Innovation Takes Many Forms for Suppliers, GM’s Andersson Says
By James M. Amend WardsAuto.com, Aug 10, 2007 11:20 AM

TRAVERSE CITY, MI – Bo Andersson, the no-nonsense purchasing chief for General Motors Corp., knows exactly what the best suppliers have in common: a superior culture, organizational quality and competitive advantage.

Suppliers need clear goals…and they have to have a clear organizational capability to achieve them, he says during a presentation at the Management Briefing Seminars here. And they must “have recognized the need to be globally competitive.”

For a company that buys 160,000 parts every day, pays about $7.5 billion in logistics support and launches 25 new vehicles worldwide every year, those traits take on utmost importance. But GM’s demands don’t end there.

The auto maker also seeks what Andersson calls productivity gains, or what suppliers more commonly might know as “givebacks.”

“Productivity comes from synergies, if you don’t have synergies, there’s nothing to share,” Andersson says, pointing out there are greater opportunities for givebacks on some models, such as fullsize pickups and cross/utility vehicles, than others.

“Some of you supply the Buick LaCrosse,” he says of the premium midsize sedan. “There is nothing to share – nothing for us, nothing for you. So typically, we won’t ask for productivity on the Buick LaCrosse.”

Innovation ranks highly, too. And not just technical innovation, Andersson says. He also counts simplifying processes, improving communication, boosting quality, having the best landed cost and sustainability as areas where innovation can play a key role.

Bo Andersson

“New technology will never help you get all the benefits you need to have,” Andersson says.

GM’s purchasing approach is paying dividends, the executive adds. Supplier-related spills and plant disruptions are down 40%. Special charters have fallen 70% (or by roughly 1,000 planes) annually. GM’s on-time parts delivery rate is up over 99% from 95% and overall, warranty costs are down 41%.

The more competitive, quality-based sourcing process saves GM money in other ways, too.

For example, the auto maker previously purchased its spark plugs from an average supplier, Andersson explains, at a cost of $1 per unit, but warranty costs pushed the price up to $1.44. Now that GM more closely scrutinizes the supply base, it gets the same part for 66 cents, without any warranty costs.

“And sometimes I hear (suppliers) say we make decisions in the wrong way,” he says.

That doesn’t mean suppliers dislike the way GM conducts business. In fact, in a Ward’s survey, Toyota Motor Corp. only narrowly beats GM as the OEM with which suppliers most prefer to do business.

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The new sourcing process doesn’t limit opportunities for suppliers, Andersson contends. Not only are global vehicle sales growing at a rate of about 5% annually, consumers are looking for new features on their vehicles, specifically things that improve safety, fuel economy and the look and functionality of interiors.

“If you’re in all these, I think you will do well,” he says. “These are the four areas where there is room for innovation. You can do innovation and price for it.”

Gentex Corp., for instance, ranks as one of GM’s favorite suppliers because of its focus on innovation.

“They clearly understand the market,” Andersson says. “They understand opportunity. They understand the risk.

“And if it were up to them they would put everything in the mirrors, including the powertrain,” he jokes.

But, Andersson reiterates, suppliers should not lean on technological innovation, alone.

“Your people, your processes, your manufacturing locations, your quality, your landed cost are all the bonds we need to be successful together.”