General Motors strives for consistent metrics
General Motors’ vice president of global purchasing and supply chain Bo Andersson has taken steps to improve relationships with suppliers. He tells Purchasing of the progress GM has made in the five years he’s been at the helm under the watchful eye of CEO Rick Wagoner, who once held his job.
By Susan Avery -- Purchasing, 10/5/2006 2:00:00 AM
Suppliers sitting across the table from GM buyers these days are hearing a different message than they heard previously: Perform well on metrics such as delivery, quality, cost, Lean initiatives and new technology, and you’ll get more business.
Just ask Japanese supplier Denso Corp., GM’s Supplier of the Year for 2006. Bo Andersson, vice president of global purchasing and supply chain at General Motors considers the understanding the two companies have of Denso’s interest in expanding its business with GM a joint success. The relationship began in 1993 when the supplier provided GM with instrumentation. Then Denso expressed interest in also providing compressors to GM, so GM’s purchasing department gave Denso an opportunity and it’s now a large supplier of compressors.
Next Denso became interested in providing HVAC (heating, ventilating, air conditioning) systems. Today, it is the only HVAC supplier to the Cadillac division of GM. And next up is navigation systems.
“We work with suppliers to find mutual expectations,” says Andersson. “If suppliers perform well, then we help them grow in the relationship. Denso gives us its best technology and we benefit from its competitiveness. And Denso benefits by becoming a large supplier to GM, which also benefits its other customers.”
Credit Andersson for the change in message. In the five years he has been at the purchasing helm, he’s taken a tone different from his predecessors, one that focuses on improving relationships with suppliers.
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Andersson sees purchasing’s role in GM’s overall strategy as working closely with engineering and manufacturing to involve top-performing suppliers early in the product development process. He points to the next generation of vehicle interiors in GM’s new Escalade and Tahoe models as a recent example of this collaboration.
“We invite our best-performing suppliers to become involved in the product development process earlier than the rest of the supply base,” he says. “It is a great way to say thank you for a great performance.”
Purchasing works closely with engineering and suppliers to bridge any communication gap and identify new technology and materials within established cost targets. One way purchasing does this is by hosting technology fairs to let designers and engineers get a closer look at supplier capabilities.
For Andersson, a best-performing supplier scores high in metrics such as delivery to GM plants, quality of product, participation in new vehicle development programs and material productivity. Material productivity is tracked through commercial and technical performance metrics such as meeting cost reduction targets, participating in Lean initiatives and introducing new technology. Purchasing measures each supplier with a standard set of metrics to facilitate benchmarking.
“We established clear expectations and metrics that determine which suppliers are most valuable to us—and we’ve been consistent,” he says. “Suppliers did not expect us to be so consistent in that process.”
GM is starting to see results from purchasing’s efforts. In April, the automaker recognized the performance of 86 suppliers with its Supplier of the Year awards. “These are our best-performing suppliers, and we give 60% of our new business to them,” he says.
 “If suppliers perform very well, then we help them grow in the relationship.” —Bo Andersson |
Clear message
Andersson sees GM’s current supply strategy as a break from tradition. “My view is that by establishing clear expectations, we can see which suppliers are the most valuable to us,” he says. “For me, good relationships come out of good performance. If my metric is only to have good relationships with suppliers then I will have good relationships but may suffer bad performance. In the first three years [of his tenure as VP], we worked very hard on making sure that we are consistent in measuring supplier performance. In the most recent two years, I personally worked very hard on improving relationships with our best-performing suppliers. “
One way purchasing does this is through a champion program for suppliers. The company’s 300 best-performing suppliers are assigned a GM executive who is responsible for the supplier’s performance and for resolving any issues that may arise with the relationship.
Andersson and his team use other tools for improving relationships with suppliers, such as the supplier business meeting (SBM), face-to-face or phone meetings through which GM communicates its business outlook. In a recent SBM, CEO Rick Wagoner handled that duty. In the conversation, Andersson provides a purchasing overview and update on supply base performance. Suppliers hear from supply chain and quality functions at GM on scheduling and vehicle launch issues. The session concludes with a period for questions.
“Suppliers like the forum because in addition to the two or three face-to-face meetings, we also have a ride-and-drive event in September when we invite suppliers to try our products,” he says. “They like the teleconference format too because they can gather their management team to participate in the session.”
Complexity
Purchasing is visiting suppliers more often to learn about what they do and, in some cases, as part of GM’s Lean initiative, to see if they can help drive inefficiency out of the suppliers’ processes.
Optimizing the supply base is not an issue that keeps Andersson awake at night. “In my view, I have three issues as head of purchasing and they are complexity, complexity and complexity,” he says. “By that I mean we buy 160,000 part numbers globally. Another way to say that is we have 160,000 opportunities for something to go wrong every day. Our focus is to reduce that complexity. If that leads to reducing the supply base, fine. If it doesn’t, that’s fine, too.”
GM realizes that many new technologies come from small suppliers. “I will never miss the chance to introduce technology—either on a product or on the manufacturing floor—by not communicating with small suppliers,” Andersson says.
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