GM speeds deliveries, smoothes production
By Staff -- Purchasing, 3/12/1998
Taking a page from the PC industry, General Motors Corp. is working to develop a build-to-order system for new vehicles. Or, at least, come as close to such a system as possible.The nation's largest automaker has already overhauled the way it delivers custom Cadillacs, trimming the time it takes to fill special orders to as little as 24 hours. Other GM divisions will implement a new order management strategy that aims to smooth production schedules for non-custom vehicles. Both strategies are expected to help GM's procurement group provide suppliers with more accurate forecasts, cutting the need for costly rush orders.
The key to such production and delivery systems, say GM officials, is timely and accurate information.
Using sales and marketing forecasts, Cadillac currently builds custom-model luxury cars with the most popular combinations of colors and options. These vehicles are shipped to one of 10 regional distribution centers across the U.S. based upon which colors and options are most in demand in which market.
Cadillac dealers, who once ordered custom models direct from the factory, now place orders with the closest distribution center, which can deliver the vehicle usually within a day.
"We're delivering new cars overnight about 75% of the time," says Cadillac spokesperson Julie Hamp. "No one else in the industry can offer that right now."
The trick, according to Hamp, is maintaining accurate information on customer preferences. "With the new system, we go by which cars customers are buying in a particular area and with what options," says Hamp. "We put cars in specific distribution centers based on those actual buying patterns."
For example, in warmer climates such as Florida, Cadillac's distribution center will include vehicles equipped with light-colored body paint and interior. "It's just uncommon for customers in Florida to buy a Seville with a black interior," says Hamp. At the other extreme, vehicles sent to distribution centers in colder regions of the country, such as the Northeast, typically include such options as heated seats.
If a distribution center doesn't have the exact vehicle a customer wants, a special order will be placed with the factory. However, because fewer such orders are being placed with the factory, Cadillac has been able to stabilize production, giving it the flexibility to handle special requests much quicker.
The automaker can now deliver new vehicles from factory to customer within three weeks, which, according to Hamp, is still well below the industry average of 8 to 12 weeks.
Dubbed Custom Xpress Delivery (CXD), this system allows Cadillac to better plan its production schedules and better forecast its parts and materials needs to suppliers.
"CXD cuts down on the volatility of what you're asking from suppliers," says Alan Adler, a spokesman for GM's North American Operations' procurement group. "By having fewer build combinations in the plant, our purchasing people can give more accurate forecasts to suppliers."
Adler adds that CXD also can help Cadillac trim unnecessary costs. "There is tremendous potential savings in terms of cutting down on the number of rush orders we have for parts used for custom options, such as heated seats," says Adler. That's because suppliers typically charge a premium for special or rush orders.
Hamp says other GM divisions are looking at how they might implement a system similar to CXD. In the meantime, divisions such as Oldsmobile are beginning to use customer preferences and buying trends to predict which options customers will want on vehicles three months prior to production.
As with Cadillac, this order management system is expected to smooth manufacturing schedules, allowing GM more flexibility to respond to custom-orders and changes in customer needs.
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