TRAVERSE CITY, MI – Just 156 global suppliers have 53% of allCorp. worldwide purchasing, and it won’t be easy for other companies to work their way into the select group unless they are passionate about getting there, a top executive says.
“Like (Motor Co. Executive Vice President) Mark Fields said yesterday, you have to be committed” to succeed in the automotive business, says Bo Andersson, GM vice president-global purchasing and supply chain.
The top companies all supply GM in its four regions of the world.
Of the 156 suppliers, 46 are headquartered in North America, and 94 are from Europe, he says. The split probably reflects the fact European companies have had more experience earlier in working with other countries and cultures.
Having a global footprint and viewpoint means a supplier can adapt to GM’s requirement for a world price on components. In the past, the auto maker measured suppliers regionally, but now it does so globally.
“We want the best quality at the best landed cost,” Andersson tells an audience at the Management Briefing Seminars here.
While logistics can add 10% or more to piece costs, that difference easily is recouped on about 25% of all components that are sourced in low-cost countries. Sourcing for certain parts, such as wiring harnesses, with a high labor component and low capital investment requirement moves around the world, following cheap labor.
“Morocco is too expensive for us,” Andersson says. “We source wiring harnesses from the Ukraine.”
He notes that where the health costs for an employee in the U.S. are about $3,000 a year, in the Ukraine they are only $24.
Andersson says just five years ago, GM sourced wiring harnesses from one supplier that produced them in three countries (Corp., although he doesn’t name the company).
Today, GM has four wiring harness suppliers working in 10 countries, and 87% of the harnesses it uses are produced in economically emerging nations.
Quality from overseas sources can be better than that made at home, he says, adding he met a worker in a Korean factory who told him, “If I ship a bad part, I will be fired.”
In North America, he says, suppliers must embrace the cultural change and deliver quality around the globe at the best price.
“In the 1990s, many suppliers moved operations to Mexico, but it didn’t work out well because their culture didn’t change,” Andersson says. They shipped parts and assemblies back and forth and didn’t realize better quality at a better price.
“The goal isn’t to use cheap labor,” he says, “but to win business.”
GM, itself, is undergoing similar changes, Andersson says. “We’ve probably changed more in the last six months than the previous six years.”
The auto maker divides its current suppliers into three categories. There are 86 that have won GM’s Supplier of the Year awards and that Andersson knows extremely well. They have landed more than half of GM’s new business in the last several years and provide half of all the new technology used in GM vehicles.
Andersson says struggling suppliers should adopt the attributes shared by the Supplier of the Year companies, such as a forward-thinking culture, competent manufacturing, a global footprint and good communication.