Identify the problem(s) faced by General Motors (GM).

according to the case study:General Motors Profile: Driving Customer Satisfaction.

General Motors Profile: Driving Customer Satisfaction

Faced with declining market share and a changing industry, General Motors (GM) launched an ambitious effort that transformed its supply chain and made customer satisfaction a priority.

In the late 1990s, the Internet seemed poised to transform the automobile industry. Consumers armed with information could quickly compare prices, options, quality, and service and make more informed choices. New business models threatened to squeeze industry margins and disrupt the long- standing original equipment manufacturer (OEM)-dealer relationship. General Motors observed these changes warily.

The worlds largest vehicle manufacturer, GM had revenue of $185.5 billion, production facilities in 32 countries, and a workforce of about 325,000. In 2003, the company sold more than 8.6 million cars and trucks about 15 percent of the global vehicle market. Despite its size and clout though, GM had seen its global market share erode from 17.7 percent in the early 1990s to 15 percent in 2002, mainly due to declining levels of customer satisfaction and competition from foreign imports. The industry had changed.

In the 1970s and 1980s, GM alone decided what products to make with little input from dealers or customers. Explains Harold Kutner, group vice president of worldwide purchasing and production control and logistics at the time, We were an arrogant company. We had an attitude of we will make it, and the customer will take it. This attitude typified the Big Three automakers at the time. Running plants at full capacity was the name of the game whether or not the vehicles being made were the ones customers wanted.

THE IMPETUS FOR CHANGE

By the late 1990s the need for change was becoming clear. Consumers were more savvy, powerful, and demanding. Yet GMs responsiveness lagged the industry. Dealers grew increasingly frustrated by the mix of inventory foisted on them. Even in key markets, dealer lots were clogged with over 100 days of supply. To clear out slow-moving products, GM had to offer sales incentives, which squeezed profit margins.

Dealers could not get the vehicles they wanted the vehicles their customers wanted. Desirable options such as aluminum wheels, leather interiors, and V8 engines often were not available in adequate quantities. Unavailable options, or constraints, were high at GM dealerships relative to the industry as a whole, averaging tens of thousands of orders affected at any given time over the range of GM products. This meant that customers could rarely get their first-choice vehicle. As a result, they often settled for more basic, lower-margin models, which ultimately hurt GMs bottom line.

Customers who chose to special-order a vehicle had to wait as long as 70 to 80 days for it to arrive. Furthermore, GM was uncertain of its delivery-date reliability because delivery-date promises were not tracked at the time, and neither dealers nor customers had any way of checking on the status of their orders there was no visibility into GMs order-fulfilment process.

At the same time, the companys supply chain costs were growing. High levels of raw materials and work-in-progress inventory, inefficient processes, outdated information-technology systems, and bloated overhead resulted in a costly, sluggish organisation at a time when streamlined operations were becoming more and more critical. Now, with market share down and Internet-driven change on the horizon, GM knew that it could no longer operate as it once had if it hoped to remain a market leader.

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Change at the mammoth company would not be easy. After all, GM made over 30,000 vehicles every day, using over 160,000 parts from a vast network of global suppliers a staggeringly complex undertaking. Brad Ross, head of GMs global order-to-delivery (OTD) organisation, describes the process as a tremendously orchestrated set of events that integrates orders across sales, manufacturing, and logistics, resulting in what we refer to as the daily miracle of production.

GMs OTD process encompasses four of the Supply-Chain Operations Reference-models key supply chain processes plan, source, make, and deliver. Given this complexity, transforming OTD would be like turning the Titanic around on the Flint River, notes Kutner. Yet that is what GM set out to do. The goal? To ship customer orders in less time, with less inventory, at a lower cost and to satisfy customers better than anyone else in the industry.