Running Head: GENERAL MOTORS SUPPLY CHAIN

General Motors Supply Chain

MGT 322 Principles of Logistics Management
February 21, 2016

Running Head: GENERAL MOTORS SUPPLY CHAIN

Introduction
Over the years, the U.S. auto industrys market has been experiencing fluctuations due to
pricing, quality and foreign competition. General Motors Corporations (GM) had been the
leading car and truck manufacturer. Over the past few decades, GM has been experiencing a
decline in their market share due to increased market share from other automotive makers such
as Hyundai, Toyota, Honda, Nissan, Ford and Chrysler. American automakers, GM, Ford and
Chrysler known as the Big Three, were hurt financially because most of their highest profits
came from the sales of their largest cars. (Bethell, 2008, p. 40). The primary reason for
increased market share for foreign automakers is that their cars were more fuel efficient, smaller,
less expensive and often more reliable.
In an effort to eliminate waste and maintain competitive advantages, GM introduced lean
manufacturing by incorporating elements of the Toyota Total Quality Production System that had
been adopted by several Japanese auto manufacturers to increase production efficiency. This
implementation was successful in operational and environmental improvements but help was still
needed in the area of Supply Chain Management (SCM). This includes: risk, visibility, inventory
management, cost, customer demands, and logistics. GM expects their suppliers to jump on
board the lean philosophy that they now hold as part of their corporate strategy.
GM Strategy
Global Purchasing and Supply Chain (GPSC) organization closely manages both material
and logistics costs and supports the launches of GMs vehicles around the world by ensuring the
right quantity of high-quality parts is at the right place at the right time. GM uses the Just-inTime (JIT) manufacturing concept which utilizes distribution strategies including maintenance of
regional distribution facilities and third party management of logistics. An efficient supply chain

Running Head: GENERAL MOTORS SUPPLY CHAIN

is no longer capable of handling the complexities of changing global trends hence it is therefore
necessary to incorporate a smarter supply chain.
Wisner, Keah-Choon, & Leong, (2012). Stated that the objective of SCM is to balance
the flow of materials with customer requirements throughout the supply such that costs,
quality and customer service are at optimal levels. Lean production is the reduction of
waste, continuous improvement, and the synchronization of material flows in production
to suppliers and customers.
Lean Manufacturing
Because Toyota was the founder of JIT and Lean Manufacturing, in 1984, GM jointly
owned an auto manufacturing plant with Toyota called Nummi, (New United Motor
Manufacturing Incorporated) based in California. By working closely together, partner firms
can gain access to the best practices of their partners and then transfer the practices hack to the
parent organization. (Inkpen, 2005, p.114) Over the past few decades, GM has steadily and
significantly improved its quality and productivity due to its experience with the NUMMI
acquisition.
Senior executives at GM acknowledge that NUMMI has been at the forefront of the
firm's efforts to adopt lean manufacturing. According to Gary Cowger, GM VP
manufacturing and labor relations, "The roots of our improvement are in the Toyota
Production System [TPS]. (Inkpen, 2005, p.114-115)
As lean manufacturing was being implemented throughout plants in GM the results were
showing positive results in quality and production. However, there were obstacles that needed to
be overcome. People are resilient to change and this was not exception. To implement lean
manufacturing required management and production to work as a team. The team concept

Running Head: GENERAL MOTORS SUPPLY CHAIN

requires team leaders, which means some hourly employees have to take on greater
responsibilities. At first there were very few workers who wanted to become a team leader
because it gave the impression that you were sucking up to management and at that time
management was thought of as the enemy. The team concept also requires the managers to work
with the hourly employees more as partners and less as subordinates. This is an example of what
Winser, Tan and Leong would call site mentality, failing to see the big picture. (Winser, 2012)
More importantly there was an incredible amount of lack of trust between management and
hourly workers.
Waste
Part of the SCM strategy at GM is to eliminate waste because waste reduction enhances
productivity, quality, efficiency and throughput thus saving the company money. GM integrates
its waste-reduction goals into business plans at the all levels including manufacturing plants,
suppliers and service providers. Monthly reports are generated, monitored and measured in
reaching the company wide waste reduction goals. Senior management has supported the waste
reduction program with manufacturing leading the efforts and supply chain supporting the
process.
Supply chain supports these efforts by re-evaluating suppliers, substituting
different materials or seeking out energy options, logistic changes, geographical options
or other processing technologies. (www.gm.com) GM facilities reuse, recycle and
converts energy from waste which contributes to the bottom line. The money generated
from recycling goes right back into technologies and product continuous improvements.
For example: GM turns its own plant byproducts into new car parts to giving vehicle

Running Head: GENERAL MOTORS SUPPLY CHAIN

scrap to insulate coats for the homeless , thinking outside the box to what an item can be.
. (www.gm.com)
As a result of its landfill-free program, GM has built a strong network of suppliers
committed to keeping materials in their use. It looks for ways to recycle plant waste into vehicle
parts or plant supplies.
Synchronization of Material Flows
A successful SCM requires the purchasing department to places orders as required,
responding to customer demand, communicating with several distributors and retailers as it
attempts to satisfy this demand while sharing information. Operating an integrated supply chain
requires continuous information flow. defined integration as, the quality of the state of
collaboration that exists among departments that are required to achieve unity of effort by the
demands of the environment. (Tumain, 2011 p. 106) There are three dimensions of supply
chain integration: information integration, coordination and resource sharing, and organizational
relationship. Information integration is when companies are sharing information such as
forecasts and production plans, coordination and resource sharing is the realignment of decisions
and responsibilities and organizational relationships are communicating with others, measuring
performance and having the same goals. Results of a successful supply chain are:

Increased market share and sales growth

Reduced inventory levels
Reduced SCM costs
Decreased order cycle/fulfillment time
Increased asset and capital utilization
Improved delivery performance
Flexibility in meeting/responding to customer requirements
Improved return on assets and sales
Increased forecast accuracy
Reduced cash-to-cash cycle time (Tumain, 2011 p. 107)

Running Head: GENERAL MOTORS SUPPLY CHAIN

Continuous Improvement
The Global Purchasing and Supply Chain division was responsible for streamlining the supply
chain and the year 2013 was a good one for the U.S. automotive market as sales rose 7.6 percent
to 15.6 million vehicles. By standardizing its parts, GM aims to streamline purchasing which
will result in more business for a fewer suppliers. In the past five years, GM has made key
changes to their supply chain by moving the contracting of suppliers to a central location. GM
has also introduced decentralized centralization which means we buy all of a particular
component in one location. (Andersson, 2008) This location is responsible for managing a
particular commodity global wide.
Suppliers are being reduced in GMs compression strategy. With this strategy, GM will
choose the best one or two suppliers and give them all of the business for whatever commodity
they supply. This strategy helps to build a stronger relationship and helps the supplier grow in
addition to standardizing parts. Over the last 18 months we have been very focused on total
costs within the supply chain. By which I mean everything that feeds into the chain from
currency and oil prices to transport, packaging, inventory, raw materials and labor costs. We have
119 creativity teams within the purchasing area whose job is to find gaps and opportunities.
(Andersson, 2008)
Suppliers
For GM, Suppliers are a critically important part. They are key in the development,
production and reliability of our products, Helping GM to meet customers expectations for
vehicle availability, affordability and quality. To approach sustainability in procurement and in
supply chain activities, GM focuses on four key areas: policies and principles, disclosure,
performance and engagement. Recently GM has implemented the no-bid contracts which forgoes

Running Head: GENERAL MOTORS SUPPLY CHAIN

traditional bidding. GM purchasing chief Steve Kiefer says the program, dubbed the One Cost
Model, has been used to negotiate purchasing contracts worth billions of dollars. (Sedgwick, D.
2015).
The One Cost Model program allows GM engineers and purchasing to visit the suppliers
and analyze their cost data. If GM likes what they sea and if they can agree to the terms the
supplier can get a contract for the life of the vehicle and GM promises loyalty to them. These
suppliers will also get a look at GMs product plans and will have the opportunity to provide cost
savings ideas. This program also helps to enhance the relationship between GM and their
suppliers as it requires a great deal of trust.
Logistics

The logistics are challenging for accelerating warranty parts recovery in GM, because
GM receives parts from approximately 9,000 dealers in the United States and Canada as well as
additional parts from other countries. Also GM engineers have to closely monitor the trends of
warranty parts repairs in order to make crucial decisions about parts requiring analysis. To handle
this challenge, GM consults the expert of Logistics Management, UPS, and gets the solution A
streamlined, automated materials recovery process and a centralized analysis system geared the
specialized needs of engineers of suppliers which works well. (www.ups-scs.com)
Adding stamping plant to GMs global operations is one way that GM manages the
logistics. Since the new metal stamping plant will produce large metal parts on campus of the
nearly 50-year-old Arlington assembly plant, it is expected to save GM $40 million a year in
shipping cost. Also, co-locating the manufacture of key components would improve quality.
After co-locating, the scratched or dented on parts during transport could be avoided that may be
eliminate the extra cost required to repair such frequent damage. Furthermore, the transportation

Running Head: GENERAL MOTORS SUPPLY CHAIN

is full of uncertainty which will make cost of delay or cost of inventory. The re-locating could
reduce these uncertainties and minimize these costs.
Outsourcing
U.S. companies have discovered that it is cheaper to outsource than to own all stages of
the production process; outsourcing can provide immediate cost reductions without the usual
capital investment requirements" (Davis, E. W. 1992). GM undertook a massive
outsourcing program during the 1980s to move at least $4 billion worth of parts and components
annually from many of its 89 plants to outside suppliers. GM's share of parts and components
produced in-house was predicted to drop from 60 percent to 45 percent by the end of the decade.
Some of the offshore sourcing caused many plant closings in the US, however. approximately
70 percent of respondents in the purchasing survey indicated that their volumes of foreign
purchases were increasing; the upward trend was expected to continue for the foreseeable future.
Many of these companies had, by the late 1980s, adopted global sourcing as a major competitive
strategy. (Davis, 1992)
Recommendation
GM needs to stay focused on continuous improvement and have more of a team concept
approach. The partnership between the UAW and GM is vitally important for their success.
Saturn which is no longer alive was a prime example of how all of GM plants should operate.
People who worked at Saturn have a great sense of pride and self-worth when working together
as management and hourly workers. Their voice mattered and they were heard, making them feel
as if the company was theirs to run and to make successful. It is truly a shame what happened to
Saturn.

Running Head: GENERAL MOTORS SUPPLY CHAIN

Conclusion

GM is an integrated company that incorporates a large supply chain to reduce its costs
and maximize profits and uses many different strategies such as outsourcing to improve quality
and lower costs occurred through the manufacturing process. They manage their supply chain by
building relationships with supplier and consumer. They pride themselves on on-time delivery
and using logistics to lower costs and keep inventory low without occurring stock outs. The
biggest skill that GM desires in their supply chain is just-in-time manufacturing. GM wants to
keep inventory low without backorders surfacing in order to reduce the carrying cost that occurs
with a high inventory level. The way GM does this is by increasing efficiency and reducing
order waiting times through their web-enabled supply chain portal, Supply Power. GM can
manage all of its orders and requests through this portal and ships parts to the factories and plants
when needed. Like every other market, the automotive industry presents significant threats to
the GM supply chain. GM relies heavily on its suppliers and needs all of them to be operating
efficiently in order for their company to operate efficiently. GM also has to use overseas
transportation which take longer to ship and can cause deliveries to not be on-time. The GM
supply chain is a complex management process that has to be perfect in order to compete in the
automotive industry.

Running Head: GENERAL MOTORS SUPPLY CHAIN

10

References
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policy have wrecked both Michigan and its largest city. But Tom Bethell finds signs that
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Davis, E. W. (1992). Global outsourcing: Have U.S. managers thrown the baby.. Business
Horizons, 35(4), 58.
GM's Andersson focuses on 'decentralized centralization'. (2008). Automotive News
Europe, 13(20), 0030.,
GM Accelerates Warranty Parts Recovery with Specialized Logistics, UPS Supply Chain
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Goolsbee, A. D., & Krueger, A. B. (2015). A Retrospective Look at Rescuing and Restructuring
General Motors and Chrysler. Journal of Economic Perspectives, 29(2), 2-24.

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10.1257/jep.29.2.3
Inkpen, A. C. (2005). Learning Through Alliances: GENERAL MOTORS AND
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89(6685), 0008
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http://www.gm.com/content/dam/gm/en_us/english/Group3/sustainability/sustainabilityp
df/

Running Head: GENERAL MOTORS SUPPLY CHAIN

11

Tumaini Mujuni Katunzim, (2011). Retrieved from: www.ccsenet.org/ijbm International Journal

of Business and Management Vol. 6, No. 5; May 2011. Published by Canadian Center of
Science and Education
Wisner, J.D., Keah-Choon, T., & Leong, G. (2012). Principles of Supply Chain
Management (3rd ed.). Mason, OH:
South-Western Cengage Learning. ISBN: 9780538475464