General Motors Supply Chain

I. BACKGROUND INFORMATION

There are 472 GM dealers, nine GM authorized garages, and 10 GM parts distributers in Brazil, for a total of 491 service parts points of sale. Currently, GM has approximately 75,000 part numbers, with 700 high-turnover parts, supporting 20 vehicle platforms. The relationship of GM Brazil and GM dealers has always been independent. The supply chain networks, the nodes of the network are managed separately.

The Bullwhip Effect

Small variations in demand downstream caused increasingly large variations toward the upstream portion of the network is the bullwhip effect. The demand at the GM distribution center is dependent on the inventory management systems and inventory policies of the dealers. The result is severe instability in production programs for the companies upstream which negatively affect cost efficiencies in the supply chain. Plants are forced to work overtime when the bullwhip goes up and then face idelness when the bullwhip goes down. The original part bought from the dealer’s counter costs between 50%-100% more than a similar part bought on the gray market.

The GM Solution- Auto Giro

GM decided to launch a national initiative to substantially change the way it managed its supply network called Auto Giro.

VMI system

GM aggregates the demand of 472 dealers hence GM assumes the responsibility of managing inventories. Each dealer has about 6,000 active inventory items, with approximately 2,500 being purchased per month. Logistics can be achieved if deliveries to several dealers share the transportation cost using a milk-run type of routing in which one mode of transportation makes periodic and coordinated deliveries to a group of dealers. Due to the past relationship of GM pushing parts downstream in the chain there is resistance. The following are measures taken:

1) GM grants protection against parts obsolescence and part stock-outs.

2) GM provides an internet-based “parts locator”

3)...