BMW case submission Final
Content
BMW: THE 7-SERIES PROJECT
New Product Development Case Submission
Introduction
BMW, the leading player in luxury car segment is facing stiff competition from Japanese companies in luxury car market. Initially, existing major players did not take Japanese companies as serious contender owing to their existing expertise and brand image. However, the unexpected excellence in customer satisfaction, initial quality, technical features and lower cost let them capture significant luxury cars market share which resulted in sold out of few well known players. Though BMW was able to retain its position in market but new competitive forces in market made BMW management think about ways to reduce its product development lead time, to improve quality and to increase product variety. It was believed that the existing prototyping process can be improved to achieve these objectives.
Changes in the Automobile Industry (Luxury Car Segment)
I. Customers expect a much higher standard of conformance. The Japanese car makers have shifted the benchmark of complaints to 3-5 complaints per car. Honda Acura and Toyota Lexus had been continuously beating competitors at Customer Satisfaction and Initial Quality The Japanese Luxury cars are priced substantially below European counterparts. However, the Customer is Quality sensitive. The basis of competition therefore, is not Price but Quality More frequent introduction of new car models by the Japanese competitors. This is attributed to incremental changes between models and shorter Time to Market (lead times from concept to car of 4 years as compared to BMW’s 6 year lead time)
II.
III.
Changes in BMW Strategy
BMW decided to focus on the following strategic issues to accelerate product development: 1. Increased Product Variety 2. More Frequent Product Introductions 3. Emphasis on improving Quality in new model launches
Issues in the Case
Owing to the use of minimum tools in prototyping BMW has the capability of introducing new technologies and improve styling of the model at very late stages in the development cycle. However, most of the changes effected in the design are not because of a breakthrough in design or technology but because of the unsuitability of design for manufacturing large volumes. The non-feasibility of production tools identified downstream forces the engineers to redesign the components. Therefore, late design changes become a necessity every time. The capability is more often abused at the cost oftime and quality owing to delayed product launch and last minute design quality issues.
Lead Time Issues: The product lead times are very high compared to competition. Major changes in design happen in process engineering and pilot production phases which is highly expensive as well as unexpected increases in product lead times a. Time spent on concept design and styling ismuch longerat two years as compared to the competitors. In such a lengthy time frame, a robust design is expected. Still the design is not frozen leading to changes at later stages. b. Use of materials other than production grade in prototyping stage which were later realised to be non-compatible with production methods and capabilities c. Suppliers for production parts are not involved in initial stages such as prototype design and component engineering. This information could have been used in identifying production feasibility issues early in development cycle d. Use of manual techniques by skilled craftsmen such as clay which hides the manufacturing issues. Non-use of pre-production tools for critical parts such as bends delays the identification of major manufacturing issues e. Only about three-quarters of the “production tools” were ready when pilot production began because of long lead times for procuring them Quality Issues: a. Many design issues are identified only at later stages. Owing to this, most of the time in pilot production is spent grappling with big problems. The production phase starts before the fine tuning and resolution of minor issues thus creating quality concerns. However, the customer is highly quality sensitive and does not compromise on the minor issues. b. During ramp-up phase both old and new models are designed on the same assembly line. Though it increases the utilisation of fixed assets, it leads to dual quality norms creating confusions on the plant assembly line thereby creating Quality issues in the final product.
Recommendations
a. Design for manufacturing: The product design should take in to account possible manufacturing issues based on existing manufacturing processes and focus should be on minimising these possible issues, manufacturing time and costs. Since product development speed is crucial here, in line with the new goal of introducing new engine, redesign or a series every year, efforts to minimise designs tool up and the manufacture of the product should be given high consideration. b. Leverage existing internal knowledge: BMW needs to develop & use efficient Knowledge Transfer mechanisms through existing cross functional teams by actively utilising the experience of Designers and Production Engineersin prototyping phase.
c.
d.
e.
f. g.
h.
i.
They could help in deciding where to use pre-production tools for testing in place of clay models, based on the historically troublesome areas of the car designs. This will reduce the changes in lead time due to non-feasible downstream componentsthat are discovered during the expensive pilot production stage. This will also reduce the costs involved and lead-times in procuring the tools, as not the entire set of components will be developed using these. Focus on Freezing the Design at the Earliest: The frequent and last moment changes in design of the prototype turn out to interrupt the complete prototyping/manufacturing process by delaying the product launch and adding more to the costs involved. Therefore focus should be given on freezing the designs much earlier than the existing system. House of quality norms can be used to define customer attributes and to freeze design changes early and then more focus on the quality issues. Include lead users in design and prototyping phase: To make the designs more robust and improve quality of the final product, lead users can play an active role in design byeffectively capturing customer needs. Also, a beta testing phase could be introduced to obtain feedback of lead users on finer nuances. This will encourage thefreezing of design and use of pre-production tools in prototyping. Increased use of Analytical prototyping: With increased focus on automation and shortening the NPD process, BMW should try to develop or use existing Material Testing Tools to get an idea for feasibility of the design with the production grade materials. This is apart from the case fact that they are already extensively using CAD/CAM Tools to check for fault tolerance. Rapid prototyping: BMW should also explore use of stereolithography which can help in shortening the prototyping preparation for some of the modules. Greater Supplier involvement: BMW should choose suppliers corresponding to various components or modules, and involve them early in the NPD process. Thus, suppliers would be able to study the design and technical parameters of the component/module which could put constraints on high volume production. Based on this, either they will have sufficient time to evolve their production process and tooling or will provide appropriate feedback making the process move closer to ‘design for manufacturing’ concept. Further, this will shorten the entire NPD cycle. Integrating Pilot Production with Factory Pilot Production Run: The two stages of Pilot Production in the Research and Engineering Centre and Factory Pilot Production Run take 6 and 3 months respectively in the current development cycle. Moreover, it employs full-time high skilled workers in the Pilot Production at Engineering centre whereas relatively less skilled workers do the final run and production. By integrating these two stages, the factory workers can be provided with an early exposure to the new tools and processes. Phasing out the Mixed Model: The current system of mixed model where new car models are produced with old models for a better utilization of fixed assets should
be avoided as the hidden and intangible costs like greater confusion in workers and complex logistics affect the production efficiency negatively. The production of new models should be run on separate assembly lines so as to make the workers accustomed to these models sooner. j. Promote Incremental Innovation:Since the existing model lines were re-designed every four years, it necessitated substantial changes in model design due to changes in technology and customer preferences. By revisiting the old model designs more often at 2 years, the changes in design would be reduced to incremental. Thus BMW would be able to more effectively use modular design techniques. Thus it leads to decoupling of design tasks and production tasks. Concurrent component development process and production tools development leads to shorter lead times. k. A manufacturing-oriented team: A dedicated team can be set-up which would work in co-ordination with the cross-functional design team and, well in advance will start planning on the suppliers for individual components. While this would ensure that the knowledge of the suppliers would be taken into account during the design stage, it would also keep the costs low by transferring or sharing the costs of prototyping using pre-production tools. This initiative will also help in shortening the NPD cycle. Through the above mentioned recommendations, BMW would be able to address the major issues in quality control and shorter lead times. The shortened Product Development Cycle will enable the company to successfully follow the new company strategy. The expected changes in Development Cycle Lifetime are shown in Exhibit 1.
Exhibit 1: Expected Changes in Development Cycle Timeline
New Product Development Case Submission
Introduction
BMW, the leading player in luxury car segment is facing stiff competition from Japanese companies in luxury car market. Initially, existing major players did not take Japanese companies as serious contender owing to their existing expertise and brand image. However, the unexpected excellence in customer satisfaction, initial quality, technical features and lower cost let them capture significant luxury cars market share which resulted in sold out of few well known players. Though BMW was able to retain its position in market but new competitive forces in market made BMW management think about ways to reduce its product development lead time, to improve quality and to increase product variety. It was believed that the existing prototyping process can be improved to achieve these objectives.
Changes in the Automobile Industry (Luxury Car Segment)
I. Customers expect a much higher standard of conformance. The Japanese car makers have shifted the benchmark of complaints to 3-5 complaints per car. Honda Acura and Toyota Lexus had been continuously beating competitors at Customer Satisfaction and Initial Quality The Japanese Luxury cars are priced substantially below European counterparts. However, the Customer is Quality sensitive. The basis of competition therefore, is not Price but Quality More frequent introduction of new car models by the Japanese competitors. This is attributed to incremental changes between models and shorter Time to Market (lead times from concept to car of 4 years as compared to BMW’s 6 year lead time)
II.
III.
Changes in BMW Strategy
BMW decided to focus on the following strategic issues to accelerate product development: 1. Increased Product Variety 2. More Frequent Product Introductions 3. Emphasis on improving Quality in new model launches
Issues in the Case
Owing to the use of minimum tools in prototyping BMW has the capability of introducing new technologies and improve styling of the model at very late stages in the development cycle. However, most of the changes effected in the design are not because of a breakthrough in design or technology but because of the unsuitability of design for manufacturing large volumes. The non-feasibility of production tools identified downstream forces the engineers to redesign the components. Therefore, late design changes become a necessity every time. The capability is more often abused at the cost oftime and quality owing to delayed product launch and last minute design quality issues.
Lead Time Issues: The product lead times are very high compared to competition. Major changes in design happen in process engineering and pilot production phases which is highly expensive as well as unexpected increases in product lead times a. Time spent on concept design and styling ismuch longerat two years as compared to the competitors. In such a lengthy time frame, a robust design is expected. Still the design is not frozen leading to changes at later stages. b. Use of materials other than production grade in prototyping stage which were later realised to be non-compatible with production methods and capabilities c. Suppliers for production parts are not involved in initial stages such as prototype design and component engineering. This information could have been used in identifying production feasibility issues early in development cycle d. Use of manual techniques by skilled craftsmen such as clay which hides the manufacturing issues. Non-use of pre-production tools for critical parts such as bends delays the identification of major manufacturing issues e. Only about three-quarters of the “production tools” were ready when pilot production began because of long lead times for procuring them Quality Issues: a. Many design issues are identified only at later stages. Owing to this, most of the time in pilot production is spent grappling with big problems. The production phase starts before the fine tuning and resolution of minor issues thus creating quality concerns. However, the customer is highly quality sensitive and does not compromise on the minor issues. b. During ramp-up phase both old and new models are designed on the same assembly line. Though it increases the utilisation of fixed assets, it leads to dual quality norms creating confusions on the plant assembly line thereby creating Quality issues in the final product.
Recommendations
a. Design for manufacturing: The product design should take in to account possible manufacturing issues based on existing manufacturing processes and focus should be on minimising these possible issues, manufacturing time and costs. Since product development speed is crucial here, in line with the new goal of introducing new engine, redesign or a series every year, efforts to minimise designs tool up and the manufacture of the product should be given high consideration. b. Leverage existing internal knowledge: BMW needs to develop & use efficient Knowledge Transfer mechanisms through existing cross functional teams by actively utilising the experience of Designers and Production Engineersin prototyping phase.
c.
d.
e.
f. g.
h.
i.
They could help in deciding where to use pre-production tools for testing in place of clay models, based on the historically troublesome areas of the car designs. This will reduce the changes in lead time due to non-feasible downstream componentsthat are discovered during the expensive pilot production stage. This will also reduce the costs involved and lead-times in procuring the tools, as not the entire set of components will be developed using these. Focus on Freezing the Design at the Earliest: The frequent and last moment changes in design of the prototype turn out to interrupt the complete prototyping/manufacturing process by delaying the product launch and adding more to the costs involved. Therefore focus should be given on freezing the designs much earlier than the existing system. House of quality norms can be used to define customer attributes and to freeze design changes early and then more focus on the quality issues. Include lead users in design and prototyping phase: To make the designs more robust and improve quality of the final product, lead users can play an active role in design byeffectively capturing customer needs. Also, a beta testing phase could be introduced to obtain feedback of lead users on finer nuances. This will encourage thefreezing of design and use of pre-production tools in prototyping. Increased use of Analytical prototyping: With increased focus on automation and shortening the NPD process, BMW should try to develop or use existing Material Testing Tools to get an idea for feasibility of the design with the production grade materials. This is apart from the case fact that they are already extensively using CAD/CAM Tools to check for fault tolerance. Rapid prototyping: BMW should also explore use of stereolithography which can help in shortening the prototyping preparation for some of the modules. Greater Supplier involvement: BMW should choose suppliers corresponding to various components or modules, and involve them early in the NPD process. Thus, suppliers would be able to study the design and technical parameters of the component/module which could put constraints on high volume production. Based on this, either they will have sufficient time to evolve their production process and tooling or will provide appropriate feedback making the process move closer to ‘design for manufacturing’ concept. Further, this will shorten the entire NPD cycle. Integrating Pilot Production with Factory Pilot Production Run: The two stages of Pilot Production in the Research and Engineering Centre and Factory Pilot Production Run take 6 and 3 months respectively in the current development cycle. Moreover, it employs full-time high skilled workers in the Pilot Production at Engineering centre whereas relatively less skilled workers do the final run and production. By integrating these two stages, the factory workers can be provided with an early exposure to the new tools and processes. Phasing out the Mixed Model: The current system of mixed model where new car models are produced with old models for a better utilization of fixed assets should
be avoided as the hidden and intangible costs like greater confusion in workers and complex logistics affect the production efficiency negatively. The production of new models should be run on separate assembly lines so as to make the workers accustomed to these models sooner. j. Promote Incremental Innovation:Since the existing model lines were re-designed every four years, it necessitated substantial changes in model design due to changes in technology and customer preferences. By revisiting the old model designs more often at 2 years, the changes in design would be reduced to incremental. Thus BMW would be able to more effectively use modular design techniques. Thus it leads to decoupling of design tasks and production tasks. Concurrent component development process and production tools development leads to shorter lead times. k. A manufacturing-oriented team: A dedicated team can be set-up which would work in co-ordination with the cross-functional design team and, well in advance will start planning on the suppliers for individual components. While this would ensure that the knowledge of the suppliers would be taken into account during the design stage, it would also keep the costs low by transferring or sharing the costs of prototyping using pre-production tools. This initiative will also help in shortening the NPD cycle. Through the above mentioned recommendations, BMW would be able to address the major issues in quality control and shorter lead times. The shortened Product Development Cycle will enable the company to successfully follow the new company strategy. The expected changes in Development Cycle Lifetime are shown in Exhibit 1.
Exhibit 1: Expected Changes in Development Cycle Timeline
