Tag: suppliers

OM in the News: Agentic AI Revolutionizes the Factory

It’s 4 a.m. at a large automotive parts plant. The night-shift supervisor freezes as the dashboard flashes an alert: a critical spindle is vibrating out of tolerance. In the old world, he’d wait for maintenance to evaluate and decide. But today, an AI agent has already paused the line, checked service records and called the right technician—before he even takes a step toward the control room.

That’s the new reality for many manufacturers facing a stubborn obstacle: the ever-widening gap between data and decisive action. Now, a new class of digital entities is changing that equation. AI agents powered by decision intelligence are beginning to sense, reason and act across the manufacturing ecosystem, cutting decision latency from minutes to milliseconds.

Think of AI agents as the digital nervous system of a modern factory. They continuously sense what’s happening across machines, people and systems, then respond intelligently without losing context. Across the manufacturing stack, they’re quietly reshaping work for every role:

On the shop floor: Agents merge operations and information technology (IT) data to give operators real-time context. They can recommend optimal machine parameters, trigger tool-change schedules, balance workloads across lines or alert technicians before deviations escalate. Maintenance teams can use agents to predict component wear and plan interventions that don’t interrupt production– a topic in Chapter 17.

In production and quality operations: Agents help supervisors and quality staff detect process drift early. They analyze sensor data, images and process variables, suggesting immediate corrections or automated parameter tuning. In continuous manufacturing, this can mean fewer rejects and less rework, which we discuss in Chapter 6.

In ERP and planning: Agents connect production, procurement and finance systems. A planning agent (see Chapter 14) can run simulations of “what if” scenarios, what happens if a supplier shipment is delayed or if energy costs spike and recommend production adjustments.

Across the supply chain: Agents can constantly monitor inventory, supplier performance and logistics signals. When a potential shortage or delay is detected, they are able to trigger contingency workflows such as redistributing available stock, recommending alternate suppliers or rescheduling deliveries–see Chapters 11 and 12.

To sum it up: “Tomorrow’s factories won’t just inform — they’ll decide,” writes Industry Week (June 12, 2026).

Classroom discussion questions:

  1. Summarize what AI agents can do in a factory setting.
  2. How does agentic AI have the potential to change the manufacturing operation?

OM in the News: America Now Has an EV Rust Belt

At first, North America’s biggest auto-parts supplier was thrilled to snag the job of making enclosures for the batteries in GM’ new electric pickup. The contract was so big—and promised to be for years to come—that Magna International built a new  $575 million factory in a Michigan cornfield. And Michigan even offered a $44 million incentive package to draw the promise of new jobs–a topic in Chapter 8.

Five years later, that million-square-foot plant is mostly empty and losing money, a casualty of America’s messy breakup with EVs, reports The Wall Street Journal (April 1, 2026). It is one of dozens of now desolate EV parts plants across the country. It can take years to pivot a factory and supply chain from one type of vehicle to another. And it would take 4-6 months of higher gas prices for most Americans to reconsider more fuel-efficient vehicles– an unlikely prospect. Detroit automakers have scrapped their boldest EV dreams—and are looking beyond $50 billion in charges tied to broken supplier contracts and wasted investments.

The deserted Magna factory in St. Clair was expected to stay busy for years.

Magna, which has more than 300 factories around the globe and parts in nearly every car on the road today, has been left holding the keys to the St. Clair, Michigan  building that is bigger than 20 football fields. The Canadian company needs to find a second life for the factory and the hulking rows of assembly-line robots. A few years ago, Magna had plans to build an entirely new business unit around EV battery enclosures.

The EV slide is reverberating through the automotive industry’s sprawling supply chain. Multinational companies such as Magna, Dana and BorgWarner slashed jobs and closed plants due to the EV pullback, while a string of smaller manufacturers shut down altogether. Last year, more than $20 billion in previously announced investments in EV and battery facilities were wiped out.

Smaller suppliers have little recourse to recoup costs when automakers cancel a vehicle program and stop buying parts. They typically absorb the upfront cost of setting up an assembly line with the expectation of recouping it over time as parts are shipped. GM’s supplier contracts were struck with the expectation that GM would be building one million EVs a year. By December, 2025 the company was selling around 8,000 a month.

Classroom discussion questions:

  1. Discuss the typical incentives offered to attract a new plant.
  2. Why has the EV trucking business been especially hard hit?

 

 

OM in the News: Building Sustainability Into Product Design

Did you know 80% of a product’s environmental impact is determined in the design phase? With so much dependence on design, it is critical to start thinking about the environmental impact of a product as early as possible, alongside the traditional drivers of cost, quality, and time. To overcome resource scarcity and meet emissions targets, manufacturers are steadily increasing their environmental consciousness, writes Industry Week (April 26, 2024). Those set to succeed are doing so from the very start of their development processes.

Combining the real and digital worlds makes it possible to integrate the entire value chain. This delivers a digital thread that serves as the foundation for collective intelligence, connecting workflows and processes along the value chain. It can also provide designers with access to a comprehensive digital twin informed by simulation results and production data, material information, supplier and product carbon footprint data, etc.

This empowers engineers to rethink design, as they have access to a dynamic and iterative process (outlined in the 5 points below) that is never finished and allows for recycling, remanufacturing and reuse. However, for this to work, sustainability needs to be embedded into all phases of the design process. a point we make in both Ch. 5 (Product Design) and Supp. 5 (Sustainability in the Supply Chain).

1. Conceptual Design In addition to traditional design requirements such as performance, durability, usability and cost, designing for sustainable outcomes means meeting new requirements, including carbon emission caps, water use restrictions and recyclability. Capturing these early is critical .

2. Suppliers When sourcing materials and components, it is important to establish communication with suppliers that best comply with sustainability requirements.

3. Detailed Design The right tools will enable engineers to select the best part materials based on required material properties and the associated sustainability scores.  One material may result in a lowered carbon emission rating within manufacturing because it is more recyclable, while another material option might be more durable and extend product life.

4. Validation Validation covers many workflows and engineering domains to ensure the product functions as expected. Innovative materials used to meet sustainability targets might require more thorough testing.

5. Design Improvement This is a continuous journey that extends long after the product is made. Integrating sustainability goals into product design is making that a reality for every company.

Classroom discussion questions:

  1. Why are suppliers an important part of new product design?
  2. Name a product that has gone through these 5 steps.

OM in the News: Walmart and “On-time, In-full” Shipments

This is the latest shift in a logistics effort that has historically left companies scrambling to meet the retail giant’s demands.

Walmart wants suppliers to deliver shipments on time 90% of the time and in full 95% of the time, down from a 98% benchmark for both measures set in 2020 amid a surge in consumer demand. The change marks a significant lowering of Walmart’s “on-time, in-full” (or OTIF) thresholds that are meant to increase the efficiency of Walmart’s sprawling U.S. logistics network of distribution centers serving the company’s thousands of stores.

Walmart has been working to get tighter control over its inventory as it fulfills more online orders from its stores and competes on home-delivery speed with e-commerce giant Amazon.com. Vendors that fall short of Walmart’s on-time, in-full targets face fines worth 3% of the cost of the goods that didn’t arrive on time or in full.

Walmart last shifted its thresholds in September 2020, when it tightened the requirements as supply-chain disruptions left many store shelves empty of high-demand products during the Covid-19 pandemic. The latest change comes as the retailer returns to more normal ordering patterns after years of struggling with sharp fluctuations in stocking levels during the pandemic. The greater equilibrium in supply chains has helped relieve pressure on suppliers.

Consumer packaged-goods vendors delivered an average of 84% of orders on time in 2023. Walmart’s lowered thresholds should be welcome news to vendors that have struggled to meet the 98% benchmarks. “Very, very rarely do things go perfectly as planned with deliveries. Trucks break down or get caught in traffic, and orders are sometimes packed with the wrong quantity and mix of items, such as orange-flavored soda instead of grapefruit,”  said one industry expert.

Classroom discussion questions:

  1. Why is Walmart changing its OTIF policy?
  2. How does impact suppliers?

OM in the News: Losing Patience with China

China’s strict anti-Covid-19 policies have left most of Shanghai in lockdown for much of the past two months

Are foreign companies giving up on manufacturing in China? Covid-19 policies and Beijing’s increasingly ideological approach to business are making many companies reassess growth plans, reports The Wall Street Journal (May 26, 2022). A new  survey by the European Union, of companies in China, found that 23% of respondents were considering shifting current or planned investments to other markets, the highest total in the past decade.

Apple, whose suppliers in China constitute the country’s largest source of private-sector employment, is pushing its contractors to do more manufacturing elsewhere. Even before the latest Omicron wave hit Shanghai, over a third of American companies told the American Chamber of Commerce this spring that they would reduce investment in the country due to the policy environment there. The stars are aligning for a much more concerted effort, long predicted but slow in arriving, by large manufacturers to diversify away from the country.

China’s export growth has taken a steep dive thanks to a combination of Covid-19 lockdowns, weakening overseas demand and, most likely, tougher competition from other low-cost manufacturers that were closed last year. There will inevitably be more disruptive lockdowns in China given the very low probability of a significant move away from the “zero-Covid” policy until early 2023 at the earliest. And while alternative production locations such as Southeast Asia and India all present their own difficulties, they also have some distinct advantages, including growing, youthful labor forces—and governments that aren’t positioning themselves as ideological and, potentially, military opponents of developed democracies.

Classroom discussion questions:

  1. What are the tradeoffs of leaving or staying in China?
  2. What Southeast Asian countries would most benefit from an exit of western manufacturers from China?

OM in the News: Popeyes Runs Out of Chicken?

The new chicken sandwich

Popeyes sparked the so-called chicken wars between restaurants this summer when it launched a crispy sandwich– the first time the 47-year-old chain had rolled out a chicken sandwich nationally. The sandwich features filets from small-breasted birds, which tend to be favored by retailers and are in tighter supply than large-size birds. But supplies are low and producers have pre-existing commitments with competitors.

It turns out the chicken-sandwich sales far exceeded the Popeyes’ expectations, reports The Wall Street Journal (Oct. 28, 2019). A viral social-media campaign fueled by snarky exchanges between Popeyes and competitors led to lines out the door at many of its 2,400 U.S. locations. Customers who couldn’t get a sandwich grew angry and desperate. Many owners initially hoped to sell more than 60 sandwiches a day, but some went through 1,000 instead. Popeyes announced at the end of August that it had run out of the sandwich. The company went through a supply intended for 3 months in 14 days!

So Popeyes has spent much of the past 2 months securing suppliers that could meet its specifications for quantity and small-breast size of the item’s poultry. The lengthy amount of time Popeyes is taking in bringing the sandwich back highlights the supply-chain high-wire acts that can go on behind the scenes as restaurants try to move quickly to meet consumer tastes, and how forecasting and reality can diverge wildly even after 2 years of testing a new product. Competitors, hoping to satisfy the craving, have stepped in, with McDonald’s testing a new spicy chicken sandwich last month. Getting ready for its relaunch next month, Popeyes franchises have been hiring staff.

Supply crunches have hit other chains testing new menu items. Chipotle warned last week that it would likely run out of its new carne asada steak offering as early as next month after demand exceeded expectations.

Classroom discussion questions:

  1. What supply chain mistakes did Popeyes make?
  2.  What forecasting techniques (see Ch. 4) could Popeyes have used for this new product?

OM in the News: Tesla Needs Its Battery Maker, But a Culture Clash Threatens

A Tesla Model S being fitted with a battery pack

In 2008, Tesla began delivering its first EV and wanted a partner capable of manufacturing lithium-ion batteries on a mass scale. But years after committing to invest billions of dollars in a shared battery factory in the Nevada desert, Panasonic has a strained relationship with Tesla. The Gigafactory was supposed to boost profits, cement Panasonic’s future in automotive electronics and give Tesla easy access to the most important—and expensive—component of its vehicles. “Instead,” writes The Wall Street Journal (Oct. 8, 2019), “the partnership has exposed a culture clash between the conservative, century-old Japanese conglomerate  and the 16-year-old Silicon Valley upstart built around Mr. Musk’s vision for upending 100 years of automotive tradition”.

Musk has pushed Panasonic to cut what it charges for the battery cells as Tesla builds another costly factory in China. Panasonic has resisted the pricing requests, and is hesitant to go into China with Tesla. Production has fallen behind schedule, and the race to catch up has thrown the Panasonic battery unit deeper into the red. Tesla, for its part, needs the Gigafactory to continuously improve efficiency and reduce manufacturing costs so it can lower its car prices, which it sees as critical to mainstream success.

An early source of tension was missed deadlines. Panasonic would rush to supply Tesla’s production targets only to find the auto maker behind schedule. Tesla unveiled the Model 3 to overwhelming interest, leading Musk to try to speed up production plans. In 2016, he promised the plant needed to make enough batteries for 500,000 vehicles by 2018—2 years ahead of the original plan. That meant the battery factory had to speed up plans in a round-the-clock operation. In April, 2019 Musk blasted Panasonic, saying it was operating at a pace that constrained Model 3 production, even though it appears Tesla will sell only 400,000 EVs this year.

Classroom discussion questions:

  1. Unhappy with the price of batteries Panasonic supplied for the Model S, Tesla made plans to build its own. But after a few months the plan was scrapped. Why do you think this happened?
  2.  Describe the relationship between these 2 companies.

OM in the News: Is Boeing “Partnering for Success” or “Pilfering from Suppliers”?

787s being assembled in Everett.

“So much goes into the development of a commercial aircraft—billions of dollars, millions of work hours, rivers of sweat,” writes Businessweek (Feb. 19, 2018). At Boeing’s rollout of the 777 in 1994, the phrase “working together” was an organizing principle because, said Boeing, “we realized that only by working together as a team—with our customers and suppliers, would we build a truly great airplane.” Boeing extended its embrace of globalism with its next airplane, the 787, introduced in 2011, relying on a far-flung network of suppliers that not only built but also designed many of the parts.

But togetherness goes only so far under new CEO Dennis Muilenburg. Boeing has turned hard-nosed amid the greatest sales boom in aviation history, and he’s insisting suppliers cut prices. This cost initiative is called Partnering for Success; some of its targets call it Pilfering from Suppliers. The initiative demands additional price cuts of about 10%.  Says Muilenburg, “it is making our supply chain better, and 90% of our supply chain sees that.”

The company just spent $1 billion to erect the Composite Wing Center. But the first time Boeing developed a composite wing, it hired Mitsubishi to do the engineering and manufacturing in Japan, part of an effort to spread the enormous development costs of the 787 to multiple partners. Work on the fuselage went to Italy and the passenger doors to France.

Boeing had never handed off responsibility to its suppliers on this scale—and it was a disaster. The first plane out of the factory in 2007 was an empty shell, lacking plumbing, wiring, and electronics. Early models were built and rebuilt. An engine exploded, the carbon fiber frame had to be reinforced to support the wings, and an electrical blaze knocked out pilot control panels during a flight test. Battery fires grounded the global fleet soon after the plane was finally delivered, 3 years late. Boeing lost money on the first 500 787s it delivered and vowed to control its suppliers much more closely.

Classroom discussion questions:

  1. Is the supplier cost cutting strategy a good one?
  2. Why is Boeing insourcing more parts?

OM in the News: Suppliers and Whole Foods’ Slotting Fees

Whole Foods, which cut prices last year to make it cheaper to shop there, now is making it more expensive for suppliers to get their products onto shelves, reports The Wall Street Journal (Feb.9, 2018). The supermarket chain is asking suppliers of all sizes to pay new rates for prime shelf space as it tries to boost profits and better organize the exploding number of organic products hitting the market.

Many suppliers will see an increase from the average $25,000 “slotting fee” companies were paying to be featured in the stores’ most-visible, high-traffic areas. Additionally, Whole Foods is pitching its biggest suppliers on a promotion costing up to $300,000 for several weeks of prime shelf space along with souped-up marketing. The chain also is asking suppliers to offer bigger discounts on their products to earn the space. A high-visibility nationwide promotion at Whole Foods now often requires companies to cut product prices by at least 25%.  “We knew full-well that there would be discontent,” said Whole Foods’ V.P.

The firm is adopting a suite of retailing tactics meant to enhance profitability, including centralized purchasing decisions, tighter control over inventory and working with a national contractor to do in-store sampling. Grocery suppliers will pay a fee of 3% of the cost of goods delivered, and beauty suppliers will pay 5%. Whole Foods has hired an outside company to stock shelves “to provide a much more effective result.”

On the other hand, Kroger, the largest U.S. supermarket chain, has been courting niche brands over the past year with a new portal for local suppliers and a series of natural-foods trade fairs. The company doesn’t charge slotting fees for small suppliers.

(See our discussion of slotting fees in Chapter 9 on pages 374 and 392.)

Classroom discussion questions:

  1. Discuss the ethics of charging fees to allow products to be placed on supermarket shelves.
  2. Why is this an issue particularly in the grocery industry?

OM in the News: Boeing Tries to Streamline its Supply Chain

“Boeing has begun a push to streamline its supply chain, reducing overlap between existing divisions and cutting layers of management and bureaucracy,” writes the Seattle Times (Nov. 10, 2017). The firm’s enormous global supply chain delivers more than a billion parts to its assembly plants every year, everything from buckets full of fasteners to entire wings for its 787 Dreamliner. The management of that global network  is the focus of Boeing’s plan.

One tool it has turned to is increasing its use of modern information technology and digital analytics to track supplies and identify blockages in the pipeline. Boeing’s current supply chain has grown organically over many decades with multiple internal divisions all using separate tracking systems. The extended study, currently under way, will also help Boeing better determine which suppliers are working well and which are underperforming — so that it can allocate contracts accordingly, and in some cases take work in-house.

Boeing expects the first organizational pieces of the streamlining initiative — bringing together supplier management, raw-material management and elements of engine systems supply — to be in place by year end.

Classroom discussion questions:

  1. Why is Boeing struggling to control its supply chain?
  2. Why is a large percent of the supply chain outsourced, and why to many different countries (refer to the Global Profile that opens Chapter 2)?

OM in the News: Humanitarian Efforts of a Houston Supermarket Chain

A flooded H-E-B store. Three of the chain’s 83 stores in Houston will need to be rebuilt; the interior of one store shown.

One of the colleges within the POMS academic society is called Humanitarian Operations and Crisis Management. Hurricane Harvey, which slammed Houston, provides a great example of how OM steps up to the plate in times of a disaster. At a time when retail watchers question the future of brick-and-mortar stores due to Amazon’s continued ascendance,  retailer H-E-B is drawing widespread praise after managing to open 60 of its 83 stores in Houston, hours after the hurricane struck, writes LinkedIn’s Work in Progress (Aug. 2, 2017).

When employees couldn’t get to work, some stores still operated with as few as 5 people: one stationed at the door as crowd control and 4 working the registers, trying to get people out as quickly as possible. The behind-the-scenes operation is a complicated dance involving multiple command centers, a helicopter, private planes, military style vehicles and frequent calls to suppliers, urging them to send toilet paper.

Here are the word’s of H-E-B’s Houston president: “Coming out of a hurricane, if there’s been flooding, they’re going to want mops and bleach. I’ll take all the bread I can possibly get. Then you’re going to start to get produce. We don’t care about flowers in the middle of a hurricane. You only have so many trucks and so much space. We brought over 2,000 partners from Austin, San Antonio, the Rio Grande Valley. They hopped into cars and they just drove to Houston. For 18 hours a day, they’re going to help us restock and then they’ll go sleep on the couch at somebody’s house. We’ve called P&G and said: Send entire trailer loads of toilet paper directly to our stores. Bypass our warehouse, so you can just get it to us. I called Frito-Lay and said manufacture your bestsellers. I need Lay’s, I need Doritos, I need Fritos. I won’t turn down any delivery. We’ll take it as fast as we can.”

Classroom discussion questions:

  1. How was H-E-B able to reopen so quickly?
  2. What OM tools can be used in times of a disaster?

 

OM in the New: Wal-Mart Introduces OTIF Inventory

 

Packages move along a conveyor belt inside a Wal-Mart fulfillment center.

“Long known for squeezing its vast network of suppliers, Wal-Mart is about to step up the pressure,” reports Businessweek (July 24, 2017). The focus this time is delivery scheduling, and the company’s not messing around. Two days late? That’ll earn you a fine. One day early? That’s a fine, too. Right on-time but goods aren’t packed properly? You guessed it–fined.

The program, labeled On-Time, In-Full, or OTIF, aims to add $1 billion to revenue by improving product availability at stores. It underscores the urgency Wal-Mart feels as it raises wages, cuts prices and confronts a powerhouse rival in Amazon that’s poised to grow with its planned purchase of Whole Foods. Says a retail expert, “They’re trying to squeeze and squeeze and squeeze.’’

The initiative builds on progress Wal-Mart has made in reducing inventory and tidying its 4,700 U.S. stores after the back rooms became so cluttered it often stored surplus products in cargo trailers parked out back. The new rules begin this August, and the company said they will require full-truckload suppliers of fast-turning items — groceries, paper towels — to “deliver what we ordered 100% in full, on the must-arrive-by date 75% of the time.” Items that are late or missing during a one-month period will incur a fine of 3% of their value. Early shipments get dinged, too, because they create overstocks.

By February, 2018, Wal-Mart wants these deliveries to be “OTIF” 95% of the time. Its previous target was 90% hitting a more lenient 4-day window. “Variability is the No. 1 killer of the supply chain,’’ says a senior Wal-Mart exec. While big suppliers should be able to invest in fancy inventory-management systems to get up to speed with the new rules, smaller businesses will feel more pain. Some don’t even know what “OTIF’’ stands for.

Classroom discussion questions:

  1. What are the implications of OTIF to suppliers?
  2. Why is Wal-Mart introducing this inventory strategy?

OM in the News: Wal-Mart Squeezes Its Suppliers (Again)

A Wal-Mart Stores company distribution center in Bentonville
A Wal-Mart Stores company distribution center in Bentonville

Wal-Mart Stores will begin charging fees to almost all vendors for stocking their items in new stores and for warehousing inventory, raising pressure on suppliers as the world’s largest retailer battles higher costs from wage hikes, reports msn.money (June 24, 2015). The company  just started informing suppliers about the fees and other changes to supplier agreements. The changes will affect 10,000 suppliers to its U.S. stores.

The changes are aimed at bringing “consistency to the collection of allowances related to the growth of our business and suppliers’ use of the Wal-Mart supply network,” it said in a letter to suppliers. The new agreements mean a larger number of vendors will likely start paying fees, passing some of the retailer’s costs onto suppliers. For instance, Wal-Mart is seeking to charge a food supplier 10% of the value of inventory shipped to new stores and to new warehouses, both one-time charges, and 1% to hold inventory in existing warehouses. Currently, the supplier is not charged anything.

The move marks a shift by Wal-Mart, which unlike other retailers has sought to limit such fees in return for demanding suppliers give it the lowest price. This approach suggests that it is seeking areas to offset its increased investment in wages. Charges like the new-store and warehouse fees are common in the retail industry, but their broad application across all suppliers is a new step for Wal-Mart. The fees for new stores and for warehousing goods are a way of sharing the costs of growth and keeping prices low, a Wal-Mart spokeswoman said: “The changes we have outlined will help us ensure that we are operating at everyday low costs that yield everyday low prices.”

Classroom discussion questions:

1. Why is Wal-Mart changing its supplier agreements?

2. How does this impact the supply chain?

OM in the News: What Makes the Apple Watch Tick?

A Wall Street Journal (May 1, 2015) analysis just released suggests the cost of the new Apple Sport Watch is a smaller share of the retail price than other Apple products. The costs of parts and manufacturing for the cheapest version available total about $83.70. The watch sells for $349. That 24% ratio for parts and manufacturing is lower than the 29% to 45% ratio than for other Apple devices. The total bill of materials for the Watch Sport is $81.20 and manufacturing costs add about $2.50 per watch. These figures don’t take into account capital, logistics, R&D, intellectual property, or other supply chain costs.

Inside the Watch, a touch screen is supplied by TPK and a display module by Analog Devices. Apple manufacturers the S1 processor, while Toshiba and MicronTechnology  supply the memory chip. The Bluetooth controller comes from Broadcom.

A key component of the watch made by one of two suppliers was found to be defective, prompting Apple to temporarily limit availability. That part is the so-called taptic engine, designed to produce the sensation of being tapped on the wrist. After mass production began in February, reliability testing revealed that some taptic engines supplied by AAC Technologies of Shenzhen, China, started to break down over time, forcing Apple to scrap completed watches as a result.

Classroom discussion questions:
1.  What are the most critical components, cost-wise, of the watch?

2. What is a bill-of-materials (see Chapter 5)?apple watch

OM in the News: GM Turns to Long-Term Supplier Contracts

An auto worker assembles an SUV chassis at the Arlington, Texas, GM plant
An auto worker assembles an SUV chassis at the Arlington, Texas, GM plant

General Motors’ purchasing chief said the nation’s largest auto maker aims to sign new parts contracts for two vehicle generations, or as long as a decade, to cut costs and gain access to advanced technologies. GM is gearing up for big investments in luxury cars, electric vehicles and other projects, and expects to sign hundreds of billions of dollars in new supply contracts over the next 2 years. By locking suppliers into longer-term contracts and looping into vehicle designs earlier in the process, the auto maker expects suppliers to share more innovations and better processes that help save money. “We want them to double down on us,” the purchasing head stated.

Recently, GM asked about 30 of the auto maker’s biggest parts makers to help relieve supply bottlenecks so the company can crank up production of its highly profitable pickup trucks and sport-utility vehicles. In some cases, GM promised to help suppliers cover additional costs to get the needed parts.

“The change is part of a technology arms race in the industry, with auto makers vying to be first with self-driving features for vehicles or propulsion technologies that reduce emissions,” writes The Wall Street Journal (April 15, 2015). GM’s CEO recently implemented a strategy aimed at improving relationships with suppliers; she believed that the auto maker was overly optimistic in its planning assumptions or too forceful in its cost-cutting mandates. The firm is attempting to undo decades of damage caused by poor relationships with suppliers that had curtailed its early access to new innovations.

Classroom discussion questions:

1. Describe GM’s prior relations with suppliers.

2. Why the change?

3. Research the history of the famous GM VP-Purchasing, Jose Lopez. (See Supply Chain Digest (July 7, 2009)