General MotorsClass 5: IT Enabled Supply Chain Mgmt

Hau LeeCase Summary by: George Cho

Main Takeaways

To share information especially customer needs with suppliers throughout the value chain will bring a significant reduction in the level of inventory and cost.

Two types of sharing information have pros and cons.

-public market exchange

-private exchange

More in-depth Summary

Problem: the industry had been stuck in a vicious cycle in which automakers focused on maximizing sales in order to optimize the utilization of their capital-intensive plant assets and unionized labor force.

Vicious cycle>

Produce vehicles to maximize factory sales → push to dealers → build higher inventories → incent to sell → customer compromises or walks away → erode margins

<Results>

Excessive structural cost, dissatisfied customers, slow to respond, lost revenue opportunities

Customer side

: strengthen customer relationship and expand sales channels

  1. situation: long lead time and absence of the sense of customer needs
  2. Action

1)leveraged the customer data in numerous discrete customer management databases

2)with the information shared, provided customized service and promotion

3)conducted new survey on customer demands concerning vehicle delivery which showed what they really care is that they got the car what they wanted not how fast they got the car available

4)launched GM BuyPower offering an integrated online channel and personalized offline dealer experience

5)used GM BuyPower to strengthen the “shopping” and “buying” aspects of the GM purchase funnel

6)gathered customer tendency through GM BuyPower

7)built GM owner center for post-purchase customer

8)envisioned every vehicle to become part of a wireless network, OnStar

<Supply Side>

: adopted Built-to-Order system and centralize logistics

  1. Situation : long scheduled lead time and unreliable production schedules led to excess inventory throughout the value chain

1)Manual and rarely real time communication between GM and supply chain partners

2)Lack of collaboration in product development

3)Innovative solution to logistics which cost $6 billion annually needed

  1. Action

1)balance between Built-to-Stock(BTS) and Built-to-Order model(BTO)

2)launched new department of Order-to-Delivery(OTD) which was responsible for order fulfillment, supply operations, and logistics.

3)OTD Reduced delivery time from over 80 to 40 days and increased client reliability from 68% to 90%

4)OTD strengthened the link between manufacturing, dealers, and customers

5)Built a private web-based portal “GM SupplyPower” to complete transaction and share information related to purchasing, sourcing of materials, quality and production control, logistics, engineering, and manufacturing.

6)Replaced the private “GM SupplyPower” to public marketplace named “Covisint”

7)Covisint enabled small firms to participate and reduced problem dealing with all different standards and protocols.

8)Used covisint for procurement about $25 billionworth of material

9)Switched from multiple third-party logistics providers who did not communicate each other to a centralized joint-venture called “Vector SCM” with CNF, a logistics company providing global supply chain services.

<IT Side>

: integrated disparate systems and built a robust and scalable architecture

  1. Situation : discrete and isolated information system around the organization
  2. Action

1)hired CIO for every business unit

2)put in place a cross-functional matrix of process information officers (PIOs) and CIOs.

3)Linked the existing system with middleware and standardized the system

4)Merged and tracked customer information and data

Case Discussion / Digest Questions

If the article had class discussion questions or case-digest questions, answers to the questions should be included. Check Catalyst for the questions.

Private vs. Public

Private Exchange

•Deeper integration among back-end systems

•Known and trusted trading partners

•Restrictive participation

•Considerable capital expense

•Staff to operate and maintain system

•Technology may be obsolete prior to ROI

Public Exchange

• Lower cost of entry

• Open published industry standards

• Creates community/efficiencies

• Perceived loss of competitive business advantages

• Integration of legacy systems

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