Having embarked on a plan to improve quality and relationships with its suppliers, General Motors is also reassessing the way it sources parts from, possibly looking to decrease the amount of suppliers with whom it does business while bringing work in-house.
“Engineering and purchasing are going through every commodity and assessing sourcing with an eye to bringing it inside,” GM vice president of global purchasing Grace Lieblein recently told reporters at an industry function. “We’re looking at where it makes sense.”
Ms. Lieblein brings a unique perspective to the purchasing role, having risen through the product development ranks rather than the purchasing side of the business to come to her current position. In that regard, an engineering viewpoint might allow for a more effective integration of parts sourcing operations by being familiar with the details of the automotive design and engineering processes — whether said sourcing occurs by purchasing or by developing the parts internally.
On the purchasing side, Ms. Lieblein and her team are working to bring suppliers into the process before parts are even designed. Previously, GM furnished suppliers with a statement of requirements that needed to be met. Today, the automaker is “engaging suppliers before we start designing parts.” Similar to a mutually-beneficial partnership, it’s this close collaboration between GM and suppliers that’s highly influenced by a healthy relationship — one that GM is doing its best to enhance by deploying 200 engineers on a global level to work with suppliers in the field.
Some industry analysts, however, believe that The General would be better off if it made the majority of the parts it uses in its vehicles itself — much like key competitors, namely Volkswagen, already do today. Such a model, for which GM arguably has sufficient business scale, could result in greater control and thus quality during the development, manufacturing, and subsequent troubleshooting and support stages, while being more profitable for the automaker in the long term.
The implementation of such a strategy, however, would require GM to significantly increase its internal parts design and engineering efforts, a move for which good timing seems to be of the essence.
Comments
Yes finally gm is starting to do what makes sense
This is only part of the streamlining GM will see. They will be looking to make more and more things efficient as they were that far out of line in so many areas. It was once true that suppliers used to laugh at GM for being able to sell them the same part under 10 different part numbers for 10 different prices.
Having fewer suppliers is a good thing. Most major Corporations employ a ‘strategic sourcing’ philosophy whereby they aggregate their spending with supplier partners in return for lower unit pricing. It starts with a Request for Information & Quote (RFIQ) for the product/service that the Corporation is looking for – be it stationery, tires, glass, wires, computer equipment…etc. The RFIQ would be issued to the major or emerging competitors in that particular product or service sector – pre-qualified that they can meet the quality and quantity demands of GM. The responses to the RFIQ are ‘scored’ against certain evaluation criteria (e.g. price, reputation, quality). Some Corporatations might have a dual-vendor strategy, a single vendor strategy, or a multi-vendor strategy depending on what fits their business requirement the best. Generally speaking however, if you aggregate your spend with fewer vendors they give you a better price. Like most everything else, the longer the term of the agreement and the more quantify of product or service you agree to buy, gets you the better price. This better price should translate into reduced product pricing for GM – assuming they pass it along to their buyers.
What a great idea! Perhaps it should be called AC, or Delco, or Harrison Radiator, or Guide Lamp, or Delco Moraine, or Delco Remy. What do we know now that we didn’t know then. 20 years ago the “Industry Analysts” felt we were paying too much parts sourced from in house divisions. Sounds a little like the IT story where in house was out sourced to EDS, then in part to HP, and now it comes back home.
Stupid is as Stupid does
Care to elaborate, sir?