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Originally Posted by Coi
If it was cheaper for them to have every feature on every car they would already be doing it. Even if that came with a small increase in base price they would still do it if they could. Pretty much all Audis have standard heated seats and Lexus has standard adaptive cruise control, so BMW is already loosing out by not having that stuff standard. There's no reason they would be leaving both money and a competitive advantage on the table if that was the case.
The only time it's cheaper to include an option than not include it is if the number of cars not getting it is extremely small. Like this was the case for heated seats on the "base" $35k Model 3 a few years ago because they made it pretty much impossible to actually buy one even if you wanted it to so production of that spec was miniscule. (It was mostly made to meet a specific Canadian regulation around tax credits, but I digress.) This does not apply with options where the ratio of cars with and without the option are more reasonable.
The more parts BMWs needs the more they have to pay for shipping, storing, and time for installing those parts. Sure, economics of scale apply but that doesn't mean that overall buying more of something costs less than buying fewer. The total parts cost up until the point of installation is larger with more standard equipment.
Also stuff like adaptive cruise control radars are expensive and often come from suppliers like Delphi or Bosch. So the car manufacturer isn't just paying the raw cost of building these parts but is covering the logistics and profit margin of a supplier too.
Individual paint is actually a special case, and you're paying for more than just the disruption to the assembly line. I remember hearing about paint-to-sample with Porsche where they actually have to test the paint on every material it will be going on (steel for chassis, aluminum for body panels, and plastic for bumpers) to make sure the color matches on all of those. They they have to do durability testing for that specific paint on all those materials. This is extremely labor and time intensive. If you're picking a color under BMW individual that isn't normally offered on that model then the material composition of the exterior metals or plastics might be different, potentially requiring testing. Also the labor involved for painting one car on an entire assembly line a different color than all the others is obviously vastly more than simply installing or not installing heated seats or radar cruise.
I would also guess that a huge proportion of the cost for individual color is profit because they know people who want it are willing to pay that much. Even if individual color didn't cost BMW anything they would still charge $5k for it because they can.
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"If it was cheaper for them they'd already be doing it" isn't a valid argument... that's not how companies work. You invest in studies designed to uncover potential opportunities and it then goes through a process of validation for approval. If everything that was cheapest was already being done there would be no room for efficiency gains at any company. You're basically saying BMW is already operating at max efficiency and has no room for improvement.
I'm not saying it IS cheaper, I'm saying I wouldn't be surprised if it is. Truthfully we don't have insider information on their sourcing, transportation and distribution costs, but you can bet they've conducted the break-even analysis for this proposal. I've worked in various manufacturing industries over my career and currently lead a department dedicated to supply chain optimization, so I have an idea of how much of an impact logistics and supply chain efficiencies have on overall COGS.
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The more parts BMWs needs the more they have to pay for shipping, storing, and time for installing those parts. Sure, economics of scale apply but that doesn't mean that overall buying more of something costs less than buying fewer. The total parts cost up until the point of installation is larger with more standard equipment.
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Absolutely it can be cheaper. If you're now shipping FTL as opposed to say, LTL or parcel due to maximized volumes tied to your main product line, there's a certain break-even point where shipping efficiencies begin to favor higher volume, regular ordering. I worked at a large manufacturing and distribution company where we conducted a study showing exactly that. That by maximizing truckloads we could actually reduce our logistics costs while simultaneously shipping more product. Think of it this way - by standardizing your ordering process and maximizing truckloads, you're sending less but fuller trucks as opposed to frequent, less than truckloads. This also ties into your forecasting - if you have greater forecast accuracy because your ancillary products are tied to your main product, it benefits your logistics costs as well as inventory costs.
As for individual colors - yes I agree there's many components that go into pricing for it - perhaps even profit. But I wouldn't be surprised if disruption to supply chain is the #1 cost associated with it. If BMW was actually making a healthy profit on individual colors, they'd advertise them much more openly. Outside of this forum, few people even know what an individual color is, and most don't even know you can special order a car. Majority of people still assume your only method of purchasing is off the lot and your color selection is what has been ordered by the dealer for inventory (obviously there's some change happening in the current climate).