Tag: 2nd tier suppliers

OM in the News: BMW’s Supply Chain Disruption

BMW’s plant in Rosslyn, South Africa.

BMW is halting or slowing production of certain models in response to a shortage of parts caused by delivery problems from first-tier parts supplier, Bosch. “The hiccups show how dependent manufacturers are on a global, smoothly running supply chain,” writes The Wall Street Journal (May 30, 2017). Even small disruptions anywhere along the line can cascade into delays in getting the company’s big money-making products off the assembly line and into showrooms.

In BMW’s case, the culprit is a “Lenkergetriebe,” or steering gear, manufactured by Stuttgart-based auto-parts giant Bosch and used in BMW’s Series-1,2,3, and 4 models. “Our supplier Bosch is not currently able to provide us with a sufficient number of steering gears,” said a BMW exec. Bosch, in turn, said the trouble arose when a 2nd-tier supplier in Italy experienced difficulties in delivering the casing for the steering gears.

As a result of the shortages, production is restricted at several BMW plants in Germany, China, and South Africa. “Automotive value chains are international. An interruption in delivery of parts from a partner in Europe can therefore also have implications in China,” said the BMW exec. “The vehicle is not complete until all parts, most of which are supplied just-in-time, are installed. It is, therefore, understandable how a missing part—even if only a small one, as in this case—can have a major impact.”

Classroom discussion questions:

  1. What can BMW do to prevent such supply chain disruptions in the future?
  2. What are the differences between 1st, 2nd, and 3rd tier suppliers? Provide an example of each in a non-automotive industry.