Exploring the Triple Bottom Line Approach in BMW's Operations

Desklib provides past papers and solved assignments. This report analyzes BMW's operations, logistics, and supply chain management.

2019
Understanding Operations, Logistics, and Supply Chain Management

Understanding Operations, Logistics, and Supply Chain Management
Table of Contents
Introduction............................................................................................................................. 2
Quality management................................................................................................................3
Supply Chain Business Relations Management........................................................................5
Triple Bottom Line Approach....................................................................................................7
Recommendations................................................................................................................... 8
Conclusions.............................................................................................................................. 8
Reference List.........................................................................................................................10
1

Understanding Operations, Logistics, and Supply Chain Management
Introduction
Operations management can be defined as a process that involves administering the
organisational business practices to achieve the highest efficiency levels within the
organisation. It oversees the management of the conversion of the inputs such as raw
material, energy, and labour to the outputs in the form of services and products delivered to
the customer (Brown and Bessant, 2013). In many organisations, the supply chain
management is a part of the operations management. Although, where the operations
management focuses on aspects internal to the organisation the supply chain management
deals with things that are external. The supply chain management can be referred to as the
process that involves different aspects of managing the product flow from the raw material
acquisition to the distribution of the final product or service to the customer (Christopher,
2016). The logistics management is considered to be a part of supply chain management
and it involves managing the daily activities related to product or services produced in an
efficient and effective manner (Christopher, 2016). The operations, logistics, and supply
chain management together form the bulwark of organisational efficiency and effectiveness.
It's a critical aspect of a cost-effective and successful organisation whether a manufacturer
or a service provider. It's especially important in manufacturing companies where cost-
effectiveness, efficient production, and timely delivery are integral to day-to-day operations
of the organisation (Christopher, 2016).
To consider the key issues affecting the operations, logistics, and supply chain management
of an organisation, we will take BMW Group as an example. The BMW group with its base of
operations in Munich has a global presence as an automobile and motorbike manufacturer.
It was founded in 1916 by Karl Rapp as an aircraft engine manufacturer. The renowned
brands of the BMW group in the automobile segment include names like MINI, Rolls Royce,
and BMW. BMW Group has a large operational base in the UK with UK being the only
country that has manufacturing units of all three BMW brands MINI, BMW, and Rolls Royce
along with a vehicle distribution centre and sales and marketing operations (Bmwgroupa,
2019). BMW acquired the predominantly British automaker in 1998. The BMW group has
spent over £2 billion to establish and expand its UK operations. The BMW group due to its
large scale of operations across the globe and specifically in the UK has a robust operations
2

Understanding Operations, Logistics, and Supply Chain Management
management and supply chain management policy (Bmwgroupa, 2019). For the purpose of
this essay, two specific issues that the operations and supply chain managers at the BMW
group face will be considered. The first issue is quality management while the second key
issue is the managing supply chain business relations. Both the above components of
operations and supply chain management are critical parts of a sustainable, effective, and
successful organisation. Quality management forms a part of both operations and supply
chain management while supply chain business management is integral to the supply chain
management.
Quality management
Quality management can be defined as the process which involves ensuring a predefined
quality level as per the stakeholder and compliance requirements in the tasks and activities
of an organisation (Oakland, 2012). These include determining the quality policy, creation
and implementation of quality assurance and planning process as well as controlling the
quality and improving it wherever it's required. In the case of the BMW group, quality
management is an integral part of all aspects of their business operations. In fact, the BMW
group is known for its stringent quality standards and offering its customers exceptional and
premium quality products (Oakland, 2012). BMW group employs 134,682 employees at over
30 locations across the world to support its operations and ensure quality products and
services delivery to its customers (Bmwgroupa, 2019). BMW group maintains the quality
standards at every level such as the procurement of raw materials, packaging,
manufacturing, product handling, and logistics. BMW group ensures effective quality
management by incorporating Total Quality Management (TQM) Practices. TQM is the
management approach that focuses on customer satisfaction by continuously detecting,
reducing, and eliminating manufacturing errors, ensuring adequate employee training
levels, enhancing customer satisfaction level, streamlining the supply chain management
(Zink, 2012). To maintain quality standards BMW group has incorporated COSP or Customer
Oriented Sales and Production Process (Mansouri et al., 2012). It involves aligning the
manufacturing or production process according to the customer requirements or
specifications instead of providing a standard product to all the customers. The company
improves the employee effectiveness by instilling practices like flexible working hours that
3

Understanding Operations, Logistics, and Supply Chain Management
stimulates performance, gratification, and creativity of the employees (Zink, 2012). The use
of over 300-work schedule models allows BMW group the flexibility to adhere to market
and customer demands. The BMW group incorporates high-quality standards through
routine quality audits and continuous improvements. BMW group uses a multi-level,
comprehensive quality system to ensure quality standards in work processes, procurement
practices, and production practices. BMW uses a combination of JIT and lean manufacturing
approaches. Lean manufacturing involves systematically eliminating and reducing wastes
such as overproduction, transportation, inventory, over-processing, and defective units
(Zink, 2012). JIT or just in time processing involves order based processing instead of
forecast based and results in minimal inventory at every stage. TQM ensures employee
participation in problem-solving and troubleshooting. Another aspect of quality
management is compliance. It involves ensuring adherence to global and local regulatory
standards in the fields of logistics, manufacturing, packaging, and handling of the BMW end
products. Digitisation helps BMW not only in quality management but also in specific fields
like production. This involves analysing the data generated during different stages of various
processes within the organisation to identify a trend, problem areas etc. This information
allows the manager at BMW to identify the problems and implement solutions to ensure
quality standards. The Smart Data Analytics helps in improving the manufacturing process at
BMW. It facilitates the creation of accurate forecasts that help in optimising the existing
process and allows continuous improvement in terms of lean production (Zink, 2012). The
BMW group ensures the quality standards at the suppliers end through collaboration and
joint process development. At the supplier’s facility, the product and product processes are
developed by the BMW group through a process known as Maturity Level Assurance.
Various quality management tools like the RMT or risk management for parts application,
LPKM or supplier performance and competence management, SWS or supplier warranty
status, and TQP or parts quality in logistics and the production are used to ensure quality
standards. The Total Quality Management Processes of certain other manufacturers form
the industry standards (Zink, 2012). One Automobile maker that outshines the others in
quality management is Toyota. Toyota is known for its quality standards and lean
production system (Yang and Yang, 2013). Toyota incorporates tools such as PDCA, 5S, A-3
reporting, and 8-step practical problem-solving. The quality management approach of
Toyota ‘The Toyota Way’ is based on continuous improvement or Kaizen and focuses on the
4

Understanding Operations, Logistics, and Supply Chain Management
elimination of overproduction and waste while creating an environment in which any
employee can suggest changes as and when they wish. Its focus is on long-term
improvement and is a highly successful quality management approach (Yang and Yang,
2013). The Toyota way is considered to be a benchmark in the automobile industry in terms
of quality management and BMW needs to work some more to arrive at a similar level.
Currently, the BMW group is successful in maintaining its quality standards in the
production process as well as in the supplier network. As a result, the name BMW is
associated with engineering excellence and premium quality.
Supply Chain Business Relations Management
The global presence of BMW Group and the presence of its manufacturing operations at a
number of different locations makes the management of supply chain business relations an
important aspect of the smooth running of BMW Business. The management of supply chain
business relations comes under the purview of operations and supply chain manager
(Lavastre et al., 2014). An operations manager or a supply chain manager has a
responsibility to maintain good supplier business relations since the global structure of
BMW, makes effective management of supplier relationship critical for the organisational
success. The supplier network is important not only since it’s responsible for supplying
quality parts and other required inputs necessary for continuous product manufacturing but
it’s also an important contributor to the value creation, innovation, and quality assurance
(Lavastre et al., 2014). The BMW group has three different categories of suppliers Concept
Suppliers, Series Development Suppliers, and Market Suppliers. The Concept Suppliers are
responsible for developing technical concepts; the series development suppliers are
responsible for developing a process for series production on the basis of a given concept
while the market suppliers are responsible for supplying the standard parts. BMW group
works with over 12000 suppliers across the world in over 70 countries (Bmwgroupb, 2019).
The basic requirement for a supplier is maintaining similar innovative, technological, social,
and environmental standards. The BMW group manages the supplier network on the basis
of the Supplier Sustainability Standards. The Supplier Sustainability Standards is compliant
to labour and social standards, and human rights (Bmwgroupb, 2019). The BMW Group
considers the Supply chain as the heart of their business operations. BMW group ensures
5

Understanding Operations, Logistics, and Supply Chain Management
sustainability focuses on two key areas that are managing and minimising the risk and
coordinating with suppliers for leveraging the potential. Risk management involves
assessing a supplier’s sustainability through the analysis and identification of sustainability
risk of the supply chain. The suppliers are involved deeply with the company through
activities like this along with training and enabling the supplier and actively involving them
with stakeholders in different initiatives. BMW also has initiatives like BMW supplier
Innovation Awards given to suppliers for outstanding innovations and development
(Bmwgroupb, 2019). Over 100 years of experience in handling and managing the suppliers
has given the BMW group an insight of efficiently managing the supply chain business
relations allowing it an edge over its competitors. The BMW group not only focuses on their
suppliers but also on sub-suppliers to maintain desired transparency levels and curb any
potential risks (Bmwgroupb, 2019). The approach can be justified on the basis of the Bosch
fiasco that led to closure or slowdown of BMW manufacturing units resulting in a shortage
of finished goods and delays in the delivery time. All this happened since the sub-supplier of
Bosch was unable to provide timely delivery of steering gears which led to delay in supply of
steering gears to BMW. Due to the incorporation of ‘Just in Time’ strategy, the BMW group
doesn’t have an inventory of many a part sourced through the suppliers. Supply of most of
the parts is in tandem with their installation time (Bmwgroupb, 2019). The JIT or Just in Time
strategy may hinder the automobile manufacturing process since the dependability of
carmaker on suppliers for timely delivery becomes severe. As discussed in the Bosch’s
fiasco, the dependability of BMW on suppliers makes real-time collaboration and
communication a necessity. Timely and correct information plays a critical part in efficient
supplier management along with effective supply chain business relationship management.
BMW group focuses on creating a supplier relationship based on understanding and trust
(Bmwgroupb, 2019). The company establishes and improves the processes at the supplier’s
facility by lending its technical expertise and monitoring the said process. This allows the
company to gain competitive advantage along with its supplier while earning a profit in the
long term. The BMW groups approach helps in the creation of an effective collaboration
while promoting transparency (Bmwgroupb, 2019). The supplier relationship management
is crucial since it helps address a number of factors such as mitigating risks, optimising
performance, reducing costs, instilling loyalty, enhancing administrative efficiency, and
protecting the brand reputation.
6

Understanding Operations, Logistics, and Supply Chain Management
Triple Bottom Line Approach
The triple bottom line approach adds the parameters of environmental and social
considerations in organisations focus on economic gains. It helps in measuring the economic
value, social responsibility, and environmental impact of an organisation (Azevedo and
Barros, 2017). BMW group is known to report revenues along with social and environmental
reports indicating a preference to report three bottom lines. The social aspect of their
report describes their activities of supporting and paying back the local community as well
as the global community. The environmental reports include their effort of becoming a
green organisation by minimising the wastage, focusing on recycling, minimising the use of
environmental resources, focusing on reducing the car emissions, etc. The BMW group
believes in taking the environmental and social responsibility of their business actions
(Azevedo and Barros, 2017). They believe that sustainable economic success is only possible
when a company seeks social acceptance by acting responsibly. The company publishes a
sustainability report annually listing its work on environmental and social aspects and
discussing their work in both areas. They include a list of environmental agencies they are
associated with either directly or indirectly (Azevedo and Barros, 2017). The sustainability
report also contains the company’s financial reports of the company. In its 2018
sustainability report, The BMW group earned a profit before tax of €9815 million while in
2017 the figure was €10655 million (Bmwgroupc, 2019). The BMW group was able to reduce
its CO2 emission by 42% as compared to the 1995 base year. The BMW group spent €349
million in 2017 on further education and training and it increased to €373 million in 2018
(Bmwgroupc, 2019).
Recommendations
The BMW groups work on operations, logistics, and supply chain management is quite good,
especially in the field of quality management and supply chain relationship management.
Their work in creating and establishing the process at the supplier’s facility seems to be a
good initiative for the long-term association and a good way of establishing trust and
transparency. Initiatives like BMW Supplier Innovation Awards are crucial for promoting
innovation that can be beneficial for the organisational growth (Bmwgroupb, 2019). In spite
of the processes and systems in place, the case of Bosch highlights the dependency of the
7

Understanding Operations, Logistics, and Supply Chain Management
company on suppliers for parts and any delay may adversely affect its production operation
across the world. The BMW group can correct this by making the supplier accountable for its
sub-supplier that may mitigate any financial risk associated with the delay from suppliers
end. The company's focus on improving the transparency in its relationship with suppliers
and sub-suppliers can also be a good way of minimising the risk of delay. Also, incorporating
robust communication practices may be beneficial in such scenarios since timely
information is crucial in today's business environment and a timely intimation of potential
delay may allow the company to make alternate arrangements (Zink, 2012). In quality
management front, the company is doing quite well. Their continuous reputations of
delivering premium products and for engineering excellence attest to the effectiveness of
the quality management in place. The company can consider certain aspects of the Toyota
Way like incorporating employee’s views in the quality management review and
improvements. Although, even in its current state, the quality management practices of
BMW is exceptional in terms of company requirements.
Conclusions
The essay focuses on understanding the operations, logistics, and supply chain management
practices of an organisation. The German automobile multinational BMW Group is
considered as an example for the purpose of understanding its quality management
processes and supply chain relationship management (Lavastre et al., 2014). The supply
chain relationship management practices of the BMW group are found to be exemplary with
a focus on developing trust and understanding between the company and the supplier. The
Company is striving to create a transparent relationship between itself, suppliers, and the
sub-suppliers and focusing on promoting innovation. The company's approach is allowing
the company and the suppliers to gain a competitive advantage. The quality management
practices of the BMW group are innovative and effective and the cause of the company's
reputation of providing engineering excellence and premium quality products (Zink, 2012).
8

Understanding Operations, Logistics, and Supply Chain Management
Reference List
Azevedo, S.G. and Barros, M., 2017. The application of the triple bottom line approach to
sustainability assessment: The case study of the UK automotive supply chain. Journal of
Industrial Engineering and Management (JIEM), 10(2), pp.286-322.
Brown, S. and Bessant, J., 2013. Strategic operations management. Routledge.
Bmwgroupa., 2019. Bmwgroup. [Online]. [28 March 2019]. Available from:
https://www.bmwgroup.com/en/company.html
Bmwgroupb. 2019. Bmwgroup [Online]. [28 March 2019]. Available from:
https://www.bmwgroup.com/en/responsibility/sustainability-at-the-bmw-group.html
Bmwgroupc., 2019. Bmwgroup. [Online]. [28 March 2019]. Available from:
https://www.bmwgroup.com/en/responsibility/sustainable-value-report.html
Christopher, M., 2016. Logistics & supply chain management. Pearson UK.
Lavastre, O., Gunasekaran, A. and Spalanzani, A., 2014. Effect of firm characteristics,
supplier relationships and techniques used on supply chain risk management (SCRM): an
empirical investigation on French industrial firms. International Journal of Production
Research, 52(11), pp.3381-3403.
Mansouri, S.A., Gallear, D. and Askariazad, M.H., 2012. Decision support for build-to-order
supply chain management through multiobjective optimization. International Journal of
Production Economics, 135(1), pp.24-36.
Oakland, J.S., 2012. Oakland on quality management. Routledge.
Yang, C.C. and Yang, K.J., 2013. An integrated model of the Toyota production system with
total quality management and people factors. Human Factors and Ergonomics in
Manufacturing & Service Industries, 23(5), pp.450-461.
Zink, K.J., 2012. Total Quality Management as a holistic management concept: the European
model for business excellence. Springer Science & Business Media.
9