Mass Customization: The BMW Way

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Case Details:

Case Code : OPER051
Case Length : 12 Pages
Period : 1990-05
Organization : BMW Group
Pub Date : 2005
Teaching Note : Available
Countries : Germany
Industry : Automobile

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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"For us, the experience of driving a BMW has to be aspirational, special. The R&D is designed to take that ultimate driving experience one step further. There will never be a boring BMW."

- Helmut Panke, Chairman of BMW, in 2002.¹

"BMW is setting an industrial benchmark. Our focus is to follow the market demand. It is a challenge to our supply chain, but gives us a competitive advantage."

- Manfred Stoeger, vice president of logistics and information technology, in 2004.²

BMW's New Plant

In May 2005, the BMW Group (BMW) inaugurated its new plant in the Leipzig area of Germany. Gerhard Schröder, Germany's Chancellor, opened the plant along with Helmut Panke (Panke), the Chairman of BMW. The opening was also attended by several other political dignitaries from Germany.

The foundations of the Leipzig plant were laid in 2001. Panke said that availability of highly qualified staff, high standards of supplier quality, legal security and excellent infrastructure were the main reasons for choosing Leipzig over hundreds of other German and foreign locations that had bid for the plant.

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BMW had invested more than €1.3 billion in building the Leipzig plant, which was to manufacture the BMW 3-series³ cars. The plant had a maximum annual production capacity of 650 cars per day and was expected to create 5500 jobs in the area when operated at full capacity.

As with all other BMW plants, the Leipzig plant was designed to allow maximum flexibility and effective communications - two factors that BMW emphasized for customization of its cars. BMW was reputed for its customization program, which allowed buyers to design their own cars from a set of available options. These orders were then conveyed to the factory which manufactured them according to the specifications, and delivered them to the buyers in the shortest possible time. In manufacturing circles, this system is called 'mass customization', as it combines the advantages of mass production with those of customization. Most analysts agree that BMW was one of the prominent implementers of mass customization in the auto industry.

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1] Nigel Holloway, "The Best-Driven Brand," Forbes, July 22, 2002.

2] "BMW: Custom cars on demand," Modern Materials Handling, February 1, 2004.

3] The BMW model lineup was split into different series. 1-series included entry-level small cars and 7-series were super luxury executive cars.