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Supply Chain Management of General Motors

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Netra Shetty
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Supply Chain Management of General Motors - December 29th, 2010

The Ford Motor Company (NYSE: F) is an American multinational automaker based in Dearborn, Michigan, a suburb of Detroit. The automaker was founded by Henry Ford and incorporated on June 16, 1903. In addition to the Ford, Lincoln, and Mercury brands, Ford also owns a small stake in Mazda in Japan and Aston Martin in the UK. Ford's former UK subsidiaries Jaguar and Land Rover were sold to Tata Motors of India in March 2008. In 2010 Ford sold Volvo to Geely Automobile.[5] Ford will discontinue the Mercury brand at the end of 2010.

Ford introduced methods for large-scale manufacturing of cars and large-scale management of an industrial workforce using elaborately engineered manufacturing sequences typified by moving assembly lines. Henry Ford's methods came to be known around the world as Fordism by 1914.

Ford is the second largest automaker in the U.S. and the fourth-largest in the world based on annual vehicle sales, directly behind Volkswagen Group.[6] At the end of 2009, Ford was the third largest automaker in Europe (after Volkswagen and PSA Peugeot CitroŽn).[7] Ford is the eighth-ranked overall American-based company in the 2010 Fortune 500 list, based on global revenues in 2009 of $118.3 billion.[8] In 2008, Ford produced 5.532 million automobiles[9] and employed about 213,000 employees at around 90 plants and facilities worldwide. During the automotive crisis, Ford's worldwide unit volume dropped to 4.817 million in 2009. Despite the adverse conditions, Ford ended 2009 with a net profit of $2.7 billion.[10] Starting in 2007, Ford received more initial quality survey awards from J. D. Power and Associates than any other automaker. Five of Ford's vehicles ranked at the top of their categories[11] and fourteen vehicles ranked in the top three.[12]

company that has undertaken the mission of implementing an integrated supply chain management strategy knows that one of the greatest challenges it faces is the significant change in internal culture that is required to make the supply chain redesign successful. It is not an easy thing, to re-condition people to accept change, especially in organizations where a certain mindset has prevailed for many years. However difficult it may be to accomplish, change can be implemented successfully when directed by a strong and knowledgeable leader, who understands the tools available for achieving positive change, as well as their role in initiating and sustaining these changes.

To identify an example of change management in SCM, one needs to look no further than the experiences of one of the top ten largest organizations in the world: General Motors. Why GM? Isn’t this a traditional automotive company? To the contrary, GM is one of the best examples of a radical culture change that impacted their supply chain. In the last two decades, GM has often been held up as an example of an organization with archaic management structures, arms-length supplier and dealer relationships, and dysfunctional processes. The popular press is quick to use GM as a counterpoint in discussions on “innovative” management strategies demonstrated by Honda, Toyota, DaimlerChrysler, and other automotive competitors. It has not helped that GM’s share of the U.S. car and light-truck market has been diminishing significantly over the last three decades.

There is no question that GM has had its share of problems, and has even been the object of derision in films such as Roger and Me. However, relatively little press has been given to GM’s accomplishments in becoming a global e-business supply chain leader. GM has made a commitment to a clear focus on supply chain agility, and in the last five years, has undergone a radical change in its global management structure. While many companies have initiated e-business strategies in supply chain improvements, GM has also created a three-pronged strategy to support its intention of “leaning” their supply chain through internet technology. While many people have laughed about the notion of selling and manufacturing “bricks and mortar” products such as automobiles on the web, GM has embraced this challenge, and is feeling the full impact of this strategy on their entire organization. GM’s strategy involves using the Web to design, build, and buy innovative new vehicles in ways never imagined.

A solid global supply chain structure already is in place to ensure that this new strategy is realized. Led by its recent CEO, Richard Wagoner, GM has undergone a radical change throughout its management structure in the last five years. These efforts have paid off. GM is now viewed by many as one of the most innovative of the “Big Three” automotive companies, and although they still have a number of challenges ahead of them, they are making steady progress towards the real competition: Toyota, Honda, BMW, and other global competitors.

Change management is often very confusing for executives to deploy. With so many effective tools available, it is often difficult to determine which tools should be applied to what situations, and how the tools could be used in combination. For example, benchmarking, a process that has been shown to be a valuable means of learning how one company’s supply chain performance compares to that of other organizations, has proven to be a valuable tool utilized in managing change in the supply chain. Through this process, companies are able to clearly identify performance gaps, and thus, focus their supply chain management efforts on the areas most in need of improvement. Yet, this is only one example of the many mechanisms that can be used to execute supply chain redesign. Other tools, such as Six Sigma, may be used to improve quality throughout the supply chain. Lean enterprise may be used to streamline processes or eliminate waste within the supply chain. But how does a change leader know which tools are most effective?

One may find the answer to this question at the recently founded Society for Leadership of Change ( www.theSLC.org ). This Society provides a forum for sharing knowledge of the proven tools and philosophies for successfully leading and implementing change within organizations. The SLC offers a community for leaders of change to network with experts in the fields of Benchmarking, Six Sigma, Lean Enterprise, Supply Chain Management and Change Leadership, in order to learn about the various tools and how they can be successfully and realistically applied to problems. The value of this society is that it does not offer theory or pose hypothetical questions; instead, the society will present pragmatic answers to real-world problems in the area of change management.

But, who is a leader of change? The answer is anyone who wishes to participate in change leadership within their organization. There are leaders at every level of a corporation. There are CEO’s and board members, who plot the strategy and overall direction for the organization. There are managers and supervisors, who support the company’s strategic plans and guide their employees to meet objectives. There are also group or team leaders, who guide specific projects.

t took some time, but by the 1980s American manufacturers such as General Motors (GM) had absorbed the Japanese lessons of "lean" manufacturing and were looking to make some improvements of their own. For help, GM turned to Wharton Business School professor Morris Cohen who, with support from NSF, analyzed a critical part of its production system: The process by which GM distributed 600,000 repair parts to more than a thousand dealers.

Cohen's approach was to see this process as one of many "supply chains" that kept GM up and running. Supply chains form a network of resources, raw materials, components, and finished products that flow in and out of a factory. Using empirical data and mathematical models, Cohen and his colleagues proposed a complete reorganization of GM's repair parts supply chain.

"We suggested that a high degree of coordination be put in place to connect decisions across the supply chain," says Cohen. "Today, that's commonplace, but back then the idea was considered radical."

In fact, the idea was so radical that GM rejected it—not because they disagreed with Cohen's analysis but rather because the scale of the reorganization was too much for them to contemplate at the time. However, GM was soon to embark on building a new car company called the Saturn. GM's management decided to apply a number of Cohen's recommendations to the new venture, including the main proposition: centralized communications and coordinated planning among the Saturn dealerships and the company distribution center. Rather than operating in the traditional fashion, as separate entities, the dealerships would be hooked up via satellite to a central computer. By consolidating information and making it available to everyone, management could make optimal parts ordering decisions, neighboring dealerships could pool resources, and dealers could focus on maximizing customer service without worrying about what inventory they should be stocking. All of these improvements let management accommodate difficult-to-predict parts service demands without holding excessive inventory, while still ensuring that dealers got the parts they needed to repair cars in a timely manner.

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