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Supply Chain Management of General Motors Corporation

Supply Chain Management of General Motors Corporation

Discuss Supply Chain Management of General Motors Corporation within the Elements Of Logistics forums, part of the PUBLISH / UPLOAD PROJECT OR DOWNLOAD REFERENCE PROJECT category; General Motors Corporation (GM) is the world's largest full-line vehicle manufacturer and marketer. Its arsenal of brands includes Chevrolet, Pontiac, ...

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Supply Chain Management of General Motors Corporation
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Netra Shetty
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Supply Chain Management of General Motors Corporation - January 7th, 2011

General Motors Corporation (GM) is the world's largest full-line vehicle manufacturer and marketer. Its arsenal of brands includes Chevrolet, Pontiac, GMC, Buick, Cadillac, Saturn, Hummer, and Saab. Opel, Vauxhall, and Holden comprise GM's international nameplates. Through its system of global alliances, GM holds stakes in Isuzu Motors Ltd., Fuji Heavy Industries Ltd., Suzuki Motor Corporation, Fiat Auto, and GM Daewoo Auto & Technology. Other principal businesses include General Motors Acceptance Corporation and its subsidiaries, providers of financing and insurance to GM customers and dealers. In the early 2000s, struggling under the weight of escalating healthcare and pension costs, GM sought to shed some of its less profitable activities. Toward that end, among other moves, the company sold its stake in Hughes Electronics, phased out production of the Oldsmobile, and discontinued the Chevrolet Camero and Pontiac Firebird. Facing a tough economic climate, GM has nevertheless retained its position as the world's leading automaker.
General Motors Corporation (GM) is the world's largest full-line vehicle manufacturer and marketer. Its arsenal of brands includes Chevrolet, Pontiac, GMC, Buick, Cadillac, Saturn, Hummer, and Saab. Opel, Vauxhall, and Holden comprise GM's international nameplates. Through its system of global alliances, GM holds stakes in Isuzu Motors Ltd., Fuji Heavy Industries Ltd., Suzuki Motor Corporation, Fiat Auto, and GM Daewoo Auto & Technology. Other principal businesses include General Motors Acceptance Corporation and its subsidiaries, providers of financing and insurance to GM customers and dealers. In the early 2000s, struggling under the weight of escalating healthcare and pension costs, GM sought to shed some of its less profitable activities. Toward that end, among other moves, the company sold its stake in Hughes Electronics, phased out production of the Oldsmobile, and discontinued the Chevrolet Camero and Pontiac Firebird. Facing a tough economic climate, GM has nevertheless retained its position as the world's leading automaker.

GM Accelerates Warranty Parts Recovery General Motors
Automotive
with Specialized Logistics

General Motors, the world’s largest vehicle manufacturer, drives its GEOGRAPHIC AREA SER VED
United States and Canada
business results by rolling out innovative vehicles with high performance

standards. To increase business performance, GM called on UPS Supply
Chain Solutions to deliver an innovative solution for its materials recovery
of parts under warranty—a key factor in reducing costs and boosting CHALLENGE
customer satisfaction.
Build ease and accountability into

Client Challenge the supply chain for GM warranty
parts, and boost efficiency in the
In the highly competitive automotive industry, GM continuously seeks to
process of root-cause analysis.
enhance its products and customer service. The automaker was one of the

first major companies to recognize the need to fuel improvements by
revving up the reverse logistics of materials recovery.
GM engineers closely monitor the trends of warranty parts repairs in order SOLUTION
A streamlined, automated materials
to make crucial decisions about parts requiring analysis. The logistics are
recovery process and a centralized
challenging—GM receives parts from approximately 9,000 dealers in the
analysis system, geared to the
United States and Canada as well as additional parts from other countries.
specialized needs of engineers
Previously, GM dealers had to package the parts, address them to the
and suppliers.
designated supplier at one of more than 200 locations, take them to a post

office and pay the shipping costs up-front. This process required GM to
repeatedly call the dealers to determine if they had shipped the parts, and
then contact the suppliers to verify the parts had been received. RESULTS
“We wanted a more responsive process with flexibility and accountability • Improved materials recovery
time from 3-10 days
built in,” said Gary Smits, GM Manager of the Warranty Parts Center.

“UPS Supply Chain Solutions helped us simplify the process and speed • Increased dealer return rate
from 60 percent to nearly
it up. The quicker we can get a part back, the quicker we can fix the
90 percent
problem. Customer satisfaction is our primary focus.”
• Enhanced visibility of

Our Solution root-cause analysis results

UPS Supply Chain Solutions offered GM a total materials recovery • Helped speed up product
enhancements
solution— from door-to-door package delivery to inventory management,

and the advanced technology needed to streamline and control the GM
supply chain.
Our engineers worked closely with GM to establish a new Warranty Parts
Center in Lake Orion, Michigan. This advanced process and analysis



center— convenient to GM engineers and suppliers—serves as the engine powering the entire process.

GM introduced its dealerships to an accelerated reverse logistics process with the ease of handling they needed to respond rapidly. When a GM engineer selects parts for analysis from a database of dealer warranty claims, the dealers involved are notified electronically to ship the parts to Orion. The dealers package the parts and apply a pre-printed UPS return service label. The regularly scheduled UPS driver then picks up the part— at no cost to the dealership.

The current system generates electronic reminders to each dealer for up to 28 days, creating a monthly debit file for the cost of the repair work if the part is not returned. Upon arrival at the Warranty Parts Center, the part is audited based on data pre-loaded into the system, given a bar-coded label, and placed in inventory for up to 60 days.

When a GM engineer schedules an analysis session, the parts are selected from inventory and moved into one of the center’s inspection areas, com-plete with tools, electrical outlets or wrenches—whatever the job requires. A GM team assembles in one place to examine the parts and review the warranty claims data. UPS Supply Chain Solutions software gives team members the power to add data and filter it any way they want. The engineers can quickly sort the data to identify the commonalities and assess the root cause of the warranty claims.


“Our engineers and suppliers are very pleased with UPS Supply Chain Solutions,” said Smits. “We concentrated on the new vehicle launches this past year—a very important area of the business. Their system enabled us to request 100 percent of the identified parts for newly launched vehicles, and we returned them quickly.”

Going the Extra Mile

UPS Supply Chain Solutions keeps striving to add value to the process as GM’s needs evolve. One improvement is a new Web site section enabling GM engineers and suppliers to gain immediate access to inventory reports, schedules and general information. Dealers can also log on to check the status of their received, outstanding or debited returns with the GM Warranty Parts Center, 24 hours a day, seven days a week.

“With UPS Supply Chain Solutions, we’re driving resolution time down, and that’s helping us stand out when it comes to customer satisfaction,”

Smits said. “They keep making improvements in our logistics and supply-chain processes so that we can focus on making improvements in cars.”

“With UPS Supply

Chain Solutions, we’re
driving resolution

timeWarrantydown,PartsandC—terGarythat’sManagerSmi ts

helping us standGeneraloutMo ors when it comes to
customer satisfaction. They keep making improvements in our logistics and supply-chain processes so that we can focus on making improvements in cars.”


Cherri Musser is the Process Information Officer of Supply Chain and OnStar at Detroit-based General Motors Co. She is responsible for providing information technology applications for all Supply Chain and B2C Applications worldwide. Supply Chain includes purchasing, production control and logistics, order management, as well as business to business e-commerce. B2C includes all customer-facing Internet, mobile commerce and OnStar applications.

Before coming to GM in 1996 Musser spent 20 years at Texas Instruments, where she served as vice president of worldwide research and development in TI's Software Division. Previously, Musser was Director of TI's Enterprise Solution Division where she managed the Applications Software Strategic Business Unit. Musser earned a bachelor's degree in mathematics and computer science from Mississippi State University in 1973, and received a master's degree in business administration from Southern Methodist University in 1986.

Q: What have been some of the greatest challenges moving to a Web-enabled supply chain?

The biggest challenge has been the business process change that has been required in order to effectively use the Internet. The other challenge we have at GM is getting global common processes so we can quickly apply technology and use it across the globe. I'll give you an example in the Web space. Our shopping and buying Web sites had to be very different to address 40 different countries. We wanted to be able to put in one infrastructure and one set of technology and give different content and views and make sure we understood the local laws as we did this, so we had teams of people that worked with the business units and IT groups...[to design] a user experience and content. Underneath that were some reusable components we could use across the company. When you configure a vehicle it's basically the same engine but the data is different and so we found tools...and we let the country define how they wanted to navigate through [the GM site] and we have tools that allow them to do that very easily and that could service them very easily. Over two years we deployed one common site...through a combination of technology and the process of isolating what was important to our business partners...You have to look at the business processes and determine how much central control and regional control is needed and [we wanted to] make sure we have underlying infrastructure that supports that.

Q: What's your view on the implementation of new technologies and bleeding edge versus a more conservative approach?

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We pushed the edge on the Buypower application I talked about because we aggressively went to J2EE [Java 2 Platform Enterprise Edition]...we felt that was the only way we could meet the requirements of central and distributed, because we really needed to move quickly and we needed the ability to be central but distributed, so it was a perfect match for us. When I go into more mission critical areas I'm more conservative. I'm responsible for systems that take orders and transfer them into our assembly plant. If it's not done right, it could shut the plant down. I have to make sure when I introduce something into a mission critical environment it has to work every time. I'm always looking for ways to apply new technology, but I have to say, "How aggressive can I be?" and it depends on what business process I'm supporting, and where you could afford some glitches. Initially in the Web space you were a little more tolerant of what's going on versus if you were scheduling a factory.

Q: What are some of the enhancements you've been working on this year for the supply chain?

Supply Power is [the name of] our portal for our supply base. All communications with suppliers go through that portal. They [suppliers] get their score cards from GM...all purchase power with suppliers goes through that portal: purchase orders, requests for quotes. It's very much Web-enabled there. What we've tried to do is selectively take areas in the business process and redefine how work gets done and improve communication and those are the ones we've Web-enabled first. So for internal processing on the supply chain we have an employee portal for communication. All of the new applications I do in the purchasing space and material space when it has to do with communication, goes through the supplier portal.

One of the more significant areas we're working on is an area called Demand Sensing. That's where we're taking inputs from the clickstream data we get from Buypower and brand Web sites and we are taking inventory levels from the fields -- the vehicles. We look at sales patterns and determine what the popular configurations of vehicles will be. We're in the process of deploying that. Then our dealers and the field sales organization can do a better job of determining what to order if there's not a firm customer order behind it. What we found is there is a high correlation between what people configure on the Web site and what becomes the popular configuration that is sold. There is a very high correlation so that's why we decided to take that clickstream data and other data and come up with a list of suggested configurations. That's still in pilot mode. It probably will be deployed in the December timeframe. It will be phased in eventually to all 14,000 to 15,000 dealers globally.
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Q: Can you point to any examples of how the supply chain has saved the company money through better efficiencies in 2002?

There are a couple of areas we really focused on this year -- one was reducing inventory levels of the material in the plants before product is built and I know we've got some significant savings. We have reduced our logistics costs significantly and we've improved our overall reliability of product to dealers. We're also getting a much higher percentage of on-time delivery. On the inventory levels, we worked specifically with the plants and have a program where we looked at buffers [a term related to holding inventory components in stock because the supplier may not get them to you] and we determined what buffers we really needed to keep...and a combination of analysis around buffers and driving the cycle time out has really required us [to save money].

On the logistics side, we partnered with a company [whose] entire focus was to reduce our logistics costs inbound and outbound globally. It required some technology...it's a very big success story.

On-time delivery is another area. We really got to improve because of our ability to predict when we'd get product to a dealer and we've made incremental improvements in our order management systems so we have more visibility to what we said we could do and how did we perform against that commitment.

Q: What else is occupying the bulk of your attention these days?

We have initiatives around direct selling in Brazil so we've been enhancing our Web site to support a direct selling model there. That means through the Internet you actually sell a vehicle and you have delivery through the dealership. We've made a major overhaul to the site...so a significant amount of vehicles will be sold through a direct selling model. That's one of our bigger markets. We're a Covisant user as an ASP model for the purchasing space. So we're in the process of working with them for requests for quotes as a capability they'll be supporting. We have smaller initiatives with them as well around catalog procurement. I've got a couple of data warehousing projects, one in the purchasing space and one in the order fulfillment space that we're working on and I'm championing trying to get inside of GM more of a factory concept for how we deliver software -- meaning standard work practices. We're adopting the capability maturity model (CMM) and getting that deployed both through GM and...our IT suppliers, because you get a higher level of quality through your delivered solution and a shorter delivery time and a lower cost.

Q: Who do you report to and how large is your staff?

I report to Ralph Szygenda, GM Group VP, Chief Information Officer. I have 16 direct reports and a total of approximately 300 GMers in my organization.

Q: Which of your skills has served you best in managing IT?

I would say relationship management. I have to form a partnership with my business customers in order to effect change and have technology enabled to change. GM is very matrixed so I have to have relationships with my peers. Nothing stands alone. From a business process standpoint I'm generally in someone else's space and third, the people who work for me, it's important that they see the vision and have a passion around what we do and a lot of that is [based on] the relationship I have with them. A big point I've found is if you get people working together then the impossible can get done. It also doesn't hurt to have some technology skills as well.

General Motors Co (GM.N) has a better grasp of how to handle disruptions in its global network of suppliers, said GM's chief executive, who also reiterated the automaker's outlook for vehicle sales this year.

CEO Dan Akerson said on Tuesday ensuring that shortages do not disrupt GM's supply chain is its biggest near-term challenge.

He also said supply shortages will not force GM to cut its outlook for U.S. vehicle sales in 2011, currently set at between 13 million and 13.5 million. Any problems would only disrupt production for one to two months.

"We're particularly focused on the semiconductor area," Akerson told reporters at an event on the sidelines of the New York auto show. "But we're feeling better than we did a month ago and a lot better than we did five weeks ago."

The March 11 earthquake and tsunami in Japan and subsequent infrastructure problems forced factories in Japan to close or run with limited power, causing a shortage of key auto parts and supplies, including semiconductors and paint.

Major automakers have dealt with the shortages by curtailing production in North America. GM idled its pickup truck plant in Shreveport, Louisiana, for one week last month.

"I don't think we'll have any problems going forward, given what we know today," Akerson said at the NADA/IHS Automotive Forum.

Akerson said the fact that GM's operations are still running is "almost heroic" and that GM had "not ten but tens of tens of people in Japan within 48 hours."

Akerson's comments came as executives from Toyota Motor Co (7203.T) and Nissan Motor Co (7201.T) said the number of parts at risk for shortages was shrinking. But Toyota also extended its North American production slowdown for six weeks to June 3, underscoring the continued challenges.

IHS Automotive trimmed its projections for U.S. vehicle sales this year due to surging oil prices and the Japan crisis. The industry forecaster now predicts sales this year will reach 12.9 million, down from its earlier outlook of 13.3 million.

STOCK BELOW IPO PRICE

Supply disruptions, coupled with the surge in fuel prices, have hampered GM's stock, which has fallen below its IPO price of $33. GM's stock ended down 1.3 percent at $29.59 on the New York Stock Exchange on Tuesday.

"Oil is a concern on investors' minds," Akerson said. "I think the supply chain as a result of the disaster in Japan is an issue. I think we've navigated those waters very very credibly."

Akerson declined to comment on whether the drop in GM's stock price would hamper the U.S. Treasury's exit. He also declined to discuss reports the U.S. Treasury was considering a sale of shares.

"They will tell us when they're getting out, I will not tell them when they're getting out," Akerson told reporters. "I don't know what's going to go into their calculus. I think there are many, many variables in their consideration and they don't share that with us."

The U.S. Treasury advanced $50 billion to GM during the financial crisis to help the top U.S. automaker avoid liquidation and restructure in bankruptcy.

GM got into the precarious position of having to rely on a U.S. government-sponsored bankruptcy in 2009 because of a series of bad decisions leading up to that.

"We had oversupply because we had huge fixed costs, we produced too many cars, the quality went down, they weren't in the right profile," said Akerson. "It was like you sat down and said what are 10 worst things we can do, we hit about eight or nine of them."

GM's IPO last November cut the government's stake to 33 percent of common shares outstanding down from 61 percent. The U.S. Treasury may sell more shares to further reduce its stake, a person familiar with the matter said.

THE $120 PLAN

Akerson expected fuel prices to remain high in the near-term as the U.S. auto industry nears the peak summer car driving season.

U.S. pump prices averaged $3.84 a gallon last week, the most expensive since August 2008, and about a dollar higher than a year ago, according to government data released on Monday.

"The likelihood of a sustained decline in the near future appears dim," Akerson said. "The last time the prices climbed to these levels in the summer of 2008 it caught all of us flat-footed. We're better prepared today."

A surge in fuel prices to between $120 and $130 a barrel was chief among GM's concerns after the company's IPO, he said.

His team developed what they called a "$120 plan" that included speeding up the production of the next generation of the Chevrolet Malibu, he said, adding the jump in fuel prices had come sooner than expected.

Akerson said small cars such as the Chevrolet Cruze and Sonic, as well as the Buick Verano, would help GM ride out the surge in fuel prices this year.

He said the company was unlikely to speed up production of pickup trucks given the "mileage-sensitive environment" for car shoppers. The company's top-selling vehicle in March was its Chevrolet Silverado pick-up truck with more than 32,500 in sales, nearly double sales of the Chevrolet Cruze.
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