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Issues Affecting Supply Chain of Cars and Assembly Company

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Introduction

Supply chain involves a series of activities conducted in order to make goods available to consumers. A typical supply chain consists of consumers who make use of goods they need and which are available in the market. It also consists of retailers and wholesalers who are collectively known as distributors. This is because they are charged with the responsibility of transporting goods from manufacturers’ warehouses to places where they are needed and available to consumers. A typical supply chain also consists of manufacturers who assemble goods from raw materials into finished products with the purpose of fulfilling consumer needs. Manufacturers take the responsibility of packaging products for the presentation purposes. This allows them to put their seal on the product for preservation of its integrity. A supply chain also consists of suppliers who undertake supply of raw materials to manufacturers. A manufacturer may have a number of suppliers depending on the type of product being manufactured. In the case of cars, suppliers provide steel, rubber, metal alloys, glass and other types of supplies. This means that the suppliers may also be manufacturers for the respective raw materials. In this regard, a supply chain ends with the consumer but may start with several manufacturers playing a double role of manufacturers and suppliers. This paper analyses the assembly and distribution of automobiles and factors affecting the chain of supply as a unit as well as individual companies that make up the chain.

General Motors and supply chain of cars

The company General Motors is a supply chain by itself. This is because it undertakes to design, build and sell cars and automobile parts. The company was started in 1908 and has expanded to include offering of finances for automotive production. General Motors is wide and large company consisting of General Motors North America, General Motors Europe, General Motors financial, General Motors international operations and General Motors South America (Thompson Reuters, 2012). All these arms of the company help it in production of cars such as Chevrolet, GMC, Opel, Cadillac, Daewoo, Holden and Vauxhall. The General Motors’ supply chain includes manufacture of models such as Chevrolet, Vauxhall and the rest with each model having its own supply chain. Manufacture of the models is carried out in the respective factories which are essentially assembly points. This means that General Motors gets its raw materials for manufacture of cars from various suppliers. In addition to manufacturing, General Motors has contracted various dealers. The supply chain also involves a service department where servicing of cars and repairs are done (Thompson Reuters, 2012). The repair is facilitated using only General Motors’ parts. This forms another arm of manufacture which deals with manufacture of General Motors’ parts. The dealers who facilitate repairs are given authorization under its warranty program. General Motors has many subsidiary companies spread around the world for distribution and repair purposes. For instance, ONSTAR is a subsidiary of General Motors situated in the United States, Canada and China. It offers servicing on connected safety, security, mobility solutions and information technology solutions for General Motors. It offers services such as crash response, stolen vehicle assistance, remote door unlock, turn by turn navigation, vehicle diagnostics and hands free calling (Thompson Reuters, 2012).

The primary distributors of General Motors cars are independent authorized dealers. In addition, General Motors financial gives credits to its customers thus earning a charge on the credit (Thompson Reuters, 2012). It also offers to lease products in contract of cars and facilitates large sales through offering credits to leasing companies and car hires. The automobile industry has a long supply chain ranging from supply of different parts to make up the components of the car. This part of supply chain is usually large because cars have up to one hundred of different components. If each component is supplied by a different contract, then one hundred suppliers are needed. The assembly point may also involve different companies or arms of a company because different models of cars are assembled differently. Some parts are also assembled differently than others which may necessitate at times having different assembly points. On manufacturing, many services, such as painting, may be outsourced so as to save time and cost of production. The supply chain of vehicles becomes even larger with distributors because the product is shipped to different locations of the world to satisfy the customer needs. Lastly, the supply chain ends with the consumers who are either custom-made car buyers or general model car buyers.

Issues affecting supply chain in automobile production

One of the key issues affecting automobile supply chain is dynamism in the industry itself. Global competition has rocked the industry, and each company and supply chain compete to reduce its operating costs thus increasing profit (Fine, Claire, & Lafrance, 1996). For instance, the supply chain in the United States has received great competition from Japanese automakers. This has led to demanding that workers who get automobile jobs are not unionized. The result has been cutting down of workers thus many have lost their jobs as a result of global competition. The industry, especially in the United States, has reduced its capacity due to emerging supply chains including the Indian supply chain in automobiles. In automobile supply chain most products and services are outsourced and this has made supply chains to reduce their capacity considerably. This has also occasioned downsizing in the labor department. The industry has also increased productivity thus requiring fewer workers to meet the set targets. Loss of income has been a major source of outrage for those who sacked from their jobs. Due to experience, the workers left in the supply chain are old and weak thus making the flow of ideas dormant or redundant. This is a source of concern for the industry because creativity has to be outsourced, too.

According to a previous research, the United States’ automobile industry does not enjoy cooperative labor relations (Fine, Claire, & Lafrance, 1996). This is because the United States government does not recognize non-union relationships between employer and employee. For unionized employees, the law limits reforms in the workplace in collective bargain contracts. The management of industry companies is against the unionization of members because they get more power to be heard and better paid. This disagreement limits full participation of employees towards the well being of the industry. The management of industry companies is under pressure to downsize due to the economic structure of the world. The economic pressures also require cost controls to be put into effect and necessitate outsourcing of services.

In addition to human resource issues in the industry, the industry is unable to unite wages for employees across the supply chain (Fine, Claire, & Lafrance, 1996). This is because the manufacturing companies pay more to their workers, while in the same industry suppliers pay their workers much less. This disunity between wages affects the productivity of workers and discourages them from attaining the set goals of the industry.

The supply chain sector in the automobile industry experiences relationship problems between the manufacturers and the distributors (Fine, Claire, & Lafrance, 1996). This is because the approach method in cost reduction determines the amount of information flow between the supplier and manufacturer and between the manufacturer and distributor. Some companies employ partnership method of negotiation where they invite the supplier to reduce costs in other ways and split the profits with the manufacturers. This is mostly used when the manufacturer wants to reassure contract renewal for the supplier on expiry. Other companies use the arms length relationship with suppliers thus always trying to force suppliers to cut direct cost of supply to the manufacturers. This reduces the profit margin of the suppliers and creates a minimal flow of information between the parties. This type of relationship is mostly used for mass production of cars for companies that are established in the industry.  Lack of understanding in the industry leads to wrong choice of relationship thus affecting productivity. These two kinds of relationships when handled irresponsibly can create a barrier between the manufacturers and suppliers which is not good for business.

The United States’ suppliers to the auto industry have slow adoption of innovative human resource practices. According to the research done on employee participation in supply firms in the sector, thirty eight percent (38%) of managers said they did not know how many suggestions employees had made that year. This lack of recognition of innovative talent by suppliers suppresses growth of the industry and the individual companies. The supply chain management is also an issue for the supply chain sector in automobile production. This is because the policies guiding supply tendering requirement are not universal among the companies.

Issues affecting General Motors’ company in automobile production

General Motors’ relationship with suppliers is not smooth because the suppliers are not happy with its policies on tender of supplies. This is because General Motors requires suppliers to tender their quote documents together with technical information of the product and its manufacture without claim of confidentiality (Thompson Reuters, 2012). This discourages some suppliers from offering their technology to the company. This shows that management of the supply chain in General Motors does not foster good relationship between suppliers and the company.

The distribution sector of the General Motors’ cars is very dynamic because the distributors are influenced by the trends of the consumers (Our Company, 2012). The distribution of cars for General Motors is done by contracted individual dealers who are not focused on the manufacturer but rather on the consumer feelings and needs. This means that dealers of General Motors can be swayed by demand from consumers to sell less of General Motors’ cars and more cars from a competitor who has introduced a new product to the market. For this reason manufacturers like General Motors are always listening to their dealers for new technology requirement by the customers. Production of cars by General Motors may be influenced greatly by distributors who seek only to satisfy customer needs without understanding the cost implications of new technology production.

The company also grapples with inventory control which requires observation and foretelling the behavior of the market data companies, transportation companies and other outsourced service companies (Fine, Claire & Lafrance, 1996). The General Motors is required to study its service providers and tune them through incentives to act in the market in behavior favorable and profitable to General Motors. This is not an easy task because the list of service providers may be too long where some of the service providers are not contracted directly by General Motors but through another service company. This poses problems between the management and service providers.

In the past General Motors focused on mass production of cars for profit making. With increased competition and variety of cars, the company has introduced a custom made section and integrated lean production with mass production strategies. This does not always work for the company because in the past some companies owned by General Motors had to be closed down for running losses. General Motors lacks the management and control staffs committed to cost reduction and production improve.

General Motors Company faces the challenge of defect reduction in the manufacturing process (Our Company, 2012). This is costly for General Motors as it always requires the company to adopt the mass production and arms length relationship with suppliers to make their profit mark. Dealers for General Motors are partly or fully owned by the companies. The going price of vehicles at these outlets is usually lower than other dealers’ prices. This discourages other dealers from dealing with General Motors cars.

As a listed company in the United States stocks exchange, General Motors experiences effect of economic crisis in the country (Thompson Reuters, 2012). This is because trading of General Motors shares depends on how well it performs in the distribution sector and ultimately the sale volume it makes. Finally, like all other auto companies in the United States, the General Motors faces challenges such as reduction of quantity of work in production of vehicles, reduction of resources needed to produce and sell a car and reduction of overhead running costs of the company. In some instances General Motors experiences lack of cooperation between manufacturing factories under its ownership. Some dealers for General Motors are single line dealers meaning they sell only General Motors’ cars. In such cases, the dealers though independent, adopt the name General Motors in their respective places in the world so as to gain ground for sales. Boardroom wrangles in the dealer companies reflect badly on the image of General Motors and plummets sales of General Motors’ cars.

How supply chains in auto industry deal with such issues

The supply chains in the industry adopt a hybrid system of production and control by combining lean production and mass production systems. Mass production increases the volume of cars available to consumers and increases chances of consumers buying such vehicles (Fine, Claire & Lafrance, 1996). On the other hand, lean production makes sure that economic pressures for downsizing and outsourcing are adhered to. It is important for companies of the auto making industry to improve their chances of making profit to ensure their survival.

Supply chain in automobiles industry rehires workers who have been laid off during increased production years. They also encourage workers to be unionized because union comes with encouragement to work better. In the long run the companies have realized that unionized workers are more profitable than non-unionized members. This is because they know that their interests and grievances are heard by the companies. Unionized workers involve themselves with advancement of the companies and area creative a virtue necessary for automobile manufacturing.

In some cases companies in the supply chain of automobiles have adopted a partnership kind of management to appease their workers. The partnership is between union representative and company management (Fine, Claire & Lafrance, 1996). This allows the workers to feel secure in their livelihood with the knowledge that they can’t be laid off without a cause. According to researches, a company in a chain that allows unionization of members leaps more profit than companies which do not.

Supply chains also discuss salaries across the board to ensure that all workers are paid according to their education and level of employment. They also take measures to ensure that all workers whether in manufacturing or in distribution at the same level of employment are paid approximately the same. This is by ensuring that basic salary is unified across the chain. Other benefits are earned according to the state law provisions and company goals achievement policies.

Companies in the supply of cars listen to their employees because through their employees they come up with the designs of new models. According to researches, innovations suggested by the employees are implemented at a level of fifty percent (50%) (Fine, Claire & Lafrance, 1996). This is a good sign of improvement of relationship between employers and employees. Supply chains in automobile production realize that man cannot be fully replaced with technology because human supervision in production is necessary. The logic behind this is because end product is made to be consumed by people thus it is necessary that a person in supervision is satisfied with production before it goes into the market.

Due to change there is global economic structure, companies in the automotive industry realign their management protocols and reconfigure their relationship structures. Most companies in hybrid system of production use partnership agreement and relationships to promote their well being (Fine, Claire & Lafrance, 1996). They invite their suppliers to cut cost in other ways and enjoy the profits together with the manufacturing companies. The arms length kind of relationships between manufacturers and suppliers are discouraged because they cut the profit margins of the suppliers. This eliminates the threat of receiving substandard parts and/ or assembly of cars. Moreover, the governments around the world are making policies that allow employees to choose their mode of employment. This is because they have realized that setting employees free to choose their mode of employment is profitable to companies and the state at large. Restrictions in the law of labor are mostly lifted by the government although some form of limitation is present to guarantee the wellbeing of employees and to ensure they are not over-exploited by profit minded companies.

Handling issues in general motors

General Motors tendering policies have changed a little bit but remain rather oppressive to suppliers. This is because it is one of the largest companies in the United States with complete holding so it has stocks in most General Motors’ subsidiaries scattered all over the world. However, it does not use technology or innovation credited to another company without obtaining full rights. The General Motors Company tries to avoid legal action against the use of unauthorized technology because such action can disillusion the consumers. They would like to buy and understand a technology before using it when making of their vehicles. He reassures consumers that safety and security of cars is guaranteed.

According to researches, listening to distributors in the production of cars is more profitable than ignoring them. This is however tricky because some customer demands are impractical. General Motors listens to the needs of consumers through conducting primary researches and through its operations and relationships with distributors (Our Company, 2012). Through fully owned distributors General Motors ascertains demands of the customers and the practicality of such demands. If demands are too high for mass production, the company uses custom-made wings of its operations to satisfy the needs of such customers. Custom-made cars are expensive but built to the demands of the customer. This allows the company to capture interest of people of the society who can spend money on specific qualities of the car. The arrangement also makes sure that normal production of standardized models is not interrupted by custom orders. The arrangement also makes certain that time and cost savings in production is optimized.

The control unit in management of General Motors is still wanting in most cases. However, General Motors in recent years have taken the initiative to reduce wastage and improve on production (Fine, Claire & Lafrance, 1996). This is done by training their staff members involved in control and measurement of products. This makes sure that managers know effective ways to stimulate workers towards reduction of damages and wastages during production. The company uses all modes of production systems in the different manufacturing factories across the world. In some cases General Motors uses mass production where profits depend on the volume of cars sold. In such areas quality control is mostly important because wastage should be reduced while saving cost on supply of materials cost. In other cases the company uses hybrid system where control and quality of cars is paramount. Cost reduction is a result of direct haggling and incentive to the suppliers. Lean production is adopted in the General Motors factories where cost cutting depends on the relationship between General Motors and suppliers. This is seen mostly in areas where competition is too high for suppliers and assured contracts lead to discounts.

General Motors sells its products through independent dealers who are authorized to deal in General Motors’ cars (Thompson Reuters, 2012). To appease and retain good relationships between the distributors and General Motors, wholly or partially owned dealers sell its products at the same price as independent dealers. The freedom on whether to allow haggling or not is left for each individual dealers whether owned by General Motors or not to decide.

In cases where General Motors allows dealers to use the brand name of General Motors, policies dictate that such dealers sell only General Motors’ cars and that a representative of General Motors is to be present in the board meetings to assess the relationship of board members with each other. The representative makes certain that well-being of General Motors is paramount to such dealers. They also control damage effect by wrangles preventing it from hurting General Motors’ manufacturers. General Motors also increases its profit margin through diversification of production in production of a wide range of models and car parts. Some car models are made in one region while not sold in another to cut cost in production.

Conclusion

Supply chain management plays a very significant role towards success of a business and bringing about satisfaction to customers. Besides providing the link between manufacturers and consumers, supply chain management helps in checking costs, increasing sales volume which results to maximized profits. The paper addressed the assembly and distribution process within the General Motors automobile supply chain. It has shown how General Motors has established itself in distribution of its products in addition to provision of value added services to its customers upon buying their vehicles. However, the company outsources some of the services such as paintings so as to reduce the cost of production.

The article has also found out that the main issue that affects the automobile industry is dynamism in the market. Global completion has greatly increased thereby forcing companies to apply various cost cutting measures so as to remain afloat and at the same time competitive in the market. As a result, supply chains have embarked on strategies to deal with those issues. More specifically, the paper has shown how General Motors has done to deal with the issues affecting it in its supply chain business. It has been established that distributors in General Motors play a vital role as far as success of the firm is concerned. The company has a wide network of distributors and dealers throughout the world, who help in distribution of its products to customers around the globe. They provide the link between customers and the firm. Consequently, the company is able to serve its customers better. 

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