GM'S WORLDWIDE PURCHASING 'TOUGH BUT FAIR'
TRAVERSE CITY, Mich., Aug. 6 /PRNewswire/ -- In bringing more value to its products and satisfying customers' expectations, General Motors (NYSE: GM) worldwide purchasing process must be "tough but fair if it is to support the success of both GM and our suppliers," Executive Vice President G. Richard Wagoner, Jr., said here today. Speaking to the University of Michigan's Automotive Management Briefing, Wagoner called the new process a "sound policy and a major contributor to the company's turnaround." Developed by GM using the best purchasing processes from its operations worldwide, today GM uses one common procedure worldwide. "This process is better for suppliers than the former decentralized one where buyers were focused on divisional results rather than GM-team goals for customer satisfaction," he declared. "Suppliers now deal with one organization in the U.S., rather than 27 purchasing organizations; one set of policies, and one approach rather than 27 different approaches." "It says to our suppliers, 'we want to work with you to assist you in becoming the most efficient and productive at your business in the world.' We want to assure that you have the highest quality products and can provide the kind of value our customers demand," said Wagoner, who has directed the company's Worldwide Purchasing Group since April 1993, and is also GM's chief financial officer. "The goal is long-term relationships for GM and its suppliers, with both on a world-class competitive basis," he said. "We want to be partners, but partners with very high mutual expectations. We can't hide from the marketplace while we absorb inefficiencies into our system. We want to establish long-term commitments through life-time contracts and open worldwide business opportunities for our suppliers." Wagoner said that GM's one common process for worldwide source selection and supplier development replaces separate purchasing activities in various GM operations. It incorporates a global sourcing concept for existing products and an advance purchasing concept to involve suppliers in development of new products. Noting that GM's purchasing process has received significant media coverage, he addressed three issues of concern to the company's suppliers: -- Clearly defining the role of the Automotive Components Group Worldwide (ACGW) as a supplier to GM. Worldwide Purchasing's objective, he said, is to evaluate the ACGW as a supplier using the same selection criteria and development tools as outside suppliers. This assures GM's customers the best products and also helps ACGW divisions to be fully competitive in the marketplace. -- Price is not GM's only deciding factor for selecting suppliers. Factors of quality, service, and price are weighed together, he said, "and we use specific quantitative measurement systems to ensure a supplier's performance justifies new business. Experience over the last 12 months shows that GM purchasing and the supplier's emphasis on quality has contributed substantially to GM's overall product quality improvement and its gains in customer satisfaction." -- GM respects its suppliers' legitimate proprietary technology. "This is a fundamental principle to the overall success of our purchasing strategy," Wagoner stressed, "because GM needs the full ability and creativity of its suppliers to satisfy our customers with the best, most-advanced technology and features on our vehicles. We will communicate up front with our suppliers on any intellectual or proprietary issues which may be involved in our sourcing process." "When suppliers have raised specific concerns relating to these criteria, we've investigated them," Wagoner said. "In those select cases where we've found shortcomings, we've addressed them." "The few cases that we've found are not representative of the hundreds of sourcing decisions that we handle each week, and the thousands of suppliers we work with every day in a professional manner," he said. But he urged suppliers to contact him or his executive directors with any concerns. Wagoner said he recognizes that some suppliers may feel uneasy with the revolutionary changes that GM has made in its purchasing process. The next steps will include seeking supplier's input as he and his staff refine the process. "I believe in this process," Wagoner said. "I watched it develop in GM Europe, actively used at GM do Brasil and manage its further development today. In the past 18 months we had to move quickly and decisively to make these changes to ensure that our customers would have the best products for the money they invest. Now, it's time to fine tune the process. While our commitment to the process remains firm, we will strive to do a better job to explain the process and ensure that suppliers have input and better understanding as we move ahead." Wagoner described three "improvement tools" GM uses to assist suppliers: -- "PICOS workshops" help suppliers identify and eliminate waste in their operations. Conducted in suppliers' plants, they focus on results achievable by applying lean manufacturing approaches, and consistently show double-digit efficiency improvements in the areas studied. He said this year GM plans to conduct approximately 1,500 PICOS workshops with suppliers around the world. Additionally, GM's internal operations plan to conduct 3,500 such workshops at their locations this year. Many of the PICOS workshops will be specifically designed to address quality improvements. -- "Common Enterprise" is a method to systematically eliminate inefficiency and waste through the complete "value added chain." Using PICOS tools, all operations are analyzed and improved starting with the raw material supplier, working through third-, second-, and first- tier suppliers, and continuing through the vehicle manufacturer. The purpose is to eliminate all steps and costs that don't contribute to customer satisfaction. -- "Creativity Teams" are multi-discipline groups organized and empowered to optimize the value of their respective commodity. These 325 cross-functional teams make improvements that benefit the entire NAO organization. "In the past 18 months," Wagoner said, "GM has gone through revolutionary changes that have changed the way we run our business. Today, everything we do is directed at satisfying customers. In the purchasing area our efforts are directed at continuously improving our processes and continuing to build strong relationships with our suppliers that make GM and its suppliers more effective and that also bring more value to our customers." -0- 8/6/93 /CONTACT: Cheryl Kilborn of General Motors, 313-556-2035/ (GM)
CO: General Motors Corporation ST: Michigan IN: AUT SU:
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