General Motors’ Supply and Procurement Strategies

Introduction

General Motors Company (GM) is one of the leading multinational corporations in the global automobile industry (“General Motors,” 2017). The American multinational firm has its headquarters in Detroit, Michigan. Currently, GM manufactures, engineers, designs, and markets its superior vehicles in different parts of the world. Some of the car brands marketed by the firm include Chevrolet, Cadillac, GMC, Wuling, and Buick (Ku & Hung, 2014). At GM, numerous activities are undertaken by competent workers to ensure the end user receives quality vehicles in a timely manner. One of the critical functions that dictate the company’s success is the procurement and supply chain for required inputs. The timely acquisition of raw materials is what makes it easier for the firm to support the changing needs of its clients in 35 nations. The purpose of this paper is to give a detailed analysis of General Motors’ supply and procurement strategies.

General Motors’ Supply and Procurement Strategies

Detailed Analysis

The success of GM is attributable to the effectiveness of its procurement strategies. The company has a procurement department that focuses on the best practices and initiatives in order to sustain the intended business functions. Ku and Hung (2014) define procurement as an aspect of business management that focuses on the identification and acquisition of different raw materials that are needed by an organization in an attempt to realize its goals. From the very beginning, the procurement managers at General Motors liaise with different suppliers in order to identify new raw materials. The next stage is implementing sustainable practices or strategies. The ultimate goal is ensuring that the acquired raw materials have the potential to drive business performance.

Since GM is a manufacturing firm with different branches and departments focusing on various brands, raw materials must be sourced and delivered from various suppliers. Any failure throughout the procurement process can have adverse impacts on the firm’s performance. With many suppliers and business partners in the company’s procurement supply chain, GM has identified powerful managerial strategies that can support the process (Ku & Hung, 2014). Continuous monitoring of the supply chain is done to identify various gaps and opportunities that can impact the supply chain. Constant collaboration with various suppliers remains one of the critical issues to ensure the targeted clients receive quality cars in a timely manner.

GM purchases and sources a wide range of materials, freight, transportation, supplies, and parts from different stakeholders in the industry (“General Motors,” 2017). These materials are used by the firm to produce superior vehicles that have the potential to meet the changing needs of the targeted customers (“General Motors,” 2017). The raw materials acquired by the firm include lead, steel, copper, resins, and aluminum. Within the past three decades, GM has not recorded significant shortages whenever acquiring various raw materials (Monczka, Handfield, Giunipero, Patterson, & Waters, 2015). With proper management and the ability to coordinate with the major suppliers, GM has managed to implement powerful procurement strategies that meet its manufacturing goals.

General Motors Company is known for implementing rigorous measures and supply paths that can support its business model (Monczka et al., 2015). At the heart of the procurement process is adequate management. The managers involved throughout the procurement process play a critical role in the company. They identify new opportunities and offer adequate suggestions in an attempt to transform the company’s performance.

Three-Stage Procurement Process

The procurement processes undertaken by GM can be summarized into three unique stages. The first stage is known as pre-contract. The role of this phase is to ensure the right materials are identified and analyzed in order to ensure they meet the firm’s minimum requirements for supplies. Planning is also done to ensure the right channels and terms of delivery are clearly understood by the targeted suppliers.

The second stage is called “post-contract and focuses on the unique issues associated with supply chain management” (Monczka et al., 2015, p. 430). The delivery contract is signed during the stage to ensure the suppliers are willing to support the company’s procurement model. When the right materials are delivered in a timely manner, the firm finds it easier to achieve its subsequent manufacturing goals.

The third stage focuses on most of the activities associated with the supply chain and procurement process. One unique attribute of this third phase is that it focuses on the best approaches and practices that can support the sustainability of the supply chain process (Monczka et al., 2015). During this stage, the procurement and supply chain managers focus on specific aspects such as corporate governance. Issues such as risk management and supplier relationship management are “taken seriously throughout the procurement process” (Ku & Hung, 2014, p. 67). The issue of regulatory compliance is another unique attribute of the supply chain. At GM, compliance is something capable of insulating the firm’s manufacturing process from unnecessary legal implications that might arise from the supply chain process.

General Motors has continued to support the effectiveness of its supply and procurement strategy using a number of strategies. For instance, the firm uses the process to drive its sustainability agenda. This kind of strategy has for years continued to support the company’s business model and corporate image (Monczka et al., 2015). In an attempt to realize the targeted goals, GM’s supply chain is founded on powerful attributes such as trusted partnerships, sustainability, and transparency. The concept of sustainability is achieved by ensuring that each and every support fulfills specific requirements such as engaging in environmentally-friendly practices.

Strategic partners have continued to support the procurement process. The suppliers are usually guided to deliver the right raw materials in a timely manner. Transportation is usually promoted by the continuous engagement of different stakeholders (“General Motors Company,” 2017). The values of accountability and integrity are constantly shared with the suppliers in order to achieve the targeted goals. These initiatives have continued to deliver numerous benefits to General Motors Company. For instance, the effective management of supplies is something that has reduced business costs for the company (Ku & Hung, 2014). The strategic partnerships make it easier for the suppliers to engage in research and development (R&D). The practice has led to market expansion, innovation, and competitive advantages in the automobile industry.

From the above analysis, it is agreeable that GM’s procurement and supply chain is a critical link in its business model. Experts at the firm believe strongly that the unique benefits associated with the procurement process have been recorded at the company. Some of the benefits include improved manufacturing processes, the security of raw materials, production of quality products, and increased efficiency. These achievements are critical because they ensure the targeted customer eventually receives an admirable automobile.

Comparative Analysis: GM vs. Toyota

General Motors’ supply and procurement can be described as successful because it has made the firm a leading player in the global automobile industry. A similar approach is adopted by Toyota in order to achieve its business potentials. One unique attribute that is specific to Toyota is its ability to liaise with its suppliers throughout the supply chain process. By so doing, Toyota has managed to achieve new practices that support its business strategy. The current procurement policy at Toyota is implemented in such a way that it promotes technological innovation (Monczka et al., 2015). Toyota and its suppliers constantly identify competitive measures and ideas.

Autry et al. (2014) indicate clearly that Toyota embraces a consolidated approach in order to ensure different parts and raw materials from different suppliers are acquired in a timely manner. With this kind of consolidation, Toyota has continued to purchase its raw materials at cheaper prices. The company also ensures that most of the raw materials are not obtained from a single supplier. This approach is what fosters competition and eventually makes it easier for Toyota to acquire quality raw materials that can support its business strategy.

Toyota’s presence in 26 nations across the world is something that has continued to dictate its supply chain. This has not been the same case for GM. As described above, General Motors has a centralized managerial approach for its supply chain and procurement strategies. Toyota, on the other hand, has focused on the best approaches to develop a complex supply chain strategy. The company uses the best ideas to ensure every stage of the procurement and supply chain stage is optimized (“General Motors Company,” 2017). This approach is what makes it easier for the company’s suppliers to deliver the required materials in a timely manner. At the same time, adequate initiatives are implemented in an attempt to reduce production costs.

Unlike GM, Toyota is one of the leading players that have decided to come up with a standardized strategy to support the supply chain and procurement process. The standardized system has made it easier for the company to acquire adequate raw materials for each production base. The global distribution approach has constantly supported new changes. The process is appropriate because it guides the firm to procure specific parts that can meet its lean production requirements (Autry et al., 2014). Production requirements have been changing significantly over the past years. That being the case, a globalized distribution system is something that can ensure the changes are addressed in a proper manner.

Changes in the supply chain processes are implemented frequently depending on the emerging issues in the automobile industry. Issues such as the costs of acquiring raw materials and the bargaining powers of suppliers are monitored periodically. The firm has continued to identify new strategies and collaborations that have the potential to improve the efficiency of the global distribution channels and systems (Monczka et al., 2015). These practices are critical because they have made it easier for Toyota to maximize the level of customer satisfaction. The needs and concerns of different suppliers are identified throughout the distribution system. Consequently, the practice has led to positive working relationships between the firm and its suppliers. These initiatives will eventually make Toyota a leading competitor in the industry.

Strategic Approaches

The complexities associated with procurement and distribution systems explain why companies such as General Motors have come up with adequate strategic approaches in order to drive performance (Autry et al., 2014). The first strategic approach implemented by General Motors revolves around the acquisition of raw materials from different domestic suppliers. This strategy has been supported by many experts at the firm because it has the potential to promote sustainability. Domestic suppliers understand the unique needs of the company’s manufacturing processes. Raw materials are acquired in a timely manner and used to support the company’s business model.

In the recent past, GM has identified a new strategy in an attempt to cut costs and reduce the activities involved throughout the supply chain process (“General Motors Company,” 2017). For example, the firm has identified a number of strategic partners to deliver various materials to the company. This move has been observed to minimize the uncertainties and disruptions that used to affect the supply chain process before (Lacy & Rutqvist, 2015). These measures continue to strengthen the company’s supply chain processes.

There are numerous issues that dictate the effectiveness or success of a supply and distribution chain. Raw materials and parts are critical in every manufacturing process in the automobile industry. Managers of automobile manufacturing firms understand this issue much better. In order to remain a leading player in the industry, GM has gone a step further to establish powerful strategic partnerships with various suppliers. Such partners are guided to produce superior materials and deliver them in a timely manner (Lacy & Rutqvist, 2015). The increased level of collaboration has made it easier for the company to work with the suppliers and address the emerging challenges affecting the company.

In 2014, General Motors Company rolled out its Strategic Supplier Engagement (SSE) program in an attempt to improve its supply chain process. The purpose of this program has been to guide and empower more suppliers. The suppliers have been benefiting from a wide range of perks such as training and strategic planning (Ku & Hung, 2014). The suppliers receive adequate incentives in order to promote the firm’s business strategies. With adequate training, GM has been able to receive quality raw materials from its business partners. The initiative has made it easier for the company to realize its objectives. This is a clear indication that a proper supply chain process has the potential to dictate the performance of a business organization.

The other unique attribute that makes the firm’s procurement and distribution channel sustainable is the nature of various logistical operations. The company has collaborated with logistical companies to ensure various raw materials are delivered at the right time. The logistical procedures have been implemented to address most of the challenges that have affected the company in the past (“General Motors Company,” 2017). Throughout the use of logistical partners, GM has managed to gain access to raw materials that could not have been acquired before. Additionally, the logistical companies make it easier for the managers to supervise the other activities associated with the distribution process. The firm has also “moved to lower variable costs” (Monczka et al., 2015, p. 430).

Issues such as strategic planning and operational competency are always taken seriously at the company. Suppliers are always encouraged to present their ideas and complaints. This practice is what supports the effectiveness, accuracy, and efficiency of General Motors’ supply chain process. Consequently, the firm has been able to produce superior automobiles that can meet the unique needs of the final customers (Ku & Hung, 2014). Such approaches can also be emulated by companies that want to emerge victorious, especially in the automobile industry.

Challenges Faced in the Past

Within the past decade, many players in the automobile industry have encountered numerous problems that have the potential to disorient their distribution channels (“General Motors,” 2017). For instance, commodity prices have been increased at a high rate. Some of the widely affected commodities include raw materials such as platinum metals, copper, steel, and copper. Economists believe strongly that prices have increased significantly due to the current changes experienced in the global market. General Motors has continued to compete for raw materials because of the increasing demand in the developing world (Monczka et al., 2015).

Business risks emerging from the issue of sustainability has affected the logistical and distribution processes undertaken by the company. This issue has remained a major challenge, especially in the automobile industry. Governments have come up with stringent measures to monitor and ensure that companies produce cars that support the concept of sustainability (“General Motors,” 2017). The requirement also dictates the business performance of both suppliers and manufacturers. Several years ago, this issue affected the effectiveness of the company’s supply chain thereby disorienting the manufacturing processes of various vehicles. This challenge has affected many companies in the industry uniformly. It was after addressing this issue that the company continued to produce superior cars.

The risk of purchasing specific raw materials from different suppliers is a major challenge that has affected GM’s procurement strategy for several years. This is the case because a single disruption in the supply chain process has the potential to affect the company’s production strategy (Lacy & Rutqvist, 2015). Consequently, the firm finds it impossible to deliver the final products in a timely manner. This unique gap forced the company to identify new measures that can result in better performance.

Overcoming the Challenges

As mentioned earlier, commodity costs have been increasing at an unprecedented rate. GM has been forced to come up with powerful measures in an attempt to deal with this kind of competition. The leaders at the company managed “to control commodity prices by using derivatives to economically hedge a portion of raw material purchases” (Monczka et al., 2015, p. 431). This initiative has made it easier for the company to acquire the required raw materials to support its manufacturing processes.

The issue of supply chain sustainability is affecting the performance of many companies. In order to deal with the challenge, GM has established a powerful team to establish positive partnerships with its suppliers. The practice has led to the production of sustainable and affordable cars that fulfill the changing needs of the targeted clients (“General Motors,” 2017). The strategic partners have empowered more suppliers to offer new incentives that can guide the company’s manufacturing processes. Consequently, new values such as accountability and integrity have emerged at the company. This development indicates that the firm will continue to provide quality vehicles to its global customers.

The risk of supply disruption was addressed using a powerful procurement strategy for various materials and parts. For instance, the firm identified new partners who could deliver specific systems and components without having to acquire the constituent parts separately (Lacy & Rutqvist, 2015). This measure has led to new partnerships that can support the firm’s business model.

General Motors’s SSP program is an ingenious move that has empowered more suppliers. The program is used to train more suppliers and encourage them to engage in R&D. By so doing, the firm receives appropriate components that support its production strategy. Innovative ideas and developments have been identified thereby making GM successful (Lacy & Rutqvist, 2015).

It is undeniable that the future will reveal numerous challenges that will definitely affect GM’s supply and procurement processes. This situation should guide the leaders to form powerful teams to monitor the effectiveness of the supply chain process continuously (Lacy & Rutqvist, 2015). This move will prevent unforeseeable events that can have detrimental impacts on the company’s supply chain process. Such impacts will also have significant implications on the firm’s business model and eventually affect its competitiveness in the industry.

Recommendations for General Motors

The above discussion has shown conclusively that GM has one of the most sustainable supply chain processes that have supported its business model for the past five decades. The involvement of different suppliers and decision-makers is a powerful strategy that has made the firm successful. However, some recommendations can be suggested in order to promote the effectiveness of the supply chain. To begin with, GM should “focus on the best strategies to promote long-term availability of the required materials and components” (Lacy & Rutqvist, 2015, p. 78). This means that a powerful change aimed at transforming the purchasing process will make a difference. The supply management process should be strategized in such a way that it focuses on the anticipated goals (Ku & Hung, 2014). This means that new technologies and logistical initiatives should become part of the supply management strategy.

Constant monitoring of the unique challenges that can affect the supply chain process is another powerful approach that can transform the situation. Identification of sustainable suppliers can be an ingenious initiative that has the potential to deliver positive results (Ku & Hung, 2014). The supply chain managers can go further to analyze specific issues such as key performance indicators (KPIs) and the scarcity of various raw materials. An evidence-based approach will be used to make centralized decisions that can eventually improve the supply chain process. The company can also ensure that most of the raw materials are not obtained from a single supplier. This approach is capable of increasing the firm’s competitive advantage. The strategy will eventually make the firm a leader in the global automobile industry.

The world is presently grappling with the issue of environmental sustainability. It is also agreeable that GM’s supply chain strategy has remained sustainable over the years. However, new measures aimed at maximizing the sustainability of the process can play a positive role in supporting the firm’s business model (Monczka et al., 2015). The transportation processes and behaviors of the suppliers should always to promote environmental conservation.

Concluding Remarks

The success of GM can be attributed to its powerful business model. The firm has developed the sustainable systems and processes to ensure the gears of its plants are running smoothly. At the top of these processes is the firm’s supply chain strategy. The firm has established positive partnerships that promote the acquisition of adequate resources and raw materials that can result in improved production. The emerging challenges are usually addressed in a timely manner (Ku & Hung, 2014). GM also stands a chance to transform its supply and distribution processes by promoting the concepts of sustainability and collaboration. These strategies will result in a superior supply chain process that will eventually drive performance.

References

Autry, C., Goldsby, T., Bell, J., Moon, M., Munson, C.,…Jayaraman, J. (2014). The definitive guide to modern supply chain management. New York, NY: FT Press.

General Motors Company. (2017). Web.

General Motors: Supply chain responsibility. (2017). Web.

Ku, A., & Hung, S. (2014). Manage raw material supply risks. CEP, 1(1), 28-35.

Lacy, P., & Rutqvist, J. (2015). Waste to wealth: The circular economy advantage. New York, NY: MacMillan.

Monczka, R., Handfield, R., Giunipero, L., Patterson, J., & Waters, D. (2015). Purchasing and supply chain management. Boston, MA: Cengage Learning.