General Motors, seen lagging in supplier relations by a closely watched annual metric, takes a new tact to rebuilding the kinship it has with its parts makers: Building homes in economically depressed neighborhoods of Detroit and other cities around the world.
“Suppliers are the key to building great products, and this is part of that,” says Grace Lieblein, vice president-Global Purchasing and Supply Chain at GM. “This isn’t the silver bullet, the end-all, but it reflects a different view of how we work together.
“I don’t know that we would have done this three or five years ago,” she tells WardsAuto. “Even if it were suggested by a supplier, I don’t know if we would have listened.”
Historically, Lieblein says, GM and its North American suppliers rarely met face-to-face, and usually in the sterile confines of a conference room to talk contracts or performance. Such cold comfort led to poor relations, costing GM for many years the best pricing and innovations from the supply base.
According to the annual ranking of OEM supplier relations from the Birmingham, MI-based Planning Perspectives consultancy, GM could add $400 million to its bottom line through better diplomacy.
Generally speaking, GM ranks far behind industry leaders Toyota and Honda on overall relations, and this year turned in a flat performance because some the of the cultural change Lieblein championed did not filter down to the automaker’s buyers.
GM also wrestled with suppliers over revisions to the terms and conditions of contracts seen as onerous, changes the automaker eventually rolled back.
GM’s internal rules regarding after-hours freebies, where suppliers pick up the tab for social meetings with GM parts buyers, do the automaker no favors, either.
“Our policies are about the strictest there is – no golf, no lunch, no dinners,” she says. “It erodes credibility.”
Lieblein hopes programs such as the Habitat for Humanity collaboration the automaker and its suppliers pumped up Wednesday with a donation of $984,500 and 2,500 hours of GM employee work to the charity’s Detroit chapter, can take the place of those sorts of perquisites.
And it was not her idea, she readily admits. A supplier she declines to name offered the idea of joining together for community outreach during one of the automaker’s newly launched supplier sit-downs.
“You need to build relationships that go deep when you deal with as many issues and opportunities as we do,” she says. “Everyone was energized by this idea.”
Communities such as Detroit benefit, too, with safer neighborhoods.
Lieblein says community outreach, such as the $1.6 million the automaker has pledged to Habitat for Humanity this year, reflects a renewed awareness of the impact GM’s day-to-day decision-making has on communities.
Speaking more directly about the industry, Lieblein says she sees a supply base today with strong finances and a willingness to add capacity at a steady, measured pace.
Suppliers also are willing to erect new brick-and-mortar near GM assembly plants, and in relatively isolated areas such as Spring Hill, TN, and Arlington, TX, where there is more risk.
That goes a long way toward GM meeting its internal goals for reducing logistics costs.
“We’re trying to be very thoughtful and strategic with our suppliers around where (co-locating) makes sense and doesn’t make sense,” she says. “We’ve been making good progress, one case at a time.”
GM’s Strategic Sourcing Process also helps supplier decision-making, Lieblein says. The initiative brings suppliers to a GM product program earlier than before for input on the design of parts and subsystems.
“They are the experts,” she says. “But in some cases we’re also saying, ‘This is not for one generation, this is for two generations.’ We’re doing it in some cases, not every case, but that can be a huge deal.”
Lieblein declines to provide an exact figure on how much supplier co-location has saved in logistics costs. “It’s a lot,” she says.
