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Logistics management report

ANALYSIS OF BMWs LOGISTICS ACTIVITIES

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TABLE OF CONTENTS

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INTRODUCTION......................................................................................3 BMWs LOGISTICS AS PART OF THE OVERALL STRATEGY.........3 BMWs LOGISTICS ACTIVITIES.............................................................3 CONCLUSIONS..........................................................................................4 RECOMMENDATIONS.............................................................................4 REFERENCES........................................................................................... 4

Introduction
Logistics derived from the Greek word logistikos meaning calculating has risen in prominence in the recent past with companies realizing how the function can be used to lend them a sustainable competitive advantage (Christopher, 2005). As per Stock and Lambert (2001), logistics can be defined as a process of planning, controlling and implementing cost effective storage of material and in process inventory right from origin point to point of consumption so that the needs of customer are met to as large an extent as possible. Holweg (2003) states that logistics plays a pivotal role in the supply chain process of the automotive industry and particularly Third Party Logistics is much relied upon in present times in developed countries. The benefits are multifarious but there is scepticism over the implications if not address properly. Low cost production in developing countries, emerging technology, enhanced distribution network, practices such as Just in Time are the key drivers to the development of logistics in the automotive sector (Johnson and Wood, 1996). It has to be remembered though that for logistics to be successful in any industry, it has to work well in conjunction with other components of an organization like branding and marketing, operations, procurement etc.

Adapted from Logistical Management: The Integrated Supply Chain Process (Bowersox and Closs, 1996) Bayerische Motoren Werke AG (BMW) is a company headquartered in Germany dealing with the manufacture of automobiles, motorcycles and engines. It was founded in 1916 and has since established itself as a major global player in the industry. It is the parent company of Rolls Royce and produces and owns the MINI brand. The company thrives on prestige and quality. It has an international presence with established subsidiaries in India, China, South Africa, Canada, Egypt and the United States. The core products falls in the high performance and premium category which has seen it become the most profitable manufacturer in the world.

BMWs logistics as part of the overall strategy


Logistics defines the manufacturing and production capabilities of a companys products. According to Dalgic (1998), opening of manufacturing plants over the world helped BMW remains competitive and explore niche markets. This enabled the transportation of products and materials to be highly effective and efficient. The production network as such was designed to be very flexible and responsive to ensure that every customer of the company received the ordered car based on their desires and preferences. Logistics plays a huge role in making this happen as the assembly of the ordered vehicle is based around parts being warehoused, distributed and transported when and where required. Innovation in logistics has become the order of the day and BMW constantly ceases to reduce costs and improve services to align with the organizational strategy of meeting customer demands and remaining profitable. A recent case in point is the company moving to rail transport over maritime transport in China for movement of auto parts, in the bargain doubling speed of operation. There was a significant challenge involved though which entailed transferring by crane to different gauges but over time this was dealt with to ensure the move materialized without glitches. BMWs otherwise excellent supply chain did come in for some scathing criticism when their load planning practice were found to have deficiencies in planning but those were creased out well over time using mixed integer programming tools to saving effect (Ratten ,2004). Good levels of communication, high degree of trust and building long term and sustainable relationships with every stakeholder involved particularly suppliers, dealers and of course end customers helps in making the logistical function work and contribute to the overall strategy and competitiveness of BMW.

BMWs Logistics Activities


BMWs logistics runs on the principle of ensuring that the correct numbers of parts/vehicles are delivered at the right time to the right place and to the required levels of quality. This comprises the major part of the process and product targets that are to be met on a day to day basis. Logistics is definitely paramount for stable production as well as for effective transportation between the entirety of the network which includes suppliers, dealers and customers. There is a something known as the COSP

(Customer Oriented Sales and Production Process) which facilitates every logistics move by way of ensuring that the customer can modify their orders just before their vehicles touch base with production without really affecting the delivery schedule. Taking the Oxford plant in the United Kingdom as an example, part supply organization is considered important for cost effective and efficient manufacturing. To as large an extent as possible, Just in Time techniques are applied in operations. The supply of body part of the automobiles to Oxford comes from the companys other plants set up in Swindon and Solihull. Engines arrive in specially packaged containers and are shipped directly to Oxford. The company also has 60 odd suppliers which provide other requirements as diverse as clips and fasteners. One of the most important aspects of the running of this facility is the set up of the Integrated Logistics Centre. This is a coordination unit which controls flow of production materials taking care to ensure that there is no undue buffer (with the cost associated) and everything reaches to its required destination in the required timeframes. The functions of the Integrated Logistics Centre is multifaceted in nature for one , it acts as hub whereby the various suppliers work to configure as part of the Just in Time process as close to production as possible and two to act as a sequencing and receiving facility. There has also been a new racking system which has been put in place in the warehouse to cope with increasing volumes of MINI production. Five storey storages comprising of 33 aisles and a sum of 9000 pallet locations predefines the improved capacity. Narrow aisle trucks are functional to ensure smooth transfer to areas of assembly. Production levels at the Oxford plant of BMW has increased significantly to unprecedented levels and goes without saying that the expected level of parts will only increase. This would in turn mean a higher number of vehicles which are put for sale all over the world. Congestion was a potential barrier with the increased scale of operation but in order to counter this, a lorry park has been established in the Integrated Logistics Centre quarters.

Conclusions
Through the aforementioned, it can be concluded that BMW is a company which has a set up that is well organized and executed. It has operated in markets where it has recognized potential and used it to develop its stature to the fullest extent. It choices in branding and marketing strategies , pricing approach and dealing with its suppliers , dealers and customer interfaces have been exemplary, helping to establish itself among the upper echelons of commercial icons. Research and development forms an integral part of its success and this ensures constant innovation and evolvement of already existent product lines. Quality is profound in everything that the company does which holds it in good stead in the current business environment where customers have high expectations. Logistics is central to the operational activities of the firm and holds the key to success in times to come.

Recommendations
BMWs plants such as those in Oxford stand to benefit tremendously from the third party logistics theory. Tapping in a provider which can enable inbound supply chain management which includes material control can prove to be cost effective. This can then be slowly bifurcated into other areas such as warehouse management, customer service and overall supply chain planning. The company must keep its success factors going thereby building on its competitive advantage. High speed of order acceptance , lower delivery times (3 months) when compared to the (6-12 months) taken by the likes of Mercedes and Jaguar and enhanced customer service are central to the business and must be sustained in the long run. The impact of the environment has gained precedence in contemporary times and has spread its base to the logistics function. To maintain its competitive edge, BMW would do well to define environmental objectives to be measured and tracked against so that sustainability in logistics in complied with. With regards to transportation of goods, better vehicle utilization to reduce fuel consumption and with regards to production, phasing out surface protection for automobiles would go a long way in meeting environmental targets. The company can also further develop its technology systems and standardize it so as to streamline the distribution processes worldwide to a much larger extent. Customizable inventory optimization is the key and integrating it across work streams to ensure smoother flow of information can only help in building efficiency. Labour demographics which include aspects such as age, sex and education are constantly on the move and BMWs logistics leaders would do well to take into consideration needs and ideas of their employees. It could be simple things such as providing chairs or installation of magnifying glasses or comfortable shoes or training and mentoring but these would prove pivotal in improving overall productivity of the organization.

References
Bowersox, D. and Closs, D. (1996) Logistical Management: The Integrated Supply Chain Process. New York: McGraw Hill Christopher, M. (2005) Logistics and Supply Chain Management: Creating Value-Adding Networks. Harlow: Persons Education Limited Dalgic,T. (1998) Handbook of niche marketing: principles and practice. London: The Haworth Press Holweg, M. (2003) The three-day car challenge: investigating the inhibitors of responsive order fulfilment in new vehicle supply systems. International Journal of Logistics: Research and Applications, Vol. 6 No.3, Pp.165-83 Johnson, J. and Wood, D (1996) Contemporary Logistics. London: Prentice Hall Ratten, V.(2004) Learning and information dissemination in Logistics alliances. Asia Pacific Journal of Marketing and Logistics, Vol. 16 No. 4, Pp. 65-81 Stock, R. and Lambert, D. (2001) Strategic Logistics Management. Boston: McGraw-Hill