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case study GENERAL MOTORS INVENTORY As organizations reach…
case study
GENERAL MOTORS INVENTORY
As organizations reach maturity, they can no longer depend on a rapidly growing market for goods and the continuation of the business that made them successful. They must seek new approaches to operations to increase their success in managing life cycle risk. The following discussion involves Bo Andersson and his experience at General Motors Corporation. It provides a good story about modern risk management.
In 2001, Bo Andersson became the top purchasing manager at GM. When he arrived, he realized that GM was spending $85 billion on car parts each year, purchased from 3,200 suppliers. He also learned that GM had separate engineering for almost every type of vehicle it produced. Vehicles did not share common parts. Seat frames were an example of a particularly interesting subculture feature. They were expensive, partly because GM had 26 different seat frames. Toyota had only two.
A similar situation existed with V6 engines. Once again, GM had high costs because it had 12 V6 engines, whereas Toyota and Honda had two each. What about fuel pumps? GM had 12. Toyota and Nissan had two. Moving on, Bo Andersson addressed the rather simple topic of door hinges. He learned that they could be made out of three pieces instead of five. Making the change would save $100 million annually. He had a subculture response. Engineers and designers debated the change for more than three months. Then they reluctantly began a lengthy process of design and testing for the new door hinges.
After studying the situation to be sure he understood it, Bo Andersson identified the design and purchasing problems and brought them to the attention of the engineers who worked in manufacturing. His arguments were carefully framed, but they were not well received. The different units did not support changes, arguing that a change in one component would have ripple effects throughout the entire line of automobiles. In the end, change came slowly over the period from 2001 to 2006
(BusinessWeek, July 31, 2006).
Question
a) General Motors lacked a modern risk management approach to internal manufacturing. Production efficiency lagged badly while General Motors failed to make desperately needed changes to be competitive. As a risk manager, you need to recommend why enterprise risk management (ERM) is more effective to be adopted by General Motors compared to traditional risk management (TRM).
b) The General Motors situation is also due to leadership failure. Describe why “tone at the top” and a strong risk culture are critical components for a company’s success.
note:
please sir relate your answer to the case study I mentioned above
