General Motors Supply Chain Strategy

According to GM. com (2009) General Motors Corp. (NYSE: GM), is one of the world's largest automakers which was founded in 1908, in Detroit USA. It manufactures cars and trucks in 34 countries. GM employs 252,000 people in every major region of the world, and sells and services vehicles in some 140 countries. It sells cars and trucks globally under the following brands: Buick, Cadillac, Chevrolet, GMC, GM Daewoo, Holden, Hummer, Opel, Pontiac, Saab, Saturn, Vauxhall and Wuling.

Its largest national market is the United States, followed by China, Brazil, the United Kingdom, Canada, Russia and Germany. GM's OnStar subsidiary is the industry leader in vehicle safety, security and information services.

LOGISTICAL AND VALUE CHAIN STRATEGIES

To better understand the logistical and value chain through which a firm/company develops a competitive advantage and create shareholders value chain, it is useful to classify the business system into a series of value generating activities known as value-chain.

According to his book, (1985), Michael porter introduces a generic value chain model that comprises series steps of activities found to be common to a wide range of firms. Porter identified primary and support activities as shown in the below diagram; Source; netmba. com. (http://www. netmba. com/strategy/value-chain/).

INBOUND LOGISTICS

 Inbound logistics covers activities associated with the receiving, storing, and transporting of raw materials. Management decisions involve freight consolidation, mode and carrier selection, materials handling, warehousing, and backhaul management. (netmba, 2010).

INBOUND LOGISTIC OF GENERAL MOTORS IN UNITED STATE (USA), shipment consolidation increases vehicles efficiency, which is regarded as organization responsibilities. Full vehicle loads of goods save money because the same transport overhead is shared by more units of goods. However, general Motors logistics managers used to consider trade-offs between transport costs and potential freight delays, consolidation savings and information systems investments, and consolidation savings and inventory carrying costs.

Although freight consolidation may lead to longer lead times that in some cases are deemed unacceptable, they are often yields big savings. In united state General Motors choose to invest more on information systems and computer models to get benefits from higher shipment consolidation. According to (Blumenfeld), General Motors’ Delco Electronics unit successfully saves at least 26 per cent of logistics costs annually by using a computer model to manage a mix of direct and consolidated shipping routes.

The investment in the computer model transport, which takes into account 13,000 different parts in 30 GM plants and many routes and rates combinations, which has proved worthwhile from both cost and efficiency perspectives. Also in (USA) road transportation has impact on environment, in which GM try to avoid Some part by using rail and barge which consume less energy or uses energy more efficiently than other modes like road haulage and air cargo.

A typical transport mode decision determines which transport option to use in other to avoid traffic congestion and air pollution both directly and indirectly. Rail is seen as a better alternative to road transport because it makes more efficient use of land, can use renewable energy sources, helps to relieve traffic congestion in urban areas, causes less pollution, and generates less noise. While if it comes to material handling GENERAL MOTORS and their retailers save money by using less energy, labour, and packaging materials through bulk packaging.

This practice is environmentally responsible because they use fewer resources, In addition GM occupying large amounts of land, warehouses which they are generating much of their packaging in their supply chain. Standardized reusable containers help them to reduce operation costs and packaging wastes.

INBOUND LOGISTICS

IN MEXICO, While in Mexico the logic is quite different as that of in (USA), in Mexico GM transportation network is very complex, which consisted of eight operations on three sites in Ramos, Toluca and Silao.

As higher demands continued to be placed on GMM’s production and distribution operations, its transportation network lacked collaboration. In effect, each operation was making individual logistics decisions, creating costly redundancies and inefficiencies throughout the supply chain. However, On-time delivery is critical in their business, and they consistently meet their customers' requirements. With cost, service and punctuality always at the forefront, consolidates shipments, manages carriers, and optimizes air, sea and ground routes. (Penske, 2010)

In mexico they used three kinds of packaging: primary packaging, secondary packaging, and shipping packaging. Primary packaging contains the product itself and is the immediate and required container. Secondary packaging is the material that protects the primary package and is discarded when the product is about to be used. Shipping packaging refers to packaging necessary for storage, identification, and transport. It is discarded when the product reaches its destination. Packaging operations are usually performed at the manufacturing site.

OUTBOUND LOGISTICS USA

Outbound logistics refers to physical distribution activities such as collecting, storing, and distributing products to buyers and involves (finished goods) warehousing, materials handling, network planning and management, order processing, and vehicle scheduling and routing. The main difference between inbound and outbound is different product characteristics. Inbound logistics deals with raw materials while outbound logistics typically deals with finished goods. In GM, outbound logistics has more options and is far more complicated than inbound logistics owing to the higher product values and stringent customer delivery requirements. (Netmba, 2010).

Network design, planning and management are the first issues facing logistics managers on the outbound side In General Motors (USA) trade-off decisions are made regarding to the GM market, customers, product and logistical resources. The GM (US) logistical managers console an array of options including direct shipping or hub and spoke. They are responsible in practicing tends to favored fewer shipments, less handling, shorter movements, more direct routes, and better space utilization.

Their decisions in outbound logistics include stock levels and stock points, centralized versus decentralized distribution centre’s, different service policies for different customers and different items, back order management, and replenishment policies, their logistics are willing to trade in time for transport savings (using a slower but more environmentally responsible carrier) and trade information systems investment for logistics costs (using advanced information systems to manage logistics systems better).

With improved distribution technologies and extensive logistics networks, GM understands all the dynamics in inventory decisions and use innovative methods to solve problems in an environmentally friendly manner.

OUTBOUND LOGISTICS IN MEXICO

While in Mexico the outbound delivery forms the basis for goods issue posting, the data required for goods issue posting is copied from the outbound delivery into the goods issue document. (Example) when a customer post goods issue for an outbound delivery they use to perform a series of steps which are Warehouse stock is reduced by the delivery quantity, value changes are posted to the balance sheet account in inventory accounting, requirements are reduced by the delivery quantity, the serial number status is updated, the goods issue posting is automatically recorded in the document flow, stock determination is executed for the vendor's consignment stock, and a work list for the proof of delivery is generated.

After goods issue is posted for an outbound delivery, the scope for changing the delivery document becomes very limited, this prevents discrepancies between the goods issue document and the outbound delivery. While delivery processing and distribution Controls the actual fulfillment of sales and purchase orders as well as stock transport orders. The completing of logistics tasks is handled here.

With delivery processing, the goods are shipped and relevant documents are printed out and the sales requirements can be distributed to alternative locations as well the delivery might be shipped to the customer directly from the fulfilling locations (more than one delivery), or consolidation may occur at one location before one complete shipment is transported to the end customer. OPERATIONS Operation is the process of converting inputs and transforms them into output as finished goods via assembly, testing, information system and packaging activities.

GENERAL MOTORS

USA are using many operational strategy in manufacturing and producing in which do to the word limitation an analyzing of some part in their operation will be explain. PACKAGINGS, GM U. S. A are using three kinds of packaging: primary packaging, secondary packaging, and shipping packaging. Primary packaging contains the product itself and is the immediate and this types of goods required container. Secondary packaging is the material that protects the primary package and is discarded when the product is about to be used.

Shipping packaging refers to packaging necessary for storage, identification, and transport. It is discarded when the product reaches its destination. Packaging operations are usually performed at the manufacturing site although some warehouses performing break bulk operations may add protective packaging to products. Consequently, engineers at the GM manufacturer are finding and developing the ways and means to increase the organization's ability to handle variations within the plants in short order. Moreover according to Michael C. Mazzola in terms of INFORMATION SYSTEM GM CIO effectively managed Top 20 Plan and define project for the Vector Critical Applications In-sourcing project Responsibilities and highlights include:

  • Directed team consisting of 21 members, including 3 project managers, responsible for developing business system requirements, architecture design, and a testing strategy for 9 applications being in sourced into the GM hosting environment
  • Provided oversight across multiple internal and external functional teams and monitored their deliverables in order to meet critical project milestones
  • Technical scope included 5 software (Coldfusion (2), OTM, Cognos, Teradata DW) and 2 infrastructure (Solaris 8>10 and Oracle 9>10g) upgrades
  • Over 30 GM legacy application feeds to be redirected and over 60 servers to be migrated or consolidated
  • Project was delivered on-time and within budget While in MEXICO they using almost the same but not, GM is capable of
  • Primary contact and customer liaison for GM Carrier communications
  • Provided day-to-day production on-call support for the Outbound Logistics Systems
  • Interacted with GM client and end-users to determine business requirements for minor maintenance and production support workload
  • Utilized CMM Level 2 processes to execute customer change requests
  • Successfully completed phase three of the EDS Information Associate Technical Development Program intensive course on structured computer programming and the different phases of the System Life Cycle (Microsoft Visual Basic) And in terms of packaging they are applying the same as that of in U. S. A.

MARKETING AND SALES IN GENERAL MOTORS

Many marketing decisions affect logistics operations. Customer service level and distribution channels have a direct impact on logistics. As mentioned earlier, logistics decisions boil down to trade-offs between transport and inventory and between information and inventory. The same service levels can be maintained with lower inventory and speedy and reliable transport or with high inventory but inexpensive transport.

General motors’ embarks on several promotional strategies to reach to its customers and an example of such strategy is the one given in this source. General Motors will be giving away 1,000 vehicles through its Hot Button marketing program, the latest in a line of ground-breaking marketing initiatives aimed at reaching consumers more effectively.

Consumers have a chance to win simply by visiting their local participating dealership and pushing the On Star "Hot Button" in a specially designated vehicle. (Roadandtravel. com, 2009). While in pricing strategy, GM uses many pricing strategies to sell its products worldwide. According to Carty (2008) GM who uses employee pricing strategy to reduce previous year’s inventories is trying a new strategy — pricing 2006 model cars and trucks close to how much they expect consumers will pay, but employee pricing is proving hard to do away with. After allowing its "Employee Discount for Everyone" program to expire GM brought back the popular discount program. Also GM is lowering the prices on 30 of its 76 models and adding features to other models to make them more competitive.

Under the new pricing strategy, the base price of the Chevrolet Malibu, for example, is $17,990, or $1,835 below the 2005 model, while the base price of the Saturn Ion sedan is $12,490, or $2,455 lower than the 2005 model. (Dee-Ann, 2010). GM are now engaging in a younger generation and re-introduce their brand, GM are using internet marketing effectively including viral marketing, PPC, Social Media, and even email marketing announcing sales and personal offer invitations to their existing customers.

Reaching their existing customers on a personal level make them feel exclusive and willing to do business again. Facebook is also a good tool GM are using to keep customers engaged and aware of the new changes of their product. Car Dealers are also going to have to clean up their act.

They need to stop being about deal making and hard closing techniques. Your local dealer will need to become a valuable source of ongoing information using the social media, email marketing and search engine marketing. By doing these things they can be less about “getting you into something today” and more about establishing a trusting relationship and someone who can be relied upon when the time does come to get that new vehicle. (Melissa, 2009). Which they are also applying almost the same marketing and sales strategy both in U. S. A and Mexico.

SERVICES

Services include activities such as installation, repair, returns, parts and supplies, and training. It is a particularly important part of the total product in industrial marketing and consumer durable goods. Of these activities, logistics managers in GM are concerned about returns handling, parts and supplies management, and network maintenance that provides fast, reliable service to customers. Returns handling has grown in importance in recent years with the increased emphasis on recycling and hazardous material handling. Contrary to consumer packaged goods manufacturers, GM often maintain an extensive service network to service their customers after the goods are sold. Computers, machine tools, automobiles and office machines fit in this category because their products are sold with after sales service expected as “extended products”.

A typical returns handling system reverses the direction of the flow of goods and requires changes in equipment and operational procedures. These changes may include extra storage space, specialized recycling equipment, detailed employee and customer training and buy-in programmes or the development of new markets for recyclables. Once the modification is made, such reverse logistics systems can be very efficient.

A system could include several warehouses linked in a network to perform functions such as transport to and from retailers for returns, in-house cleaning, refurbishing, and repackaging, scrap disposal, inventory management, and hazardous material handling. In other words, the warehouse becomes a recycling centre that sorts and reuses material. This process is also applied in all general motors’ marketing channels around the world.

GM FIRM INFRASTRUCTURE U. S.

A Traditional organization models consist of a hierarchical structure with a president or executive at the top, followed by vice presidents or senior managers, then additional layers of management below, and with the majority of the employees on the bottom. Jobs in traditional organizational models are grouped by function into departments; this was the case at General Motors. (Jex, 2002) General Motors was divided into different independent automakers; Buick, Cadillac, Oldsmobile, Chevrolet, and Pontiac.

Each independent automaker was operated differently and competing with each other. The competition among its own independent automakers and lack of centralization was costly. (Taylor, 2009) HUMAN RESOURCE MANAGEMENT According to GM. com, HR is paramount to our reorganization effort. If we are to hire, train and keep the best workforce possible, then we must have the best and most up-to-date HR practices possible," Wagoner says. "While the change in HR is just one element of making GM a more globally focused and competitive company, it is a key element. " One of the first things Wagoner did as president was to organize a senior executive management committee, which he named the Automotive Strategies Board.

The newly formed board includes the top-level executives at GM such as the chief financial officer, the chief information officer and the vice president of communications. Wagoner, who had promoted Barclay to the position of vice president of global human resources for GM, named her to the strategies board. The move to place the head of HR on a top-level management team is something new within the organizational chart at GM. Essentially, Barclay now is considered the chief human resource officer at GM, and she reports directly to Wagoner. (GM. com, 2010)

TECHNOLOGY DEVELOPMENT

Penske Logistics has been a supplier to General Motors (GM) for more than 75 years. With a reach that extends to more than 60 countries, logistics is no small challenge for GM. GMM is GM's Mexican subsidiary and a vital part of GM's North American operations. GMM selected Penske to be its lead logistics provider (LLP) to help drive efficiency throughout all aspects of its distribution network. Within the first six months of the partnership, transportation costs had already been significantly reduced. And, more improvements were underway, including the implementation of proprietary software to provide instant access to real-time updates from every supply chain participant. While in MEXICO Very little has changed in GM’s social media strategy in 2010 except increased budget over 2009.

While the current CEO doesn’t participate himself on social media like his predecessor did, he is very supportive of GM’s social media strategy. GM’s social media focus is mostly centered on having a physical presence at social events where communities gather. They focus on providing people an experience with cars and allowing them to talk about their experience online. Chris and his team go wherever people are already gathering so people can talk about their products in their own words. If people write about their experience, they are only asked to disclose that GM loaned them a car to drive. That’s the only requirement. All commentary is authentic. (Bernie, 2010)

OBJECTIVES FOR GENERAL MOTORS

There are many objectives which should include in this ones, but do to the word limitation an explanation of only this two will be consolted.

  • Social Media strategy
  • Marketing strategy
  • Change their current lead logistical provider (LLP)

STRATEGIES TO ACHIEVING THE SET OBJECTIVES

Social media strategy; GM should update their communication channels and Keep their consumers first, If their going through a difficult period they should demonstrate change and show that change to their consumers and explain that they have change and how they have changed, and talk with them, not at them. They should also message them to come and have instant conversations. They should not use talking points.

They should also enhance their ways of communication and ways of tracking their goods when shipped. Change their current lead logistical provider (LLP); As the world is now global everything is changed according to generation, as I noticed GM spend 75 years with their lead logistical provider, in this case GM should provide new and up to date (llp) so that they merged with the global world.

CONCLUTION

This assignment has discussed each step in the firm’s logistical and value chain to show how logistics managers are making environment more responsible in terms profession decisions. Examples The outbound activities differ little from inbound activities.

Since the main difference is higher-value products and more controllable variables in the outbound leg, many trade-off decisions were having different results in outbound and inbound logistics. Two other important cross functional topics, transporting and services, have also been examined in depth to expose some of the issues there. REFERENCES netmba. com ,2010, the value chain [available] (http://www. netmba. com/strategy/value-chain/) viewed 20-oct-2010. Penske 2010. General Motors de Mexico [online] available http://www. penskelogistics. com/pdfs/02_gm_mexico_case_study_updated. pdf viewed on 20-oct-2010. Michael C. Mazzola. 2005, Information technology program [online] available; http://www.

thetmta. com/documents/090205-MazzolaResume. pdf viewed on 21-oct-2010. Roadandtravel. com, 2009. GM to give 1000 vehicles in promotion [online] available; http://www. roadandtravel. com/newsworthy/newsandviews04/gmhotbutton. htm viewed on 21-oct-2010. Dee-Ann Durbin, 2010. Carmakers Adjust Pricing Strategy [online] available; http://www. washingtonpost. com/wp-dyn/content/article/2005/08/01/AR2005080101561. html viewed on 22-0ct-2010. Melissa, 2009. The New Marketing Focus of General Motors [online] available; http://www. optimum7. com/internet-marketing/business-strategy/new-marketing-focus-general-motors. html viewed on 22-0ct-2010. Sam, 2008.

GM and Clean Energy to open hydrogen station near LAX [online] available; http://green. autoblog. com/2008/06/11/gm-and-clean-energy-to-open-hydrogen-station-near-lax/ viewed on 23-0ct-2010. Borges B, 2010. GM Drives with Social Media [online] available; http://www. findandconvert. com/blog/2010/gm-drives-with-social-media/ viewed on 24-oct-2010. Taylor, 2009. GM Organizational Change [online] available; http://www. associatedcontent. com/article/1559542/gm_organizational_change. html viewed on 23-oct-2010. General Motors Corporate. 2010. Our Product: Vehicle Strategy [Online] Available from: http://www. gm. com/corporate/responsibility/reports/05/400_products/1_ten/410. html# Accessed on 23-oct-2010. Cooper, M. 1983.

“Freight consolidation and warehouse location strategies in physical distribution systems”, Journal of Business Logistics, Vol. 4 No. 2, pp. 53-74. Pooley, J. and Stenger, A. 1992, “Modeling and shipment consolidation in a logistics system”, Journal of Business Logistics, Vol. 13 No. 2, pp. 153-74. Marin, A. 1994. “The ultimate ECR strategy”, paper presented at The Council of Logistics Management Annual Conference, Cincinnati, OH. General Motors Corporation (2009) About General Motors’ [Online] Available from: http://www. gm. com/corporate/about/ viewed on 2-0ct-2010.

CONCLUTION

In this report, a cleared value chain strategies in which GENERAL MOTORS were applying in their local business, and the changes they have made In their overseas operations and also examines logistical issues relative to the natural environment and discusses measures that can be undertaken to achieve a proactive environmental management focus.

Because the nature of logistics management is cross-functional and integrative and since so many logistical activities impact on the environment, it makes sense for logistics managers to take the initiative in this area. Examples are given to demonstrate how