built to order theory give unique supply chain system in this organization. The supply strategies based upon law of regulation of a company of an country, some issue directly linked as environmental and trade issue. The supply chain management study most usable for sustainable position of a organization ( here, BMW Group) in the global market. The advertisement and communication with consumer have important role in the SCM system. Information sharing amongst the various departments needs to take place in a transparent manner. Effective collaboration amongst departments and allocation of resources is required. The management of demand can involve using back-order systems and increasing capacity. Produced goods need to be provided to wholesalers who distribute it to retail firms. Strong relations have to be maintained with internal as well as external stakeholders. Performance measurement is critical as it will allow managers to monitor the efficiency of BMW supply chain. 7

References

BMW (2014). Annual Report 2014. BMW Group (2019). Power of Choice, Annual Report 2019. BMW Group. (2017). We are shaping the mobility of the future, Annual Report 2017. Christopher, M. (2011). Logistics & Supply Chain Management (4 ed.). Pearson Education Limited. Christopher D. R. (2018). Strategic supply chain management implications of an unregulated Brexit. ISCTE Business School. University Institute of Lisbon. October 2018. Erskin Blunck (2016). Germany BMW’s Sustainability Strategy of Evolution and Revolution towards a Circular Economy. International Management, Nuertingen-Geislingen University, September 2016. Mock, P. (ed.) (2014), International Council on Clean Transportation (ICCT), ‘European Vehicle Market Statistics, Pocket Book’, Berlin: ICCT. Planning Perspectives Inc. (2018). Working Relations Index. Retrieved September 5, 2018, from ppi1: https://bit.ly/2OR9D2s. PR Newswire. (2015, May 18). News Releases. Retrieved September 5, 2018, from PR Newswire Association LLC.: https://prn.to/2O50x4F University of Waterloo. (2015, October 25). Social Media for Business Performance. Retrieved September 6, 2018, from University of Waterloo: https://bit.ly/2N0myNv. Wheatley, M. (2013). Intelligence: Ultima Media Ltd. Retrieved September 3, 2013, from Automotive Logistics: https://bit.ly/2CbGVra

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