Introduction
BMW Group is one of the most successful automotive companies in the world and is a considered a brand leader in the premium market segment in the United States. Despite competitive pressures within the market segments and among the low and mid-priced automotive, BMW’s vehicle volume sales continued to increase by 5.2% in 2015, thanks to the normalization of the global economy. Its revenues also increased by 14.6% and reached $92.2 billion while its net income reached $6.4 billion, a 10% increased from the previous year (BMW Group, 2016).
As per location, Germany accounted for 42.6% of the BMW volume sales, while Eastern Europe bought 19.7% of the BMW’s vehicle volume of 1,905, 234 units. Other countries/regions with significant BMW purchases are NAFTA (15.9%), rest of Western Europe (15.8%), Asia/Australia (4.6%), and Africa (1.4%) (BMW Group, 2016).
BMW Group’s success became possible because of the several factors such as economic normalcy in many regions and countries of market, strategic expansion of production network. The group currently has 30 production sites in 14 countries (BMW Group, 2016). The three new production sites include Shenyang, San Luis Potosi, Mexico, and Spartanburg, USA.
Other factors of success are new models and technologies, digitalization, and supply chain management. According to BMW Group’s annual report (2016), the manufacturing plants in Landshut and Wackersdorf produces the variety of components that are supplied to the company’s worldwide production network. The company’s supplies of carbon fiber and carbon fiber fabrics are produced in Landshut and Wackerdorf, USA. BMW sources the petrol engines for its branches around the world from Shenyang, China (BMW Group, 2016). The company also has partner plants which are meant to serve the regional markets and the countries nearby to them such as Kulim, Malaysia, Cairo Egypt, Kaliningrad, Russia, and Jakarta, Indonesia.
BMW’s Supply Chain Management Ethical and Quality Assurance Standards
According to its website, the company’s global network of suppliers (130,000 in 70 countries) is the key contributors in BMW’s value creation, success, quality, and innovation (BMW Group’s, 2017). As such BMW established its own quality and ethical standards in supply chain management in the form of drafting and implementing environment and social standards (BMW Group, 2017).
The company’s sustainability standard requires BMW to comply with national and international standards of human rights, labor laws and social standards. Such also encompasses innovation, product, and product quality, and competitive prices (BMW Group, 2017). To achieve the standards, BMW Group (2017) requires each network to identify presences of any risks including the minimal sustainability risks and assess them and conduct audits to prevent breaches. Another is that it encourages each network to leverage opportunities and work with suppliers. The main idea is to minimize risks and exploit opportunities (BMW Group, 2017).
The key principles of the company’s supplier sustainability standards include resource management and environmental protection, social responsibility, compliance, and ensuring compliance/consequences of misconduct (BMW Group, 2017).
For the Resource Management and Environmental Protection, the company has specific rules, the 19th item BMW Group International Terms and Conditions for the Purchase of Production Materials and Automotive Components and the BMW Group Terms and Conditions for Non-Production-Related Supplies. The thrust is to reduce environment impact, implement consistent environmental protection programs, management, and standards, and reduce resource consumption (BMW Group, 2017).
The company’s social responsibility mainly pertains to the implementation of the human rights, particularly of the labor rights, and preserves human dignity. The company’s thrust is to comply with standards and prohibit practices of child labor, discrimination, freedom of association and employment, freedom of association, compliance with work and safety regulations, and prohibition of human trafficking (BMW Group, 2017).
BMW also ensures that supplier has contractual arrangements that the subcontractors comply with these standards, and apply consequences to any misconduct as determined during audits and assessments (BMW Group, 2017).
International Quality and Ethical Standard Benchmark for automotive industry
In September 2016, the International Automotive Task Force mandated a new standard for Corporate Social Responsibility which required certified organizations to create policies about anti-bribery, code of conduct, and whistleblower (Benett, 2016). In October 2016, there is a revision in the new industry standard and it included language in the corporate ethics and such includes the inclusion of the behavioral expectations code for the sites worldwide, report code violations, and create anti-bribery policies (Quality Digest, 2016). The Automotive Industry Action Group welcomed these changes (Creason, 2016).
The ISO/TS 16949 Certification for the Automotive Industry is the recognized quality management certification for the sector’s supply chain. Its eight quality management principles include customer focus, leadership, and involvement of people, process approach, and system approach to management, continual improvement, fact-based decision making, and mutually beneficial supplier relationship (Bureau Veritas Group, 2016).
Proposed ethical and quality standards for BMW Group
R enhances its quality and ethical benchmarks in the supply chain management. While the existing policies of the company are sound and good, it must be enhanced by including policies about anti-bribery, code of conduct, and whistleblower.
It must also set policies that will enable employees, suppliers, and other concerned parties to adhere to quality management standards that manifest customer focus, leadership, involvement of people, process approach, system approach to management, continual improvement, fact-based decision making, and mutually beneficial supplier relationship
Among the proposed benchmarks include the heavy sanctions on bribery and corruption practices. BMW should do efforts such as terminating employees that are engaged in the shady government dealings, and provide punishments, suspension up to termination to employees that engages in bribery and corruption. Employees that receive gifts in exchange of favorable dealings will be suspended for at least three months or terminated depending on the gravity of offense.
The second proposed ethical benchmark that can be applied and added to the current supply chain quality and ethical standards is the enhancement of culture as a form of code of conducts. All employees should resemble and practice customer centrism, leadership, unity, innovation including ideas on process improvements, decision making based on facts, and fair dealings to t suppliers. Violations of the code of conduct for each manifestation may result to suspension up to termination for the habitual violators.
The third proposed benchmark is the protection of whistleblowers. For any reported violations, the whistleblower will not be subject to retaliation. A group of auditors will investigate the reported violations and act accordingly if the accusations were proven true or false.
How BMW Group should manage the operations in the movements of products across country borders
BMW Group has great advantage because of its high number of production sites across the globe. Therefore, it has less reliance on international supply chains on exports or distribution (The World Trade Organization, 2016). Automotive companies that distribute internationally are subject to tariffs, domestic content requirements, import substitution policies, trading rights restrictions, and license requirements (Cannis, B. and Morrison, 2013).
According to the Automotive Audits (2017), the global requirements for automotive industry are manifested in ISO/TS 16949:2009 technical specification which combines the requirements of management systems and international automotive requirements. These should be in accordance to the standards such as VDA 6.1 (German automotive industry), QS-9000 (American automotive industry), EAQF (French automotive industry), and AVSQ (Italian automotive industry) (Automotive Audits, 2017).
The ISO 9001 remains to be the core specification of the standards of the automotive industry which is also supplemented by six automotive manuals including the Advance Product Quality Planning (APQP), Production Part Approval Process (PPAP), Statistical Process Control (SPC), Measurement System Assessment (MSA), Failure Mode and effects analysis – FMEA, and quality System Assessment – QSA (Automotive Audits, 2017).
These standards are meant to transfer the requirements to the suppliers to improve the quality, cost efficiency by eliminating product defects, and improve company and brand image for the manufacturers Automotive Audits, 2017).
In the automotive industry, the trade associations and the Department of Trade and Industry is the best office to approach in the supply chain management as these requires international operation. The Department of Trade and Industry is ideal resource information for tariffs, quality requirements, export and import licenses/documents, as well as international standards regulatory and policy changes in the export and import markets. The Department of Trade and Industry is also the government agency that can provide trainings on any inadequacy relating to the automotive sector.
The European Union introduced new Safety Standards in November 2014. The new safety standards include the electronic stability control system, the requirements of safety features in the new vehicles such as seatbelts, ISOFIX child seat anchorages, pressure monitoring systems, and gear indicator (European Commission, 2017).
The proper contact person for each category are the local Import/Export official in the local/country offices of the World Trade Organization, the Department of Trade and Industry import and export official/department for the ISO certifications, product standards specification, and the country’s official for the commission on automotive safety.
Conclusion
Manufacturing and distributing premium brands of automotive products can be very challenging in terms of supply chain management. This is because the company needs to comply with the ethical and quality standards, the trading requirements, safety standards, as well as the product standards.
The standards may change in the future, hence, the company needs to be abreast not only on the political and economic developments of the sites of productions but also in the international standards so that the company can continue take advantage of the growth and achieve continuous sustainable leadership. It must also be updated in the changes on consumer lifestyle as well as income segments so that it can identify possible changes in the supply chain that can benefit the company towards prevailing trends
The company should also enable continuous innovation. According to a research, by 2020, there will be at about 25 billion connected vehicles on the road, which will let the introduction of new in-vehicle services and automated driving capabilities. Within the next five years, Internet of Things (IoT) will be the key trend for the new vehicles as the proportion of new vehicles equipped with in-vehicle services and automated driving capabilities will radically increase.
Being able to keep with these changes even in technology will enable upgrades in the supply chain management and achieve leadership in new opportunities. Research and development activities are critical especially that more automotive have already increased their partnerships and associations with Engineering Services Outsourcing vendors due to financial challenges and is expected to impact competition in terms of price, product design, and quality
Technology will be a key differentiator in the competition in the forecast period as there integration of technology is expected to change consumer expectations. Such will provide both challenges and opportunities for the BMW Group. The key to success in the future is not only adhering to the standards relating to the supply chain management but also research and development, technological innovation and good customer experience.
BMW Group, as a premium provider of automotive needs to be very sensitive and very capable in these areas especially with technological advancement, product quality, and customer experience as consumers increasingly demand not only for premium products but also premium services associated with the products.
Work Cited Page
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Canis, B. and Morrison, W. 2013. U.S.-Chinese Motor Vehicle Trade: Overview and Issues. Federation of American Scientist. Congressional Research Services. Retrieved from https://fas.org/sgp/crs/row/R43071.pdf Accessed January 8, 2017
Automotive Audit. Global requirements in the automotive industry. 2017. Retrieved from http://www.automotiveaudit.eu/en/audit-guidelines/global-requirements-in-the-automotive-industry Accessed January 8, 2017
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