BMW may consider itself a niche manufacturer, but what a niche.

While the Big Three automakers build cars for the masses, BMW produces luxury cars with a wide range of options. As a result, the automaker's worldwide dealers stock very little inventory on their lots. Instead, the emphasis is on showrooms where customers place orders with only the options they select.

Accommodating such a customer-build philosophy requires BMW's recently expanded manufacturing facility in Spartanburg, S.C. to operate with maximum flexibility. Beginning in July 2002, the plant moved to a pull system that builds customer-specified cars within 10 days of order placement. BMW calls this new approach 'customer oriented sales and production' (KOVP in its German acronym).

Central to making this happen are new materials handling systems, especially automated staging systems, and planning, execution and manufacturing software.

Now that it has shifted gears, the company has lowered overall inventories, virtually eliminated parts storage at the line, reduced inventories at its suppliers, and provided a much faster turnaround time from order to delivery.

'This approach has had a huge impact on our entire supply chain,' says Manfred Stoeger, vice president of logistics and information technology. 'It provides a great amount of flexibility while we customize to meet the needs of our customers.'

Much of this change to pull manufacturing is permitted because of brick and mortar and materials flow system changes made at Spartanburg, along with software systems that provide real-time information on the entire manufacturing process. By improving these systems, BMW has been able to cut by more than half the lead time required to begin production once an order is issued.

A new body shop and assembly line were added in 1998 to handle the manufacturing of the then-new X-5 Sports Activity Vehicle (BMW's SUV), expanding the facility to a whopping 2.1 million square feet. A new body shop was also created in the plant in 2001 for the latest version of the two-seater Z-4 Roadster. This is the only plant in the world that builds these two models and they are exported from South Carolina to drivers worldwide. They are also the only two models built at Spartanburg.

Also crucial to cutting lead time was a change in when an order is assigned to a particular work-in-process assembly. In the past, the assignment was made to sheet metal—when a car had begun to be formed in the body shop. Now the assignment is delayed until after the body is painted, stored temporarily and then pulled for assembly to match a specific customer order. This change means that a customer can choose options up until only six days before final production of the car begins.

An automated storage and retrieval system (AS/RS) acts as a buffer to make the delayed assignment possible. As cars exit the paint shop, they go into the AS/RS, also known as a stacker, where they are held until the assembly line is ready to build that particular car with all of its options. To make the transition to the pull system easier and to accommodate growth, a second stacker unit was added when the plant expanded with the new assembly and body shop.

Together, the delayed assignment and the use of the stackers for buffering permit a great deal of flexibility. Not only can buyers change their minds late in the game (up to six days before assignment), but BMW can alter the build sequence until nearly the last moment to accommodate any supply bottlenecks that may occur.

Managing the flow of information is also significant to success. This is where a sophisticated enterprise resource planning system and associated production software come in. Specific requirements for individual customer orders are broadcast daily to each of the suppliers for cars that will be produced.

'We have changed our information systems completely internally and to our suppliers,' says Stoeger. 'We are able to keep our suppliers constantly in the information loop. In general, the KVOP process has enabled BMW to keep an extremely high sequence adherence in assembly. This provides accurate and stable demand data to our suppliers.'

Such linkage between BMW and its suppliers makes certain that the parts arrive in sequence at the line at the exact moment that a car body needs the parts to fill a customer order. Production of the vehicle is completed within two days.

Another key component in BMW's move to leaner manufacturing was the addition of a highly automated parts warehouse known as The Sequence Center (see the Warehouse of the Month, Destination: Production). This facility receives and temporarily stores parts coming from distant suppliers. When the parts are needed for production, workers assisted by automated systems gather the parts and sequence them to meet the specific build order. The parts are then transported on a pallet conveyor through a connecting bridge tunnel to the manufacturing plant.

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

Click on the icon to read how GM's Lansing Grand River assembly plant compares to BMW's manufacturing facility.