Max Vu (Vu Ngoc Thuy) 2008190147 Productions Operations Management homework 3
1. What are the competitive challenges in the automotive industry in 1997 and beyond? How is BMW affected? The development of buyers market: In general, in the last decade the market has witnessed a power shift from manufacturers to consumers. The automotive industry did not escape this trend. Customers wanted to have more variety of cars, and more affordable ones without sacrificing quality. In order to meet this demand, automakers started focusing heavily on speeding up their process development as a competitive strategy. Many American and Japanese companies cut the speed to market considerably and were waiting to get into the European market Oversupply results in a lower price level: the production capacity of 20 million surpasses sales volume of 14 million.. Fierce international competition: with the uprising of automobiles manufacturing firms from US, Japan and Korea, European companies have to constantly develop new product sales strategies, come up with new comparative advantages and catch up with the new technologies. The pressure to reduce product development time: the main challenge at the beginning of the century in the car manufacturing industry was the product management time comparative advantage. According to the data, from late 1980s to early 1990s, European countries stand the disadvantage of automotive development time: it takes Europe much longer time than United States and Japan for all planning, engineering and overlapping processes. BMW therefore has to come up with a new schedule that lessens the product development time to catch up with these competitors. Also, a high consumer’s needs would lead to big fluctuations in trend and taste, making a lagging schedule risky for BMW. BMW has the comparative advantage of its fun driving experience that appeals to younger, affluent buyers when there is a shift in the market trend.
2. How would u evaluate the evolution of product development at BMW? Why does BMW senior management want to reengineer its successful product development process? What is the role of the new technology? The evolution of product development at BMW: The old process took 72 months with 3 cycles and 3 high quality prototypes. The current process entails 60 months with only 2 prototypes. With the help of the new CAS technology, computer aided designs have helped shortening the process cycle quite considerably.
BMW has been able to retain its “shiny paint line” on the automobiles it produced regardless of the process it uses. BMW’s process calls for bigger fixed costs compared to other companies as the companies try to keep its manufacturing volume low. With this product development schedule, the company has been successful throughout its history by developing high quality new products in a traditional way that extended back for decades. Why reengineering this product development process? Customer demands are pushing for greater variety of products in shorter times. Competitors are responding to these demands and are on the way to cut their new product development process times by 20-30%. For the company to get ahead of competitors and put itself as a leader, it needs to drastically redesign its new product development process. Although BMW has started to change the old process by introducing computer aid technologies at the beginning of 1990s, and even though the process development process had improved, the engineering lead time didn’t show major improvements. BMW is lagging behind competitors since its process is very traditional and slow. Yet the company has its usual way to develop new products and there will be internal resistance to change it. The threat was clear: either speed up its development process while maintaining its attractive exterior and high quality or struggle with competition. Role of the new technology: The new technology, namely the computer aided styling CAS system would be helpful to BMW in shortening its product manufacturing process. For the current process, it would require two real prototypes to be made, which takes time and money at the tremendous expense. When designs can be made via computers, not only will the company be able to cut on these resources but it also allows for better communication, negotiations and design-technology adjustments between engineers and designers. However, this new schedule would be hard to implement given the company’s old product developing pattern and the employees’ obsession with submitting only perfect data.
3. Is the senior management giving the organization enough time to carry out these radical changes? What are the risks if BMW changes its development process and/or organization too quick? What are the risks if they change too slowly? “A year went by without much progress” as there is no sense of urgency in the company’s staff, not even in the functional managers. So even given more than enough time, if pressure is not placed onto the work force, no progress would be observed on the implementation of this new process.
The risk BMW might have to face if they change their development process or organization too fast: The company may be rushing too much in improving its speed that it might give up its long lasting success factors: design and quality. The company’s managerial structure might not be suitable for this purpose. For a long time, its task force has been cooperating on a prototype foundation. Now with the imperfect data on virtual cars that are not even completed, engineers and designers’ frustration is foreseeable and understandable. The risk BMW might have to face if they change their development process or organization too fast: Like the senior manager has stated, BMW might end up “chasing a moving target” to catch up in speed with competitors if they set their goal too low or the implementation is not timely. Like Roll-Royce, BMW might be trapped in the same situation: becoming outdated and losing market shares to competitors with advantages in speed and price.
4. Decision point: Should senior management use the derivative 3-series project for implementing the new development process? Or should they drive change through the flagship 7-series project? As the 7-series are the flagship of the company that will determine whether BMW can retain its competitiveness in the future, it would be very risky to implement the new process onto it. However, as the 3-series has mostly been completed, the company should try implementing the new product development process on it. Even though the risk of touring station wagon still stands, it would be safer to use this product as a learning laboratory to apply this new process whose success rate is uncertain.
