General Motors

and Its
Suppliers
Prepared By:
Abhinandan Singh (MP15003)
Manjesh Jha (15022)
Sabas Navinshore Fernando (Mp15036)
Sushant Kumar (Mp15047)
 Case Facts
Percent of Total
Component Sourcing Component Cost
(Price Bidding Model)
Arm's
Internally Externally
length
Sourced Sourced Internally
Suppliers
manufactu
(65-70)% (30-35)% 35%
red
55%

Partner
Key Facts Suppliers
10%
• Adversarial relationship with suppliers
• Short term contracts with focus on lowest
bid price Achievements during Lopez’s tenure
• No focus on relationship management
with prime motive for best production  Double digit price reduction in
price some supplies
• Supplier base scattered across country  US $4 billion saving in material
• Strict policy to avoid any personal
cost during his tenure
relationship b/w buyers and suppliers
 Development cost of new part
was borne by suppliers
 GM’s Buyer Supplier Relationship
• Group’s reflection on that ??????????????????
 Pros and Cons of GM’s Model
Greater control over suppliers with
more bargaining power
Vertical Integration provides more
control on company operations
Price control mechanism was easy to
implement
Bidding war among suppliers helped Supplier association and connect
GM to get best production prices
Development cost shifted to Suppliers
on new part developed
Lower switching costs
Huge savings achieved in first few
years
Lack of trust among Buyers and
Suppliers
Lower incentive for suppliers to switch
companies
Lesser Flexibility in negotiations
except on monitory terms
absent leading to lower service
commitment
Minimum trust and leverage over
the suppliers
Discontent and stringent relationships
with the supplier
GM’ Supplier Relationship (recent happenings)
 GM’ Supplier Relationship (recent happenings)
• Suppliers ranked General Motors just behind Toyota and
Honda
• In 2011, GM began to roll out more collaborative policies
such as no-bid contracts
• Supplier Feedback mechanism implemented in 2015
Implementation of the below policies helped GM to
achieve this
 Involve suppliers earlier in the vehicle design process
 Award long-term contracts with higher production
volumes
 Improve sales forecasts to help suppliers plan for realistic
production volumes
 Appointment of executive champion
 Recognizing and rewarding supplier excellence
 Making supplier performance more transparent
 Key Learnings
 Buyer Supplier relationship goes beyond price and
supply association
 Supplier satisfaction imparts long term growth and
bottom line for a company
 Supply chain methodology should match with corporate
strategy
 Managing supplier shortcomings is cheaper than new
supplier’s acquisition
 Reliability of supplier stems from security of orders
 Suppliers can contribute actively in terms of quality,
reliability, technology and knowledge of industrial trends
 Greater financial stability and Flexibility can be achieved
with trustable suppliers
 In short, building relationship with the supplier pays in the
long run