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      10-11-2010, 09:41 AM   #1
Jason
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Post BMW's Push for Custom Order Cars

BMW's Push for Made-to-Order Cars

Forbes Magazine dated September 27, 2010

BMW can build a car exactly the way you want it, and fast. Now it has to convince Americans that's how they want to buy them.


Automakers would love to have more customers like Dr. Kevin Dean. When the 45-year-old oral and maxillofacial surgeon in Pensacola, Fla., went to a BMW showroom in April to buy a new X5 sport-utility for his wife, Carrie Ann, he wanted it all: titanium silver with a 5-liter turbocharged V8 engine; multicontoured, ventilated seats; navigation system; rear dvd entertainment system; and 20-inch alloy Y-spoke wheels.

Except the dealership, Sandy Sansing BMW, didn't have one with those exact specifications. Most dealers would then try to push another car on the customer. But with a few keystrokes the salesman, Terry Mills, alerted BMW's factory in Spartanburg, S.C. (and the 170 or so companies that supply it with auto parts) to make Dean's special order a priority. In four weeks the $78,000 car of his dreams was parked in Dean's driveway.

Vehicle customization on a mass scale has been the Holy Grail of the auto industry for more than a decade, with little success. Americans are an impatient lot. They've been trained to sacrifice a few features or accept a different color if they can get a great deal on a car they can drive home immediately.

James O'Donnell, BMW's most senior U.S. executive, wants to change that and, in the process, maybe change the way cars are made in America. BMW is launching a marketing push to convince more American consumers to order their car exactly the way they want it and take delivery in two to six weeks. To entice them, BMW will offer them unique choices and provide a video link of their car being "born" while they're waiting for delivery. The push coincides with a $750 million expansion at the Spartanburg plant to make room for a second SUV, the redesigned X3.

Today 15% of Americans custom-order their cars. BMW hopes to get 40% of its buyers to do it by 2015. "I'm convinced it will give us a competitive advantage against Audi and Mercedes," O'Donnell said.

By custom-building cars the way Dell ( DELL - news - people ) builds computers, he figures BMW can take slack out of the production process, reduce inventory carrying costs for dealers and avoid hefty rebates on cars that aren't selling. Evidence suggests that people like Dean who custom-order their car tend to load it up with more options, meaning fatter profit margins for both dealers and automakers. Customer loyalty improves as well. A survey by J.D. Power & Associates found that customers whose cars are equipped exactly the way they want it are more satisfied with their purchase.

O'Donnell and BMW colleague Gunter Klamer, a logistics specialist, had dabbled with custom ordering in the U.K. in the early 2000s. It wasn't truly custom-building: They merely filled orders from a huge central distribution center. O'Donnell, who moved to the U.S. in 2008, doubted it would work here until gas prices soared above $4 a gallon that summer and demand for smaller, fuel-efficient cars like BMW's Mini brand took off. Not only were customers lining up to order Minis, but they were ordering them with an average $2,000 worth of features. After gas prices fell back, half of Mini buyers still wanted to special-order their cars.

So in 2009 O'Donnell and Klamer suggested BMW use the rejiggering of the Spartanburg plant as an opportunity to try custom-building BMWs. By that time, however, the economy had collapsed, and many within BMW didn't think they could afford it.

But O'Donnell turned doubters into believers by freeing up precious dollars--an extra $6 million or so--to install the necessary technology and increase marketing. "We called their bluff and gave them the money," he said. "Gradually, people realized we were serious about making it work this time."

BMW's factory is already equipped to handle complex car production. It exports 70% of the vehicles it makes to more than 130 countries, each with its own regulatory requirements and consumer tastes. Also, instead of grouping features in a handful of popular packages like most carmakers, BMW sells many options à la carte. Thus, the plant could run two shifts seven days a week for six months and never build the same vehicle twice.

Most U.S. auto factories plan production several months in advance; special orders cause chaos or delays. (Ever ask McDonald's ( MCD - news - people ) to hold the pickles on a Big Mac?) BMW set up its ordering process to handle last-minute changes up to five days before production begins. The dealer's software is closely linked with BMW's manufacturing and procurement system, so special orders automatically ripple back to suppliers, ensuring the right parts are delivered at the right time.

With so many variations--2,500 possible wiring harnesses, for instance, and 9,000 center-console combinations--workers rely on overhead screens (like the ones short-order cooks use) to keep track of which vehicle they are building. Workers have 106 seconds to do each job. If one car takes less time, they use that extra time to preassemble parts for the next one.

Such complexity costs more than the typical manufacturing process, BMW admits (it won't say how much), but the benefits lead to higher profits for both BMW and its dealers.

For all its manufacturing flexibility, BMW's real challenge is a marketing one--getting Americans to be patient. "This is not an easy path that we've chosen," said Jack Pitney, vice president of marketing for BMW North America, who died as this story was going to press. "But those who take us up on it become brand ambassadors for us. That positive word of mouth will be worth far more than I could ever purchase in advertising."

By The Numbers: BMW's Short-Order Factory
It's more complex than most U.S. auto plants.

18 owner's manual languages
500 side-mirror combinations
1,300 front-bumper combinations
2,500 possible wiring harnesses
5,000 possible seat combinations
9,000 center-console combinations


Source: http://www.forbes.com/forbes/2010/09...ke-auto_2.html
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      10-11-2010, 12:46 PM   #2
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....Except that they're not ACTUALLY letting us "custom build it" the "way we want" right? I mean, where's Individual Program in all of this?

....So really, even when having the car "custom built" we're "sacrificing what we really want" such as color and other options, exactly as BMW claims that we're doing off the dealer lot. So what's the difference in the end? Custom building it or buying it off the lot, we still make sacrifices and don't get what we really want (in America where the individual program isn't available to us).

'Course, this is just my $0.02, feel free to disagree.

Last edited by LateBraking; 10-11-2010 at 12:54 PM.
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      10-11-2010, 01:01 PM   #3
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BMW does NOT make a 5 liter turbo so unless this guy is willing to pay millions of $$$$ for BMW to develop it for him, I guess he's not gonna get his X5 the way he wants it.
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      10-11-2010, 01:04 PM   #4
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Surely this initiative is limited to the X vehicles produced in South Carolina, right?

There is no way I could get a 3 series from Germany in 2-6 weeks...it took both of my E92s and my E82 8 or more weeks to get to my driveway...

Unless the Spartanburg plant will start building cars as well....
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      10-11-2010, 01:08 PM   #5
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2-6 weeks....

I'm in Germany and I was giving a Dec 13th delivery date. That's 2 1/2 months after my order was placed......2 1/2 MONTHS!!
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      10-11-2010, 01:26 PM   #6
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What this says to me is that BMW wants to shift the USA away from the model of "buying off the lot" where dealerships have large inventories of cars to a model of carrying a light inventory where customers typically order cars on an a la carte basis. I guess reducing dealer inventory means less taxes for them to pay and fewer cars sitting on the lot, unsold and depreciating, for months at a time.

Quote:
Originally Posted by iBeJayKaying View Post
....Except that they're not ACTUALLY letting us "custom build it" the "way we want" right? I mean, where's Individual Program in all of this?

....So really, even when having the car "custom built" we're "sacrificing what we really want" such as color and other options, exactly as BMW claims that we're doing off the dealer lot. So what's the difference in the end? Custom building it or buying it off the lot, we still make sacrifices and don't get what we really want (in America where the individual program isn't available to us).

'Course, this is just my $0.02, feel free to disagree.
The reason the Individual program is so weak in the USA is because it's much easier for a customer to back out of a deal without losing any kind of deposit or paying any kind of penalty. So the dealership ends up potentially stuck with a car that was more expensive than normal to build, yet more difficult to sell depending on how much higher the price has been driven up by individual options. Programs like Individual are expensive because even minor disruptions/deviations on a production line can be very costly. If BMW cranks up the number of options available to the US market (check out how many more options are available on the German or UK configurators) then the costs go up. Plus, there's BMW NA. At the end of the day BMW NA is a glorified importer. Yes, I know they do more than that, but the cut and dry of it is that they import what BMW AG sells them. I'm sure BMW NA wants to keep that process streamlined, which means more packages instead of onesy twosey options.

Last edited by FStop7; 10-11-2010 at 01:35 PM.
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      10-11-2010, 01:51 PM   #7
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Quote:
Originally Posted by BMWI6 View Post
BMW does NOT make a 5 liter turbo so unless this guy is willing to pay millions of $$$$ for BMW to develop it for him, I guess he's not gonna get his X5 the way he wants it.
I think they meant the X50i

Twin turbo V8
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      10-11-2010, 02:19 PM   #8
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I'd rather wait for a while to get my car that I want than a cookie cutter 3 off the lot with cold weater and premium package. Plus if you get anything besides the X now you can do ED and save a good deal of money. This is good but there are still things that you should be able to get ie, E91 with the turbo engine, Individual program, etc.

To what FStop7 said above I think for the individual program they should just require a non-refundable deposit on the car due to the circumstances. I think most people would gladly do this as they already know exactly what they want and have no reason to back out.
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      10-11-2010, 02:31 PM   #9
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Quote:
Originally Posted by FStop7 View Post
The reason the Individual program is so weak in the USA is because it's much easier for a customer to back out of a deal without losing any kind of deposit or paying any kind of penalty. So the dealership ends up potentially stuck with a car that was more expensive than normal to build, yet more difficult to sell depending on how much higher the price has been driven up by individual options.
what? all the bmw dealerships require a deposit in the la area (except maybe southbay....and you have to order m3's with at least the tech and prem package)

i would be more open to custom ordering a car, but it becomes a daunting task when no dealerships have the ext color in stock on the car you want to buy (ex. silverstone m3's in socal.....they dont exist for the most part). plus, they want you to make a "future payment" aka non-refundable deposit. imo, if you want to make this program more successful they have to make the deposit 100% refundable and standardize it across all dealerships (some dealerships charge from 1-5K for the deposit and is very inconsistent).
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      10-11-2010, 03:11 PM   #10
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I got both my BMW's from Sandy Sansing BMW. Great dealer!

And as far as putting money down on a car goes..if I chose the options and were assured I'd have delivery in no more than a few weeks, I'd be game. That's what your paying for, perfection, NOT a cold weather package (in Fla.) with some crappy interior trim JUST because it was the exterior color you liked.
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      10-11-2010, 03:15 PM   #11
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Quote:
Originally Posted by BMWI6 View Post
BMW does NOT make a 5 liter turbo so unless this guy is willing to pay millions of $$$$ for BMW to develop it for him, I guess he's not gonna get his X5 the way he wants it.
Ha ha, that was my first reaction too. It's probably the journalist's mistake mistaking the xDrive 50i for a 5L engine. There was a time when the last two digits of the car model represented acurately the engine displacement.
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      10-11-2010, 03:26 PM   #12
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The dealers certainly like to tell you they can keep the deposit. It's nice to work in the legal field, because not only will they refund the money, but apologize for the inconvenience at the same time.
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      10-11-2010, 04:01 PM   #13
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Quote:
Originally Posted by sq86 View Post
To what FStop7 said above I think for the individual program they should just require a non-refundable deposit on the car due to the circumstances.
That's the problem - they can't require a non-refundable deposit in most states - it's a no-win situation for dealers.
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      10-11-2010, 06:01 PM   #14
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Great, now let me order an X3 with an iS motor, and call it a day!!
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      10-11-2010, 06:05 PM   #15
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Throw in a trip to Germany to take delivery of their new car. That'll open the eyes of more than a few people over here.
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      10-11-2010, 06:37 PM   #16
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I've ordered my last 2 cars, it's the way to go for sure.
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      10-11-2010, 07:13 PM   #17
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We've always order our cars here in Aus, as it is impossible to always find one with all the exact options you want here. However, 4 weeks wait? It is more like 4 months here for an order, or 7 months if it's an individual.
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      10-11-2010, 07:18 PM   #18
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My wife and I ordered a custom-built X5 - and it really is custom. We got BMWNA to agree to paint it in Ruby Black (a BMW Individual color not otherwise available in the U.S. on the X5). Yes, we had to pay for the privilege, but I was surprised that the company even considered it, let alone agreed to it.

So . . . I think BMW will eventually loosen the strings on US custom orders once the numbers go up and customers get used to this "new" way of buying cars.

I've noticed that our local dealership (which is a relatively small dealer) doesn't carry much inventory any more. Instead, they have one 3-series car in each available exterior color to show, and one "demo" of the 1, 5, Z4 and X5 series to let potential customers drive (no, they didn't have a Ruby Black anything, though the BMW Individual program is available in the US on the 7-series). That works fine for me; we drove a diesel, decided we liked it, and now our really-custom X5 35d is in production (went to status 151 today).

I could imagine a future in which there are regional "demo" centers. BMW would stock one of each exterior color in each series, along with drivetrain and interior variations (so for example, one 3-series car in each exterior color, with varying interiors, some with Nav, some without, at least one with a manual in both the 328 and 335, and one 335d; ditto for the 1's, 5's, X's, 6's and 7's). You find the color and drivetrain combo you like from this demo center, then go back to your dealer of choice, order what you want, negotiate the final price and it shows up 4 weeks later. I think that is a system that would work over time.

John C.

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      10-11-2010, 07:40 PM   #19
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There's nothing "custom" if you gist mix and match, fooling around with BMWNA's online configuration. A Ruby Black X5 is a true custom, Individual car.
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      10-11-2010, 07:41 PM   #20
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Quote:
Originally Posted by iBeJayKaying View Post
....Except that they're not ACTUALLY letting us "custom build it" the "way we want" right? I mean, where's Individual Program in all of this?

....So really, even when having the car "custom built" we're "sacrificing what we really want" such as color and other options, exactly as BMW claims that we're doing off the dealer lot. So what's the difference in the end? Custom building it or buying it off the lot, we still make sacrifices and don't get what we really want (in America where the individual program isn't available to us).

'Course, this is just my $0.02, feel free to disagree.
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      10-11-2010, 08:38 PM   #21
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I have ordered my past 2 cars from the factory. I will continue to do so.


BMW would get more custom orders if they would start offering custom paint and things like the msport package at the same time Euro markets get it.
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      10-11-2010, 09:51 PM   #22
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I'd like to custom order my next car, and pick it up at the factory. But that 2-6 weeks must be for cars made in S Carolina.

BMW Canada orders through BMW NA. My salesman said that they place orders about 6 weeks before the production date. They can change the orders up to 2 weeks before the production week. So, 2 weeks lead time to change the order, another week for production, 6-8 weeks for shipping to NA - sounds more like 3 months.
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