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In seeking ways to further streamline the OTD organization and cut costs, GM realized that logistics were a weak link. The company had long outsourced inbound and outbound logistics activities to a network of
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third-party service providers at a high cost. However, a lack of communication and coordination among the providers led to inconsistent performance and long lead times. To reduce costs and improve efficiency, GM partnered with a global logistics company to create the joint venture Vector SCM. Today, Vector centrally manages GM s large, complex logistics network through a series of command centers equipped with the technology needed to track GM s assets and carriers. To further improve performance and visibility, Vector created one integrated information system for the third-party service providers. By improving logistics, GM s goal was to reduce costs by 20 percent in five years. By year three, GM had already achieved cost savings of 17 percent. The logistics team also sought to further cut costs by minimizing intransit damage. Vehicles are treated as jewels in the auto industry, and consumers want their jewels delivered unscratched, undented, and polished. By streamlining the route from assembly plant to dealer and minimizing vehicle handling, GM has reduced vehicle damage incidents by 35 percent.
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A FOCUS ON BUSINESS RESULTS
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Throughout the OTD transformation, GM maintained a rigorous focus on business results. Because the initiative was so ambitious with so many improvement opportunities the company risked losing sight of the big picture while chasing down avenues with limited value-add. GM chose four key metrics to guide the transformation: quality, net income, cash conservation, and market share. Every initiative and every decision had to support one or more of these metrics. The primary drivers of quality are fewer vehicle damage incidents and providing parts to the assembly line on time to support the build plan. Lower costs and fewer constraints boost net income. Lower inventory levels help to conserve cash. The OTD initiative systematically addressed each of these areas. The final metric market share was selected as the way in which customer satisfaction improvements could be translated into improved company performance. The drivers of customer satisfaction that OTD can influence are order lead time, delivery-date promise reliability, and vehicleof-choice availability. By improving these drivers, GM would boost customer satisfaction. This would be good for business because satisfied customers buy more products.
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These four business-focused metrics were a focal point for the transformation, driving the change forward by forcing the organization to keep its eyes on the road. Notes Ross, We were always able to map the improvement initiatives to these objectives.
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THE INFORMATION TECHNOLOGY CHALLENGE
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Although the primary focus of GM s transformation effort in the early stages was on redesigning the key processes and organization, GM couldn t have transformed its OTD capability without addressing the company s underlying information systems. Like most large, complex organizations, GM had a tangle of legacy systems many redundant and a lack of integration across functions, business units, and geographies. Since most offthe-shelf software requires significant customization, many of the legacy systems and applications were developed by or for GM and were specifically designed to manage the company s high degree of product and process complexity. GM is in the process of moving many of its legacy systems to the Internet, but a high-performance, wholly integrated IT environment remains a vision that will take many years to achieve. In the meantime, GM is working with what it has. Given the scope of the effort, the OTD team had to prioritize the needed capabilities and then find technology solutions that didn t cost too much or take too long to implement. The team s strategy has been to enhance key legacy systems with Web-enabled tools and integration, incorporating new tools selectively. Bill Kala, director of North American manufacturing supply operations and part of the original OTD leadership team, credits GM s global materials scheduling system a legacy system dating back to the 1980s with driving many of the savings in supply operations. Kala realized early on, however, that he had to rein in enhancement and maintenance costs. As he explains, Everyone wanted to make frequent changes to the system, and those changes were contributing to a $70 million annual spend. To gain control, Kala stipulated that any changes be clearly explained and justified. Moreover, changes had to benefit at least two geographic regions. Any request for a new stand-alone system was scrutinized carefully. The result Kala s group cut the annual cost of the system by almost 30 percent. In some areas, GM had to push IT changes faster than planned to improve partner collaboration. GM s Information Systems Group supported a move to better integrate the company s processes and systems with those of GM s dealers at the point of sale. Until then, integration had
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