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BMW Mini Big Decisions Under The Brexit Cloud Case Solution
The leadership BMW wanted to ascertain whether it was the right option to manufacture the electric version of BMW’s iconic mini car at the historic location of its UK plant in Cowley. Brexit created a difficult situation for different businesses to operate in a comfortable and suitable environment in the UK market, particularly those that benefited to a great extent from the free trade benefits offered by the European Union. Although, the management wanted to manufacture the plant in the UK, but supply chain and cost issues mandated the management to critically reflect on all the viable options, before they can arrive on a formal decision. Before analyzing the issues in detail, it is important to consider the background of the case.
Following questions are answered in this case study solution
Decision Criteria and Possible Options
Case Analysis for BMW Mini Big Decisions Under The Brexit Cloud
Mini brand of BMW was produced for targeting young people in the urban market, who wanted to stand apart from the rest of the crowd. The brand has a total of four variants, and majority of the units were produced in Cowley (210,971 units). The production network for this brand was highly globalized in nature. It consists of 30 production and assembly sites in 14 countries. The customers of the brand also had the option of customization according to their preferences, six days before the assembly. The facility had complex operations, with the responsibility of managing 12000 different parts coming from 500 suppliers. In order to maintain efficiency, planning was done for managing the communication between suppliers and managers, so that the demand from the customers can be appropriately met by the management of the company. It was an important decision on part of the management to ensure that by 2025, 15-25% of the cars sold by the company are those with an electrical engine (Mark, 2019). As of now, the most important market for electrical car, in terms of the demand, is China. It has been observed that the demand for electrical vehicles is moving up, and BMW wanted to capitalize on that opportunity. However, the announcement of Brexit created a lot of issues for the automobile manufacturers, as they were required to manage several issues. It is now important to focus on the issues, so that appropriate recommendations can be given in response.
Substantial Increase in Costs Following Brexit
The case provides information that majority of the components used in the manufacturing of the cars were procured from the EU countries. After Brexit, these imported components were to be liable for tariffs that can considerably increase the overall costs for the company. Previously, UK benefited a lot from the free trade incentives that were enjoyed by all the member countries of EU. The automobile industry benefited a lot from the free trade area in the EU region, and with that advantage lost, thins are likely to become complicated for BMW (Mark, 2019). Apart from this, the automobile giant might have to look for other potential sites, for the purpose of manufacturing the electrical vehicles. This could also be a costly decision for BMW, as it has already made substantial investment in its UK plant. Also, the infrastructure of the assembly line for the new car will require additional planning and cost; and, doing that from scratch in a new market can be a substantial addition to the cost structure of the company (Kouvelis & Dong, 2017).
Supply Chain Coordination Problems
Coordination is an important issue in the supply chain of the production of mini cars. The manufacturing of mini car is a complex issue, and there is a need to make sure that effective communication is done with suppliers, in order to make sure that the production of vehicles is done in an appropriate manner. Furthermore, manufacturing electrical vehicles entails its own complexity, and so appropriate measures are needed to be taken. Network procedures like Just-in-Time (JIT) and Just-in-Sequence (JIS) are also done to ensure that the operational framework is effective, and minimizes the overall cost of manufacturing. The production of the car involves multinational operations. For instance, the engines are manufactured in Germany, and then they will be shipped to the main plant, where it was placed into the car. Moreover, the batteries are supplied by Samsung in Korea. After Brexit, the regulations are likely to become quite strict pertaining to transmission of different parts within the same region (Mark, 2019). Transporting of components might become a hectic procedure, leading to possible delays. This would further require BMW to reschedule its various supply chain activities. Although the manufacturing model of mini car is quite flexible, it is important to take into account different factors like these, in order to make sure that potential problems do not arise for the brand (Kim & Chai, 2017).
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