The case elaborates on the different options considered by BMW regarding the manufacture of its prototype vehicles. Historically, BMW’s prototypes were handcrafted by highly skilled artisans in the company’s shop. A proposal had been made to alter the process so that prototypes are made in a way that can better uncover potential problems that may arise during final production. While the new approach is expected to make production start-up of new models smoother and reduce quality problems, there is some concern within the company that it will lead to less flexibility to change (and improve) designs during the development cycle.
Through our analysis, we have tried to address the following issues: ? ? Different ways of competing on quality in a luxury product segment and how the product development process affects each of these The notion of a prototyping strategy and the role prototyping plays in linking development strategy and manufacturing strategy Industry The segment of automobile industry in question was the luxury car market where cost plays a very small role. Generally, the luxury segment was defined as the market of automobiles with a retail price above $ 20,000.
Companies in this segment competed on features like acceleration, comfort and handling and intangibles like perceived quality and image. Major players in this industry were Daimler-Benz, Toyota, Honda, Nissan, Ford, BMW etc. BMW differentiated itself on the basis of its engineering and technical prowess. The evolution of BMW in the luxury car segment and the change in competitive scenario is included in Appendix 1 and 2 respectively. Product Development Approach Strategic Objectives
BMW tried to achieve the following objectives to compete with the European players as well as upcoming Japanese entrants: Increased Product Variety: BMW mostly made its cars to order with the new Regensburg plant playing a major role. It produced 420 cars/day but made the same car type only once every month. More frequent introductions: The Japanese automobile companies had lead time of 4 years against an industry average of 6 years due to their philosophy of introducing new models frequently, incorporating incremental changes in contrast to BMW’s philosophy of introducing new product with bold changes.
The new strategy was to introduce a new engine, a new series or redesigned series every year. Improved Quality of Newly launched models : BMW tried to develop a strategy to compete with Lexus’s record of 1. 5 complaints/car to try and meet the expectation of higher standard of conformance from the customers. 1 Stages in the launch of redesigned model (Refer Appendix 3) Prototyping (30-32 months): 3-5 batches of prototypes were constructed using handmade tools, sometimes not made up of material to be used in final product.
The advantage of this process was that it provided flexibility to make changes without much time consumption and costs. Pilot Production in Engineering Center’s pilot plant (7-9 months): Done with only the three-quarters of the production tools, but thousands of minor problems would be uncovered and investigated. Pilot Production in Factory (3-6 months): “Dress Rehearsal “and final opportunity to fine tune the process, change tooling and troubleshoot. Ramp-up: Mixed Model approach used to avoid significant drop in output and better utilize the fixed assets.
In this approach the production of old models is continued to utilize the available capacity till the production of the new model can be brought up to full volume. Issues in the above method of prototyping ? ? In spite of multiple cycles of prototyping, the production runs always needed changes. Even though each successive generation of prototype came closer to resemble the appearance and performance of the final product, the real picture of the final product was clear only during production cycles.
Though all the processes are designed to ensure quality, the number of complaints per car was high (10-15 complaints/car at launch while 3-5 complaints/car in year or a half year) compared to the Japanese competitors. Mixed model approach caused confusion and made logistics more complex. The current process for making prototype masked many design and manufacturing problems which only surfaced during pilot production and ramp-up. ? ? ? New approach to prototyping This approach advocates involving suppliers in both design and prototyping and leveraging on their expertise.
This also has a benefit that the suppliers get a chance to learn about the part before they have to make it in volume. The cockpit team also recommended contracting with a single outside vendor to supply fully assembled for prototype, pilot and production runs, and finally have the pilot assembly plant’s workers not the prototype specialists assemble the cockpit into prototype vehicle. Issues in this method ? ? ? Constrained the flexibility and creativity Increased cost of incorporating change in design Increased lead time ( 6 months to design and 6 months to procure )
2 This transition of the process can be explained by a transition from an integral architecture product to a modular architecture product. The product manufactured by earlier approach was an integral architecture where the whole product was developed together while the new approach encouraged modular approach of developing each functional and physical part separately allowing greater variety productions, more customization and optimizing flexibility over performance.
Cost – Benefit Analysis for various possible scenarios Scenario 1: Applying early tooling in Prototype building for all modules of the car Costs: 1. Cost of DM 50 million to arrange all production tools which can be more in case of major design changes. 2. Cost of material, labour and other overheads for all the production tools will also have to be borne which will add to the total cost (this data is not given in the case) 3. There are chances of changes in the current design e. g.
passenger side air bag might be added which will further add to the cost and lead time. Also the design flexibility is very important to BMW to protect their brand image of manufacturing luxury and stylish cars. Benefits: 1. Saving of DM 100 million has been estimated which would come from reductions in labour cost, tool replacement cost and lower warranty expenses. This will be realized fully only after the launch and cannot compensate for the existing budget constraint (DM 80 million). 2.
Time to reach full production volume after the launch will decrease (currently they are taking 6 months). 3. Suppliers will know about the parts before they have to make them in volume. This will again smooth the pilot production in factory. Due to the large costs, risks involved with the process, budget constraint (the whole budget for the BMW-7 Series project is DM 80 million) and also risk of losing the most important design flexibility, it is not wise to apply this new prototyping process to all the modules in the car at this stage.