BMW is reaping the benefits of being the first foreign car manufacturer in the Korean market. With annual sales of around 7,000 cars, it is one of the top sellers amongst foreign made cars. The premier auto manufacturer, which launched into the Korean market in 1995, has mounted a multi prong programme to raise its sales higher to 10,000 a year by 2008.

The primary focus is on brand building – to make BMW the car of choice for aspiring young executives. Foreign cars, which account for a miniscule 3% of the Korean car market, enjoy an enviable standing amongst the upwardly mobile. Said BMW Warehouse Manager Jae Heung Han, “When we purchase cars, we still think that imported cars are better than domestic. When we buy food, we love domestic food.”

To target the key market, it recently featured Korean hit singer and actor Jung Ji Hoon, popularly known as Rain, in a music promotional video.

The basic entry model, the 320I, is priced at 43 million won (US$46,000), which is within the reach for executives in managerial positions. Through BMW Financial Services Korea, which was established in 2001, BMW can provide the finance to facilitate the purchase.

The active promotion is backed by enhanced after sales service to meet the requirements of BMW owners, numbering over 35,000. The general rule of thumb is once the number of BMWs in the country hits 20,000, it is time for the company to enhance its service level, Mr Han noted. 

Currently, eight car dealers operate 26 workshops for cars with one workshop in the capital city of Seoul providing a 24-hr service. “We have more workshops than any other importer,” he added. There are a few more BMW workshops for motorcycles.

For the top of the range 7 series, owners can enjoy the privilege of having their cars checked by technicians onsite, saving them the journey to the workshop for basic services. Owners, too, can check in the car for servicing before they go abroad, with chauffer service provided to and from the airport.

Integral to this improved service is the spare parts support. With the establishment of the BMW Regional Parts Distribution Center in Icheon-si in November 2005, the company now has the biggest spare part facilities in Korea for foreign made cars.

Built on leased land, the existing centre is twice of the size of its previous Incheon facility near the country’s airport. “Incheon has no more room for expansion. When we launched our mini brand in 2005, we could not find space to store our parts,” said Mr Han.

Icheon-si, which lies about 30 km south of Seoul, is also more cost effective to operate. The seaport of Busan through which most of its spares are imported, is less than five hours away. Situated away from heavy concentrations of activity, there is also room for expansion should the need arise.

Just as in Incheon, the new facility is equipped with the Schaefer racking system. The contract was awarded to Schaefer after going through BMW’s well-established selection process. “We had quotations from three vendors. It is part of our 4I principle where we involve two BMW employees in everything. It may not be the most efficient but it is the most effective. With a second opinion, you would be more cautious,” said Mr Han.

A Controlling Dealer Financial Consultant with BMW Korea before his appointment, Mr Han finds the Schaefer system to be very logical. “We can calculate based on racking structures and based on parts. The racking system also goes well with other stock keeping processes.”

At the heart of the storage system is Regal 3000 3-tier shelving system, which comes with the broad range of accessories to accommodate the complex demands for storage of auto parts. Extending over three tiers providing about 2,300 bays, it is used for the storage for all the small and medium parts.

Self-locking rods are inserted into cross beams with pre-punched holes to store exhaust pipes and axles, while tyres and wheel rims of various sizes are housed in specifically designed modular racks. Self-adhesive beam cover strips are used to protect the auto parts from being scratched. The company also employs accessories such as support hooks, silencer holders and tube dividers to ensure that its parts storage are well organised for easy access.

At the request of BMW, Schaefer Korea also sourced and installed lighting systems and an elevator extending over three tiers capable of handling 2.8 tons within the Regal 3000 system.

The facility also has a free standing KRE cantilever racks for pipes and long bulky items, and the Selective Pallet Racking to provide 6,324 pallet locations with wire mesh decking.

Mr Joo Hyeong Lee, Schaefer’s Korean representative, said installation of the entire system – one of Schaefer’s biggest in Korea - was completed in 1.5 months, much faster than the norm, to fit it with BMW’s relocation plans. 

Operational in November 2005, the facility now stores 24,000 SKUs totalling 600,000 parts, sufficient for a three-month supply. The stocks are closely monitored with the help of a SAP warehouse management system. Locations of the parts are changed in accordance to movement: fast moving items are placed in the most accessible areas for easy picking while slow moving items are pushed to the rear.  Parts that have not been moved for an entire year are either scrapped or sent back to Germany, following a cost assessment.

Dealers placed their stock orders weekly. “Dealers have a dealer management system. They can run their program, which will tell them what parts they need to order,” said Mr Han.

Rush orders are placed on occasions when they are caught short, and deliveries made within a day if the parts are available at the parts centre.

It is a level of service which we have all come to expect of BMW, a marquee synonymous with reliability and predictability, and which has contributed to its success in the auto industry.

For more information, please contact:

Schaefer Systems International Pte Ltd

Ann Ng

Tel:    +65/ 6863 0168

eMail: ann.ng@ssi-schaefer.sg