Analyzing the Effect of Express Orders on Supply Chain Costs and Delivery Times at BMW
Delivery time differentiation is a supply chain concept that has been implemented in various industries, but not yet in the automotive industry. One reason is that the effects of delivery time differentiation on the supply chain are not well understood. The BMW Group, for instance, has considered offering an express order option, where express orders bypass standard orders in the supply chain processes to achieve short delivery times. Express orders distort planning processes, increase operations cost, and increase the delivery times of standard orders, however the effects have not been quantified yet. This study analyzes the impact of express orders on the supply chain, when express orders are built-to-order. To understand the supply chain consequences of express orders better, we analyzed the relevant supply chain processes at BMW Group. We determine the effect that built-to-order express orders have on delivery times and on component demand. Our results indicate that express orders can be an attractive option for BMW and other automotive companies. If the fraction of express orders stays at a reasonable level, express orders can be delivered within about two weeks.