General Motors has been working with suppliers − with some success − to build their factories closer to GM’s to cut down on transportation costs, improve quality, and increase its profit margin.
According to General Motors vice president of global purchasing and supply chain, Grace Lieblein, “Several suppliers we’ve been able to either locate [closer to GM’s Fairfax Assembly Plant in Kansas City, Kansas] — or frankly, just get parts from a better supplier location. In many cases, as we started to put our eye towards this strategy, we’ve been able to work with suppliers to move the locations, so it’s better for us, and frankly, better for them as well.”
In fact, The Detroit News reports that that suppliers Magna International and Comprehensive Logistics Co. plan to open factories next year in Spring Hill, TN, close to GM’s plant. NorthPoint Development is developing the industrial park that will be able to play host to another five suppliers. NorthPoint’s president, Chad Meyer, says his company also plans to create another site for suppliers near GM’s Fort Wayne (Indiana) and Lordstown(Ohio) assembly plants; the company is also looking into the development of a park in the Dallas area, right by GM’s Arlington plant.
“Kansas City and Spring Hill have been so successful, we’re going to do this elsewhere,” says Meyer, adding that on-time deliveries are increased when suppliers are localized. GM’s efforts to bring suppliers closer will eventually save the company “hundreds of millions of dollars.”
GM’s efforts to relocate supplier plants are tied to the introductions of 2016 and newer vehicles that will be built in plants outside southeast Michigan. “When you’re in southeast Michigan, it’s not as much of an issue because there is such a dense supply base around here,” Lieblein said. Suppliers of body panels, fuel tanks, some stampings, instrument panels and seats are especially desirable to be produced a “very short distance from the assembly plant.”
In some cases, GM has been able to promise work to suppliers for two generations of automobiles instead of one. Lieblein says suppliers have been cooperative in making the investment. “When they’re going to put money into a facility, especially if it’s in a bit of an island relative to other parts, knowing that that capacity is going to be used for multiple generations is important.”