Streamlining logistics for the ultimate driving machine

During a recent visit to BMW's Plant Regensburg Simon Duval Smith talked to Jürgen Maidl, Senior Vice-President Production Network, Supply Chain Management about how connected distribution is set to revolutionise inbound and outbound logistics at the carmaker 

On my visit I saw developments of technologies seen previously, and many new initiatives in powering the supply chain with advanced IT and connectivity. Seeing the progress of these led me to ask Jürgen Maidl if he thought there will be a point when he can say: ‘We have done what we needed to do to reach optimum efficiency through connectivity’, or is it an ongoing process?

Steven Armstrong

Jürgen Maidl

"It is a process of constant innovation but there will be a time when we can say that the basis is set and for IT it is set now,” he says, adding: “I would say that BMW IT Services is almost 80% set and we can now install all the IOT devices into the environment very easily. For example, we had a proof of technology for moving high voltage batteries around various difficult corners in the plant, we have installed a Smart Transport Robot (STR) in one of the halls and 24 hours later we could carry out the first fully laden proving sessions. With the power of our IT, projects like this are easy to implement and can be brought online very quickly. Next year we will have 30 STRs running on the production floors. To make the whole production environment IOT-automated will take longer and I may not still be in the company when it is finished!"

Sharing technology

BMW is sharing a lot of its technology with other carmakers in order to create a common set of standards and I ask Maidl to what extent will this be important when it comes to autonomous driving. He says that commonality will be important for protocols and to resolve timing issues in the interfaces between the various systems. "We will look at such things as edge computing and find out what hardware will power autonomous driving and what standards will need to be created. We are working with the VDA [on automotive standards] in Germany but also with the VDMA, the German machinery association. Standardisation is not only important for the automotive industry, many of these standards are set and used by retail companies like Amazon and H&M. I am not sure if it will be in the realm of ISO certification or it will be a logistics-led initiative and whether it will be organised on an international basis; we are starting in Germany as this country is a nation strong in engineering and machinery providers."

Maidl says that cooperation with other members of the supply chain, including suppliers and logistics providers, will work well as information openness will extend to allowing greater transparency of BMW's production activities. "Our partners will see our production status earlier, they will see production call-off times earlier. This will help them manage their production planning better. If we see some constraints coming up in their planning, which we can anticipate with our planning and give them faster feedback, this can only help the whole chain. It is not just about the openness itself, it is really in the choice of data; the deeper you go into the system of a supplier, the more they are likely to refuse to share information. I can understand this as they might fear that we will take over the management of their company which is definitely not our intention, so we have to strike the right balance."

Global differences in outbound logistics

As BMW sells around the world, so the differences in customer expectations require production, specification and transportation to be tailored for each market. In Europe and much of the world, most BMW vehicles are built to order, with customers either ordering their choice of vehicle with options and accessories from their local dealer or online, and being happy to wait for the vehicle to be built and delivered. In the US, the model is somewhat different; vehicle buyers often want to visit a dealer, find their ideal vehicle amongst a large selection in the showroom and drive it away there and then or very soon after. BMW's Connected Distribution model should help a great deal with satisfying these different purchase models, as Maidl tells me: "At the moment our flexibility, enabled by a more connected production and outbound chain, is not only to the benefit of our customers but also is used by our dealers for their replenishment.

"Yes, as you say there is the scenario of the customer of the customer visiting a dealer and walking through the lines of cars and choosing their ideal or near-ideal vehicle. Then the dealer goes into his order pipeline and can change his forthcoming vehicle order to include a similarly-specified car to refill his stock. This order flexibility will not change, it will just improve thanks to our increasingly connected model, as long this is the way of doing business in the US.

"As to customisation in a vehicle distribution centre (VDC), this might change but there is also a trade-off with the homologation of the vehicle so for a lot of hang-on parts customisation may work but when you get to changing wheels and tyres, this starts to get tricky. If the changes affect the vehicle's software, this gets even more difficult as this can take you into homologation areas. In homologation, we have the issue of the Confirmation of Production (COP) certificate and we have to deliver this for every vehicle.

"In time we may see a constant replenishment of dealer stock, driven by us and not the dealer, following the Apple type of distribution model."

Pooling and shared distribution

Several carmakers use a dealer pool system of marshalling vehicles on docksides and in holding areas, this allows dealers to source certain specification vehicles that may have been ordered (and/or over-ordered) by another dealer or dealer group, to speed getting the right vehicle to the customer more quickly. I ask Maidl if this is something that he and BMW, in the US and indeed globally, have considered and whether BMW's new 'connectedness' will help enable this. He says that this policy depends on quantity. "If you have small quantities of cars it is a good method because if a dealer only buys 10 of a particular model in a year it is unlikely that he will be able to quickly order the right car for replenishment. If a dealer is selling 300 3-Series per month then pooling does not really make sense as the effort would be greater than the result. We are talking about what we call central pipeline management for smaller volume car models and we have this in place in some regions." I put it to Maidl that he does not want to have a lot of cars sitting on docks and in holding areas either. He says that it is a fiscal issue too. "At the end of the day, this is also a cash flow question for us as well, as the cars are still on our stock."

Data security in the connected vehicle

During our visit to Regensburg and the review of the IOT connectivity in new models, the question of data security comes to mind; at what point is the car's connectedness with BMW turned on and off and how can all the actors in the supply chain and the customer be assured that their information is kept confidential? Maidl explained, "At the moment that the car arrives at the dealership, we turn off the [BMW Connected Distribution] connectivity and it cannot be turned back on. We post a signal that the vehicle is now at the dealership and from this moment on, the data security is switched on. To explain this better, where a PC or Apple computer or other device requires the customer to personalise their device or car, with a fingerprint or passcode, we do not do this. If we were to do this then we would know exactly when the customer takes over the vehicle and then we would have to close the connection for data protection purposes anyway."

The level of connectivity afforded by the new IOT technology could be a boon for law enforcement and other agencies that would like to track the movements of a vehicle and its driver but Maidl insists that the anonymity of the vehicle is not reversible except by visiting the dealership: "The vehicle status can only be changed by taking the vehicle into the dealership for repair and we can only harvest data with the customer's permission. For example, a customer can allow us to store their data in the vehicle’s Connected Drive by using the command at the end of the menu that asks if the customer would like to store the last point of data entry when the car is switched off. We had a case where we were compelled by the law courts in Cologne to reveal some data but this is an isolated case. Put simply, when Connected Drive is turned on, Connected Distribution information access and storage is turned off."

Working with design and back up the chain

With the forthcoming moves to autonomous driving, it is apparent that initiatives such as Connected Distribution will have to be 'built-in' further and further back up the vehicle development chain, to ensure that when autonomous vehicles might drive themselves off the line and to the dealer or even directly to the customer, each vehicle will be in close communication with the whole supply chain. Maidl says that his logistics departments are working closely with the vehicle software designers: "We are in the design loop, we give our requests to the design guys, we even finance our requests in that area and so this connectivity interface is in all the packages that they provide to us. The development cycles will last for some time until 100% of the car has everything available for autonomous driving, which will be an option on the vehicle - not every car will be so equipped. We are also testing how to build up a cloud of data to automate the car's driving; we will send the car a vector of two second's duration with instructions of how it should drive. The car can then be driven by a remote operator to the right place."

IT expertise in the supply chain

Many OEM supply chain executives have gone on record as being very concerned about the lack of IT competence in some parts of the logistics industry, saying that the logistics business generally is lagging behind almost every other industry in its level of IT competence, particularly in the finished vehicle arena. Maidl is sanguine on this point, saying: "At the moment we do not feel particularly hampered by this. Yes, many of these logistics companies do not have the IT infrastructure at present but like us they are investing heavily in this area. I don't see any issues on the horizon; they will have the right equipment installed in ports, and Ro-Ro ships will have IT facilities for sending data to our vehicles. I think they are on the right track. Are they moving fast enough? We will see."

BMW - ahead of the curve?

Maidl says that he feels BMW is a leader in the 'connectedness' of its supply chain but says that in some areas all major carmakers are making great advances in the area of connectivity. "I think in the areas of autonomous driving distribution using small trucks, we are ahead of many carmakers. In terms of inbound materials distribution automation, I think all of the major OEMs are doing the same but I believe that we have the most holistic approach. By holistic I mean being connected from materials into the plant, through assembly and on to finished vehicle handling. I think we are thinking and acting more broadly than some other OEMs."

Meshing new high-tech with automotive

Walking around the Regensburg plant and seeing the exciting IT programmes under development in everything from autonomous in-plant transport to the use of virtual reality, one might be forgiven for thinking that one is visiting a group of start-up companies. I ask Maidl how the integration of IT experts and traditional logistics and assembly personnel has been achieved? " We have done this in two ways; we started with a focused team, who were set up as a start-up. My department financed this, we placed them in a separate building and they had the opportunity to take projects from proof of concept through to production, using start-up methodologies such as 'fail-fast'. Luckily they succeeded. Now, with all these new technology solutions, they can go into any of our plants and find a lot of supporters in the existing workforce. We also sent them out to start-up conferences; I joined them at a technology conference in the US during a two week trip to the MIT region and to Silicon Valley, where we made many great connections. I was really delighted by the openness of this tech community; someone might say 'I do not have the solution you seek, it is not my area, but I know a guy who is doing something close to what you are looking for'. They drove us through their networks and now we feel we are part of those networks. This has led to us using many companies that you would not usually see in car plants."

I ask Maidl if he thinks that the logistics business is more open to this type of 'blue sky thinking' than say, body-in-white. He says: "I think logistics is 'common' and away from the traditional core business of making cars in many ways. Delivering and sorting parts, delivering finished vehicles has many processes that are common to many other industries, industries that are often far ahead of us in efficiency and innovation.

“We can go into these innovation communities to learn how to streamline our operations on the one hand, and on the other hand to learn how to best develop our own innovations." 

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