Bloomberg News

BMW Owners Waiting for Repairs on Supply Chain Breakdown

August 21, 2013

BMW Parts Supply Problems for Chad

A Bayerische Motoren Werke AG (BMW) employee welds body parts on a BMW 6 Series cabriolet automobile at the company's factory in Dingolfing, Germany. Photographer: Guenter Schiffmann/Bloomberg

Bayerische Motoren Werke AG (BMW), the world’s biggest maker of luxury cars, is struggling to deliver spare parts on time because of a new supply-management system, forcing customers to wait for repairs.

About 10 percent of the parts are not immediately available in the central warehouse in Dingolfing, Germany, due to the changeover, Manfred Grunert, a spokesman for the Munich-based company, said in an e-mail. BMW has workers on extra shifts to help shorten the wait, and aims to have the new system working properly by early September.

The delays, which started more than two months ago with the switch to the new logistics system, have caused ripple effects globally because orders for BMW’s 40 parts-distribution centers originate at the Dingolfing facility. The warehouse also directly supplies about 300 repair shops in Germany.

“We have to disappoint about 180 customers per month; that means 20 percent of our customers with major repair work,” said Burkhard Weller, owner of Osnabrueck-based Weller Gruppe, one of the two biggest BMW dealers in Germany. “The problem is present at all 16 of our locations. It is impossible to appease a customer who can’t use his car.”

The issue is especially sensitive for BMW because of its high-end customers and premium reputation.

“The ongoing problems on the spare parts supply might tarnish BMW’s image,” Stefan Bratzel, director of the Center of Automotive Management at the University of Applied Sciences in Bergisch Gladbach, Germany, said by phone. “I don’t remember any comparable case that a problem like that is dragging on over months.”

Profit Boost

The after-sales business is important for carmakers because it contributes substantially to their profitability, ties customers to their brand and has a high influence on customer satisfaction, according to the Nuertingen, Germany-based Institute for Automobile Industry, a state-funded think tank.

“BMW has always been among the best companies regarding the supply of spare parts,” said BMW distributor Weller, who is also a dealer for other brands, including Lexus, Toyota and Audi. “At the moment, they’re bringing up the rear.”

The logistics project -- named ATLAS for Advanced parTs Logistics in After Sales -- was started in Dingolfing in 2009, with a target to complete the new system within three years, according to a joint press release at the time from International Business Machines Corp. (IBM:US) and SAP AG. (SAP)

Dropping out

IBM, which was the main contractor and is still advertising the project on its website, is no longer involved in setting up the program, said Dagmar Domke, an IBM spokeswoman. She declined to say when or why IBM pulled out. SAP is supplying the software for the warehouse management system, said Marcus Winkler, a spokesman for the Walldorf, Germany-based company.

“The originally envisioned time frame for completion of the project had been somewhat postponed a while back as some parameters had changed,” Winkler said, without providing additional details. BMW declined to comment on its suppliers.

BMW delays in the U.S. are mostly with special order parts, said Kenn Sparks, a spokesman for the carmaker in the country. In China, some dealers are facing the same issue as well, among them China Zhengtong Auto Services Holdings Ltd. (1728)

Zhengtong, which has 20 BMW dealerships in the country, is supplied by warehouses in Shanghai, Beijing and Foshan, which in turn mainly get their parts from Dingolfing, the company said in an e-mail. Zhengtong, in some cases, has needed to negotiate directly with component makers for special orders, it said.

Left Waiting

Markus Zollner, owner of the car repair shop Zollner Karosserie in Regensburg, Germany, said that one missing part can mean that the entire repair is delayed.

“The worst is that when a delay happens, BMW is not able to tell us a delivery date,” Zollner said in a phone interview. “Sometimes cars are standing there for weeks.”

BMW’s distribution centers all increased their inventory before the system changeover, allowing for normal delivery of most orders, Grunert said. “A very high percentage of our dealers worldwide don’t have any spare parts problem.”

Employees in Dingolfing have been working extra shifts since the beginning of June to get the spare parts to the distribution centers as quickly as possible and are already clearing the backlogs, according to Grunert. Workers will likely be putting in extra hours until the end of the year to alleviate the delays, Erwin Gegenfurter, head of the works council in Dingolfing, said in an interview.

Repair Wait

“I had to wait four weeks to get my car repaired,” BMW owner Gerhard Kossielny, whose car was damaged by floods this year, said in an interview outside a Munich dealership.

The parts delays are also damaging for BMW because one of the automaker’s historic strengths has been to make fixes on vehicles during routine servicing, said Christoph Stuermer, an analyst with IHS Automotive in Frankfurt.

“It affects the ‘silent recalls,’ which BMW does regularly to change parts at a stage where the customer isn’t aware of any problem yet,” Stuermer said via telephone.

For cases where components are not arriving on time, BMW is providing replacement vehicles for customers. For dealers like Weller, that’s not enough.

“I can’t tell the customer that he will get his car back within one week; I have to say, ‘I don’t know,’” Weller said. “This is very unsatisfactory because, normally, we have a client satisfaction rate of 92 percent.”

To contact the reporters on this story: Angela Maier in Munich at amaier8@bloomberg.net; Richard Weiss in Frankfurt at rweiss5@bloomberg.net

To contact the editors responsible for this story: Chad Thomas at cthomas16@bloomberg.net; Benedikt Kammel at bkammel@bloomberg.net


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