General Motors has introduced a supply chain management initiative in which logistics will play a more integral role in product lifecycle planning. Called ‘Total Enterprise Cost’, it is intended to improve how the carmaker calculates project and material sourcing costs and will go further than the ‘total landed cost’ sourcing model that has been the traditional approach amongst carmakers.
The new initiative, which is currently a pilot in proof of concept stage and has not yet been universally rolled out, would put a greater emphasis on allocating potential risks, including those arising from capacity shortages, premium freight, quality issues and warranty costs.
GM’s executive director for global logistics, Susanna Webber (pictured), told Automotive Logistics magazine that there is now more influence from the supply chain side of the organisation when it comes to making important decisions.
“We have become an equal person sitting at the table. That is a result of GM looking at all the elements of cost,” she said.
It is also the product of a new approach at GM that aims for greater communication and feedback between the company and its suppliers. It includes an established feedback for providers on operational issues, as well as contractual and administrative details such as the procurement process.
This approach has been led by both Webber, who also played a leading role in supplier communication during GM’s bankruptcy proceeding, and purchasing chief Bob Socia, who took over last year as vice president of global purchasing and supply chain.
Logistics providers will be glad for the more open approach to communication from the carmaker, who have taken a hit in recent years as GM closed factories and cut production. Its annual global budget for all inbound and outbound-related logistics activities is now in excess of $5 billion, down from the more than $7 billion it was prior to the crisis and bankruptcy.
The reduction in logistics purchasing includes 50% for the US, although logistics spending is likely to surpass earlier budget estimates given the recent increases in the North American market.
“The fact that we are asking ourselves and our providers what we can do to improve and then act on it is providing the opportunity to really do better,” said Webber.
That improvement appears to have started to gain ground across General Motor’s supplier relations, as a recently released survey by Planning Perspective, a consultancy, revealed considerable improvements.
Read the full interview with Susanna Webber in the forthcoming edition of Automotive Logistics magazine.
