OVERVIEW
The huge success of the BMW 3 series, and the very successful market launch of the BMW X5 Sports Activity Vehicle sparked tremendous growth for BMW. Production in FY2000 reached new records of 834,500 vehicles with plants in Germany (Munich, Dingolfing, Regensburg), the U.S. (Spartanburg, SC), and South Africa (Rosslyn).
In FY 2000 the Spartanburg, SC plant manufactured the Z-3 sports car and the X5 SUV. This production represented 10% of BMW’s worldwide unit volume.
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CASE STUDY:
BMW
INDUSTRY: Luxury Automobile Manufacturer
WORLDWIDE EMPLOYEES: 93,000
U.S. EMPLOYEES: 4,000 or 4.3% of worldwide workforce
REVENUES: $33,300 million USD
AUTO PRODUCTION: 835,000 vehicles worldwide
ANNUAL COST SAVINGS: $10+ million
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THE CHALLENGE
THE SOLUTION
One of the primary concepts brought forth by Coleman Consulting was BMW's true cost for an hour of labor. It is commonly believed that an hour of overtime costs the company approximately 1.5 times an hour of straight time. A common mistake however is to overlook the fact that most benefits are based on a fixed cost; that is to say, those fixed-cost benefits do not increase as an employee's weekly total hours increase from forty to forty-one.
In its analysis, Coleman Consulting determined that one hour of straight time was more expensive than an incremental hour of overtime. That implied that for each additional hour of work above the 40 hours of scheduled time it was less expensive to have a production employee work an extra hour of overtime than to hire a new worker to cover the increased workload. For BMW, these findings dictated the need for more overtime utilization to save costs and to decrease overstaffing. Coleman Consulting utilized flexible schedules to meet BMW's dynamic workload requirements.
When overtime is less expensive than straight time, management's first reaction often is to build in large amounts of over-time as a cost-saving tool. This initial reaction, however, needed to be balanced with production workers' desires and tolerances for overtime, both short and long-term, to avoid burnout and to keep employee morale high. An extensive Coleman Consulting survey of BMW Spartanburg employees provided the data, by plant, to achieve the balance between business needs and workers' needs.
BMW's Spartanburg Plant hired Coleman Consulting to explore alternative shift schedules that would optimize capital and labor utilization. Coleman Consulting helps organizations rapidly achieve significant cost savings by implementing proven best practices for workforce optimization and capital deployment.
The Spartanburg operation experienced a very dynamic workload with seasonal and monthly fluctuations caused by numerous factors, including changing customer demand, model changes, supplier problems, and a broad range of product options. Spartanburg had a difficult time matching the labor needs to the ever-changing workload. The unpredictable workload resulted in high levels of both overstaffing and overtime. BMW asked Coleman Consulting to assist in better matching the workforce to the workload through Coleman Consulting's creative scheduling techniques. Due to the relatively high cost of equipment at the plant in Spartanburg, utilization of capital was also a focus.
Coleman Consulting looked at the Spartanburg plant as six separate operations including the Z3 Body Production, X5 Body Production, Paint, Z3 Assembly, X5Assembly, and Final Test. Each operation required special attention due to separate capacities, constraints, and unique challenges of forecasting demand. Coleman Consulting worked with management in each of the six operational areas to ensure that each area was carefully analyzed and that optimal solutions were devised in each operational area.
THE RESULTS
Coleman Consulting provided not only an effective staffing methodology for the BMW Spartanburg operation but also one that saved BMW in excess $10M annually in cost savings and avoidance from overtime and break-time policy changes. This was achieved through better matching the workforce to the workload, while also creating flexibility to minimize labor costs and maximize performance.
In addition, Coleman Consulting identified and BMW implemented several other processes and staffing efficiencies that were not formally measured in terms of cost savings. On the employee side, the BMW associates are happier with the new scheduling system, which has given them more days off and greater predictability.
With $10M+ in cost savings and cost avoidance, this Coleman Consulting project achieved an annual ROI of over 800%.
Coleman Consulting also suggested a shift overlap. With prior scheduling there was no face-to-face communication between shifts, therefore new shift production workers were often left to try to figure out where their counterparts left off. With a small shift overlap, workers could communicate with each other and give live updates about maintenance, production, and any supply problems. This overlap would also allow equipment to continue running during shift change and increase productivity. Additionally, shift overlaps helped cover absenteeism, which was regularly noted by plant managers during the Coleman Consulting interview process. Unplanned absences cause problems at the start of shifts. Managers are left in a race to find coverage before production starts. If coverage is not found, the line either runs short or shuts down until coverage is obtained.
Workers can now gain overtime opportunities by volunteering for coverage positions while managers find replacements. Under this system the likelihood for a line to go down from absenteeism is greatly reduced.
The concerns that arose over shift overlaps are alleviated through the staggered start time. In a plant that has about four thousand people, parking spaces, lunch space, and overall plant space to handle traffic are at a premium. Staggered start times allow for a more even flow of production workers during hours of operation. With alternating start times, fewer production workers would be logging in at the start of shifts, cafeteria lines would be shorter, and the flow of traffic in the parking lot would be decreased.
Following an operational analysis, Coleman Consulting detailed several scheduling model options that would provide BMW with increased flexibility, more efficient flow of personnel, and more attractive schedules for recruitment purposes to support Spartanburg's projected growth.