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Strategic Supply Chain Management
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policy while continuing to lower costs required some key changes in inventory deployment. SPO revaluated which inventories would be stored in the field and which would be held in central locations, leading to a more centralized deployment approach overall. IMPROVING MATERIAL AVAILABILITY THROUGH FORECASTING The service parts business is one characterized by seemingly random patterns of demand spread across a wide range of products for a wide range of customers. According to Mishler, approximately 10,000 of the 600,000 parts are considered fast movers, requiring little in the way of advanced planning and forecasting. The other 590,000 parts are slow movers, requiring much more sophistication in forecasting and inventory planning. SPO restructured its overall approach to forecasting: Parts were grouped by business (collision, maintenance and repair, etc.) with similar life-cycle demand curves, and SPO forecasters were trained to understand characteristics, trends, and events related to demand across the life cycle. SPO also implemented world-class forecasting tools that allowed its experts to easily test different forecasting models and implications. For example, patterns related to seasonality, demand spikes, or supply chain events could be clicked and dragged into the models to test the overall impact on the forecast. While there is still room for improvement, the results to date have already been striking: SPO has reduced inventory by over 25 percent due to improved forecasting capabilities. IMPROVING INVENTORY MANAGEMENT AND VISIBILITY Improving inventory management required GM to greatly enhance its ability to see and manage demand, supply, and inventory information at another level of detail. By developing forecasts and schedules at the level of each PDC (product distribution center), SPO is now moving into a more deterministic, data-driven environment that is enabling significant new reductions in inventory. SPO also has established the capability to see inventory availability across its network, which will soon be extended to include dealer parts departments.
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GENERAL MOTORS PROFILE: Driving Customer Satisfaction
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CREATING VALUE IN LOGISTICS SPO faced a significant gap in the competitiveness of its warehousing and logistics operations. The management team is addressing the challenge in partnership with a third-party logistics provider, systematically implementing principles of lean manufacturing. Over time, this consistent focus has enabled SPO s people to lean out material flows one at a time, implementing standardized work processes along the way. Says Mishler, We have improved our productivity [in the distribution centers] by over 50 percent. CREATING A BALANCED PARTNERSHIP WITH SUPPLIERS SPO acknowledges that much of its improved supply chain performance has been due to its improved relationships with its suppliers, including its logistics providers. In conjunction with other GM organizations, it has implemented a rigorous process of supplier collaboration, whereby performance is reviewed and ideas for reducing waste in the supply chain are exchanged on a quarterly basis. EMPOWERING THE OAKS People also play a powerful role. As Mishler explains, they re the oaks that hold up the organization. The SPO is now organized around business lines, reinforcing the focus on customers in each brand/product business. Each business line is supported by a crossfunctional team that is held accountable for supply chain performance. The teams include oaks from key functions people who know the processes and have been around the business for years and are continuously trained in skills that will help them eventually optimize each of their supply chains. Future plans include an aggressive digital supply chain initiative that will incorporate virtual warehousing, enhanced supplier collaboration, event management, advanced planning/optimization, and other new capabilities. It s really a journey, says Mishler. Once you get the entire organization focused on what is really important, you can really make progress.
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hile the five core disciplines provide the foundation for supply chain excellence, none is sufficient on its own. Supply chain performance is all about integration integration of strategy, processes, organization, and information systems. Moreover, making sure that this integration happens given the complexity of the supply chain and the hundreds of potential practices and competing priorities requires a multidimensional plan. We call this plan the roadmap to change. An effective roadmap is developed and managed as an iterative and ongoing activity. Unlike a plan that focuses on a single project, a roadmap describes each of the major initiatives to be executed over a given time period typically one to three budget cycles. It shows the links between the different initiatives and the expected performance improvements at meaningful intervals. Progress toward objectives is monitored as part of regular business or operations reviews. Creating and managing a roadmap to change (see Figure 6-1) is a cross-functional effort with ongoing collaboration among the supply chain organization, the information technology organization, and other functions, such as marketing, sales, finance, and engineering. Working together, thought leaders from these groups ensure that each initiative is clearly defined, launched, and executed in a manner consistent with the overall business strategy.
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