Tuesday, June 10, 2014

BMW

BMW
Tim Leszczynski     Guanguan Liu

Bavarian Motor Works, more commonly known as BMW, is an automotive company headquartered in Munich Germany. It is one of the “German Big Three”, which produces the most luxury automobiles in the world.  (The other two are Mercedes-Benz and Audi).  Along with producing its most known brand, BMW, it also is the parent company to Rolls-Royce Motor Cars, Mini, and also produces motorcycles under the name BMW Motorrad.  The company evolved from producing airplane engines as the company Rapp Motorenwerke in 1918, to producing motorcycles until 1928 when it started to produce automobiles.  

BMW offers a variety of products, whether they include a motor or not.  Along with cars and motorcycles, BMW also sells memorabilia, from key chains to umbrellas; they have a variety of products. Their mission statement is "The BMW brand stands for one thing: sheer driving pleasure. Sporting and dynamic performance combined with superb design and exclusive quality1”.  In 2012 the group sold a total of 1,845,186 vehicles with revenues climbing to 76,848 million Euros and a net profit of 5,122 million Euros leading to a 4.4% increase over 2011 profits2. To be this successful in the global market, a company needs a strong and unique supply chain.

To maintain a sustainable and productive supply chain, BMW works with their suppliers to boast resource efficiency, training, and qualifying them3.  “Our approach involves on the one hand ensuring sustainability standards with comprehensive, broad based risk management – i.e. with all of our direct suppliers – and on the other hand in-depth analysis of specific raw materials and resources along the entire supply chain.”3  They try to help with training their suppliers and help with the development of the Aluminum industry by working with Aluminum Stewardship Initiative (ASI) as well as using suppliers who are close by, therefore reducing the Carbon Footprint left by the transportation and logistics operations3.  Along with this, BMW is also a part of the European Automotive Working Group on Supply Chain Sustainability.  This is a group of ten European automotive companies that works on the stabilization and sustainability of the supply chains. 

What makes BMW’s supply chain unique is how they promote diversity in their supply chain. They allow companies who are owned by minority groups or women to sign separate contracts to supply certain products or raw materials. In addition, they hold a Matchmaking Conference, which brings current and potential first-tier suppliers and sub-suppliers together with purchasing executives from the BMW Group to promote purchasing from the minority owned companies3.  Today, over 600 women and minority owned companies and around one hundred direct suppliers have participated in this conference3.  The number of companies ran by women or minority groups who have become a BMW first-tier supplier or sub-supplier has increased rapidly in the recent years.

One of key factor that has shown BMW wins with their supply chain is their ability to minimize risks. They utilize a “three-step process”. First, BMW uses a proprietary sustainability risk factor to “evaluate all suppliers with regard to their environmental, social, and governance risk potential” (Page 101)3.  For example, they will consider the social risks that can exist in an area such as child labor, or environmental risks to the surrounding community, such as carbon emissions and carbon footprints.  Secondly, the suppliers are asked to fill out a self-evaluation of their sustainability management and related activities3 (Page 101).  After receiving the results, if the company shows a low sustainability performance, BMW will apply for a joint action plan to improve their suppliers’ facility and help with necessary purchases. To make sure all of the sustainability requirements will be met, prior to signing the contract, BMW will add corrective action plans and clauses into the contract. By doing so, it adds a bit of BMW influence into their supplier. Lastly, BMW has the right to independently audit a supplier’s production facilities that are at risk of not meeting the desired sustainability. One of these steps includes examining the performance of a supplier by using a specifically designed catalogue of criteria. Based on their results, BMW will decide whether or not they will help further validation or improvement.  The steps above are necessary, for BMW cannot afford to buy low quality parts or materials. 
To continually produce the quality BMW is known for, it must have high requirements from their suppliers. Potential threats to the supply chain include: faulty parts, inefficient or troubled plants, new entrants into the industry, and of course natural disasters.  However, BMW’s cooperation with its suppliers is marked by “a mutual understanding of product and production quality, security of supply, price credibility and innovative strength, as well as the continuous integration of our sustainability standards” (Page 97)3. It is essential for the BMW Group to meet social and environmental standards such as the principles of the UN Global Compact, the International Labor Organization (ILO), and the UNEP Cleaner Production Declaration (Page 97)3.  By doing this, and by focusing on their suppliers’ success, BMW succeeds in creating, managing, and reinventing a supply chain that works like a well-oiled machine. 
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