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OM in the News: GM Discovers the Importance of Logistics

October 15, 2013
GM's stamping plant is now next to the existing Arlington TX assembly plant

GM’s stamping plant is now next to the existing Arlington TX assembly plant

For years, General Motors pounded out hoods, fenders and doors for its Tahoe and Yukon SUVs at plants in Ohio and Michigan and shipped them to its assembly plant in Arlington, Texas. Yesterday, reports The Wall Street Journal (Oct. 14, 2013), the auto maker officially opened a $200 million metal-stamping plant adjacent to the Arlington factory that reduces that travel to about 20 feet from machine to welder. Estimated savings: about $40 million a year in shipping costs.

The new plant, is part of a broader rethinking of logistics by GM CEO Dan Akerson to generate hundreds of million of dollars in new profit. “Any savings I can get by cutting my logistics bill goes right to my bottom line and makes us more competitive,” says Akerson.  GM now sees logistics as representing the biggest potential opportunity to squeeze new profit from operations.

Co-locating parts-making and auto assembly promise higher quality and greater profit. GM and other auto makers say they can no longer put up with parts that arrive scratched or dented and have to be repaired.  “Now, with the reset of labor costs, especially in the U.S., more efficiency in the plants and the importance of quality, we can finally evolve,” adds the CEO of GM’s largest parts supplier.

“The best way to describe logistics is waste,” says GM’s manufacturing chief. “It is moving productive materials from point A to point B. It has no value and guess what; it doesn’t mean anything to the customer. If you can squeeze that waste of the system then you can tactically improve your profit margins.” In addition to moving its own production, GM is encouraging parts makers to move or build new facilities closer to GM assembly plants.

Classroom discussion questions:
1. Why is logistics so important to auto makers?

2. What does “co-locating” mean?

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2 Comments leave one →
  1. Jay Heizer permalink
    October 15, 2013 12:25 am

    Of course, we will hope GM is smart enough to realize that building a stamping facility in Arlington Texas required a huge investment. Adding a few cost estimate numbers to this blog can make for an interesting class discussion… investment cost, perhaps improved quality, hopefully a major reduction in inventory. As opposed to major logistics cost with the current system and perhaps labor issues in the plant losing the work. Change is seldom easy.

  2. Reva Shader permalink
    October 15, 2013 9:33 am

    One little adjustment my dear Barry. 1st paragraph, 2nd line- remove underline after welder._ L and K, Reva

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