Connected and green - BMW's outbound network of the future

Anita Pieper took over as Vice-President of Vehicle Distribution and Vehicle Distribution Centres (VDCs) at BMW Group two years ago. She tells Simon Duval Smith how connectivity and increasing collaboration with the finished vehicle supply chain is powering the future logistics at the carmaker

BMW’s distribution and VDC department is responsible for the full outbound logistics chain, from the end of assembly through to dealer delivery; the department also leads the planning and designing of the logistics network, as well as plant yard and port terminal facilities. Purchasing and contracts are handled separately.

Anita Pieper

Anita Pieper

Anita Pieper was previously head of logistics and value-added production system (VPS) at BMW’s engine plant in Steyr, Austria, and held several roles at Bosch Rexroth, Terex Cranes and earlier at several German plants for Ford. I wondered what lessons she learned from these previous appointments and how might they have helped her integrate the new connected logistics methods at BMW. She says that being aware of the network that she works in, and the responsibilities of personnel in that network are some of the most important factors. "Awareness of the status quo in your organisation is vital and this gives me a special insight into how different the various departments I have worked in are." Pieper's time at Bosch Rexroth has given her particular insights to the challenges faced by suppliers, as she says. "Yes, I think it is important that you treat suppliers as partners and if there is ever a problem, that you work very openly together.

Communication is key to a successful OEM-tier supplier relationship and now that I am at BMW, I always try to visualise any challenge from the supplier's point of view so that we can get to a win-win situation for all parties."

Connecting outbound with the total OEM business

Finished vehicle logistics is often seen as being very much apart from the inbound chain, and from in-plant production and logistics systems but increasingly, logistics leaders like Pieper seek to draw expertise and experience from other parts of their companies, especially in BMW now that the carmaker is promoting its connected distribution model as part of future logistics, as Pieper tells me: "I am really convinced that if all elements of the supply chain at BMW work closely, we have the greatest benefits. For example, we recently had two positions open in the planning part of the vehicle distribution area and we have taken on two very good planners from the inbound side of the business, knowing that they have a lot of experience with connectivity. They have brought their expertise with mobile devices and alternative technologies for implementing our e-truck programmes."

I ask Pieper how she feels that outbound logistics has developed connections with production and sales, using the new Connected Distribution system and how will these areas change. She says that there have been significant improvements on the transparency of the production side of the business. "With the connectivity functions of the Connected Distribution initiative, we have now linked the planned finish day and time of a vehicle with what might be missing from it. Sometimes there are quality issues with a car; we have one dashboard that the plant and ourselves can see which tells us where the vehicle is and what the planned completion date of the car is, and what assembly or rectification remains to be carried out. This allows us to concentrate better on preparing each vehicle in good time. We have improved the working relationship we have with the plants.

"On the sales side we have more transparency of the order situation, from the plant right through to when a vehicle is on its way or due at a port. We are still working on improving links with the transport companies to make the complete chain transparent. We are using the connectivity functions when the cars are already in the market, at the VDCs or in the compounds, but we are working on having more visibility of vehicle movements up to that point."

Is IT lagging behind in the finished vehicle chain?

Senior logistics executives are often quoted as saying that logistics generally, and finished vehicle movements in particular are lagging behind production and other parts of the automotive industry in IT terms. Pieper says that there are differences in the age of some systems and that this can hamper productivity in finished vehicle logistics. "IT systems in the production area are often newer that those we have in outbound logistics. What we see in outbound is that, at least for distribution areas and at ports such as Bremerhaven, we have a standardised IT system, our vehicle distribution system and this works well for us. In all logistics areas we must link data together; we must have more transparency across all areas, involving distribution, quality management and vehicle orders, which come through our Pro-Flex system. In this data 'pool', we then use a monitoring system to help all players use the data. As well as linking all the information from the data pool, we must also involve supplier so that they can also access data that is relevant to them. With the data pool, we would also aim to have better visibility of their schedules and other business parameters."

Pro-Flex and refining schedules

BMW has traditionally used a point called the ‘F2’ stage as the stage at which the outbound logistics organisation takes responsibility for each vehicle. Pieper says that the increased connectedness of the whole chain has not changed this point but that the new systems can help with scheduling. "With the increased visibility of orders, the outbound team might see that a vehicle is a very urgent order and can address any quality issues more quickly. Of course we are ruled by the takt time of the plant, this is a fixed parameter."

Pro-Flex order and allocation system has helped to prioritise sold vehicles and expedite them through transport and accessory-installation and Pieper says that 2019 will be the time when the Pro-Flex system will be implemented further. "For us in distribution, Pro-Flex will mean that we will be able to see the customer's requested and arranged date of delivery very early and know that we have, for example, 200 cars which must be sent from Regensburg to Bremerhaven. We might have only 150 spaces on the train transport; we will know which cars are urgent and which we can ship the following day. Or we will be able to see that all 200 are urgent and we may have to use some truck transport."

BMW Logistics has been implementing a project/plan to combine the Connected Distribution programme, Pro-Flex, and a number of other data and IT projects into a dedicated innovation division called ‘Vehicle Distribution 2020-2025’. I ask Pieper how this has evolved; she says that the plan has enabled the finished vehicle division to capture all the data it needs. "At the end of last year we carried out a SWOT analysis to better understand the strengths and weaknesses in the distribution chain and we 'screened' this in our overall vehicle distribution 'picture'. We realised that we had to illustrate this exercise in detail to all our teams as when staff change, we need to keep a clear set of directives. For example, when we talk of F2 and F3 points and specialised terms, we must make these very clear to our people and go into more detail where necessary."

Outside expertise for finished vehicle solutions

In a recent interview, Jürgen Maidl, Senior Vice-President Production Network, Supply Chain Management at BMW told Automotive Purchasing and Supply Chain that he was delighted with the IT and technology expert people coming into BMW logistics from outside the automotive industry. Anita Pieper says that while the influx of personnel with Silicon Valley-type backgrounds is mainly in the inbound side of the business, she has seen some interesting input from 'outsiders' on the finished vehicle side too. "We have a new colleague who is from outside, who is working on improving our sustainability initiatives. These people from outside the automotive industry also often understand the political landscape very well and I think it a very good thing to get this knowledge on board, especially in the IT area."

The balance of in-sourcing and outsourcing accessorisation

BMW vehicles, by their nature and by the tastes of their buyers are highly specified and I ask Pieper if the balance of in- and out-sourced accessory installation and customisation is changing, is more work being done by independent processors or is the work returning to BMW as more vehicles are built to order. She says that the balance is not shifting, due to homologation issues, and cites the China market as an example. "In China, our dealers would like to do a lot more accessorisation but we have to say no as we are restricted by homologation. After a car is imported into China we cannot change it very much. In the US there is a lot of accessory installation already and this situation is not changing."

Speaking of the US market, where consumer behaviour is very different to many other markets in that the customer expects to walk onto a dealer forecourt, choose a stock vehicle and drive it away that day or very soon after and build to order is much less common than in Europe for example. I ask Pieper how this affects BMW's finished vehicle supply chain. "We have a stock market model and a built to order model. The built to order market, with its lead times from order to delivery of up to three months is current in Europe but for almost all the world we build for stock. Our sales organisations are very familiar with customers' tastes for ordering stock models and they have sophisticated templates for this. The added connectivity of today's and tomorrow's BMWs does and will give us more insight to our customers' preferences. 

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"The new features in the vehicles will also surprise and delight our customers as they often see or hear of a function in a BMW and are delighted to find that it has been added to 'their' BMW. Of course this means that it is more important than ever that our dealers are familiar with all the exciting new functions in our cars."

Connectivity challenges

As BMW vehicles become more intelligent and connected, with AI and autonomous driving, I ask Pieper if she sees the need for manual scanning and tracking declining or will a manual ‘override’ always be necessary? She says that the connected elements will streamline outbound logistics but that security is a concern. "We are thinking that, with the increased information embedded in each car, we will be able to see where each car is and through this we will try to eliminate more of the manual procedures. There are still some issues with the security, to avoid any hacking or other criminal activity being possible."

The China-Europe railroad alternative to shipping

The China-Europe railroad has been mooted as an alternative to shipping vehicles in and out of the region and I wondered how realistic this was for BMW, given the volumes of vehicles that the carmaker needs to move. Pieper says that it is a good alternative to shipping but it has drawbacks. "It is currently too expensive but we are convinced that if more OEMs take this up then costs could come down to an economical level. To achieve these economies of scale we have set up a project within our green logistics strategy, within the VDA. In this we are working with Audi, Volkswagen, Daimler and the supplier Schaeffler; this will get underway in April this year. We know that the train will be good for sustainability but while joint operations are not always easy to discuss with other OEMs, in this case the green element makes for an easier discussion with other carmakers. Our inbound logistics colleagues use the Trans-Siberian railroad two or three times per week, with components travelling from Plant Regensburg and Plant Leipzig."

A port not a resort

Recently, in or surveys of ports around the world, some port operators say that there are still far too many vehicles sitting in holding areas, for far too long, citing that their facilities are ports not resorts. I ask Pieper how can Connected Distribution and BMW's other initiatives help to speed vehicles through to dealers. She says that usually there is no problem but there are peaks and troughs in vehicle movement to cope with. "When there is a storm at sea there can be two or three vessels arriving at once and then it is difficult for the port to have enough staff to unload the vehicles so we are trying to avoid these peaks by working closely with the shipping companies and the VDCs to prepare them for these events. It is difficult to time loading and unloading but we always aim for on time and rapid loading; unloading is sometimes deferred but at least we can ensure that vehicles are on the ship at the right time - having two uncertainties makes life very difficult."

Feeding growing US demand with another West Coast port

BMW has said that growing US west coast market sales may require the use of another, second entry point in the northern part of California, as well as the port of Hueneme. I wondered how these plans developed. Pieper says that there are discussions underway. "We have plans for a second VDC on the West Coast and also further north but the difficulty is finding a location that is safe from earthquakes for insurance reasons. This new entry point is likely to be in the San Francisco region."

Opportunities for logistics providers with BMW

With the revolutionary changes in BMW's logistics operations, through connected distribution and vehicle connectivity, I ask Pieper what does a logistics provider need to offer to become a partner of the German carmaker. She says that transparency is key: "We need transparency and connectivity with our logistics providers, to deliver more data to us quickly. And of course they need to have the capacity to service our requirements and they need to aim for more and more sustainable transport solutions. We need better fuels to power transport, LNG and CNG to power vessels and trucks. These measures are needed to satisfy forthcoming legislation but also to work towards a green and sustainable world of logistics. While we are obviously focused on the business case and costs, we need to recognise that making tomorrow's world greener may cost more but it is priceless." 

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