BMW Says Flexible, Not Lean, Is The Next Big Thing in Autos

The future belongs to the flexible in auto manufacturing.

"Everyone has to become more flexible," said Rich Morris, vice president, assembly, for BMW Manufacturing Co., the BMW (NasdaqGS: BMW) factory in Greer, S.C., which builds the BMW X5 and the BMW X6.

Flexibility as Morris means it is defined in a couple of ways. One is the ability to shift production of different models among different plants, as demand shifts in different global markets.

An example could be Honda's ability to build the Honda Accord in what had been a truck plant, with relatively little interruption to change over. That's something Honda (HMC) did last summer, as demand for trucks fell and demand for cars increased.

Flexibility can also be within the same factory, Morris said. BMW has made a specialty of offering a very wide array of factory-installed options that can be ordered individually, while mass-market brands are cutting back on variety.

"Sometimes it takes two years (for us) to build the exact same vehicle twice," Morris said in a recent press briefing at BMW of North America headquarters in Woodcliff Lake, N.J.

He said BMW builds most of its vehicles with specific colors, features and options the way individual customers order them via a dealer. "In 2008, 70 percent of the production was built to customer order," he said.

The alternative, and the way most other brands do it, is to build most cars the way dealers order them, to be retailed out of dealer inventory. That represents the dealers' best guess at what customers will buy. The advantage is that most U.S. customers want to take delivery right away. That's only possible when the car is already on the lot. The factory also saves manufacturing costs and complexity by reducing variations.

The disadvantage is that customers may have to compromise on colors, features and options they didn't really want.

In addition, Morris said BMW customers can change their orders within five days of when their car is built. That's much later in the process than other brands, he said.

That kind of flexibility isn't perfect, because the most flexible plants aren't the most "lean," for instance in terms of the inventory of parts the plant has to keep handy. On the other hand, the leanest plants that can build cars the fastest also need to become more flexible, Morris said. Toyota (TM) is the prototypical example of lean manufacturing.

"The real battle is the race toward efficient flexibility," he said.