General Motors Company’s logistics operations alone are an $8 billion-a-year expense. That involves sending parts and materials from all over the world to 168 manufacturing plants, shipping spare parts, cars and trucks to dealerships, and the necessary customs and duty fees. Needless to say, it’s in the company’s best interest to see where it can save some money in that department, and according to a Detroit News report, the operations have been scrutinized over the past year.
GM’s goal is to eventually cut $1 billion from material and logistics costs in North America by 2016. In doing so, the savings is estimated to boost GM’s North American profit margin by a full percentage point. One way for GM to accomplish this is to possibly open more logistics operations centers near some of its assembly plants, where parts can be packaged in a more thought-out sequence when it comes time to assemble vehicles.
Another way in which GM is fortifying the bottom line is what it is doing to its rail system at the Detroit-Hamtramck plant, where the Chevrolet Volt and Impala are assembled. AÂ $3 million extension of the rail line by 300 yards will eliminate much of the need for excess haulers, as the vehicles could be placed onto the rail cars from the facility. Doing so will save $7 million in costs over the next three years — a drop in the bucket when compared to $1 billion, but it obviously won’t be the only way GM will be saving money and increasing efficiencies.
An even more effective way that GM is dialing down its logistics operations will involve convincing suppliers to move their manufacturing operations closer to GM’s assembly plants, which in effect would decrease shipping expenses for both parties. The General has already negotiated a supplier of trim pieces for the refreshed 2014 Chevrolet Malibu to locate closer to Farifax, which will save $66 million over the course of production for the Malibu alone.
At the end of the day, increasing efficiencies are a great way to squeeze out some additional profit from an operation — and it’s great to see The General hone its efforts in the area.
Comments
Does this also mean the need for man power to go up or down?
Nowadays, operations-level changes usually have more to do with process than manpower (extending the railway at D-Ham is one example). However, some of the steps GM is planning on implementing (new distribution/supplier centers), for instance, might result in changes to the human job force.
Whether these will be net positive or negative is a different question, since new locations might open while older ones might close.
How about producing more parts in house like in the Alfred P Sloan days
Does it make since to make parts in house if you can sub them out with a lower price as long as the quality is the same?
The PSA European deal is supposed to accomplish a similiar result by shifting everything to the French logistics arm.
This element alone seems to make the deal worth while and has may eventually have an effect on Latin America.
I wonder how much could be saved if GM were to logistics partner with a company like Honda or Ford on a global level. These companies use many of the same parts.