There was an interesting article over on InformationWeek a few days ago. As you probably know by now, GM along with Ford and other manufacturers are currently trying to find ways to prop up sales of their fuel hungry SUV and pick up trucks.  Due to the high price of oil, many of the vehicle manufacturers are having to revisit their future product strategies with plans for smaller more fuel efficient vehicles taking priority over SUV development.  In fact in the past few weeks there has been a major shift in production strategies with GM and Ford temporarily closing down SUV plants and Ford has delayed the release the new version of its market leading vehicle, the F150. This vehicle was at the top of the sales charts for nearly 25 years, a month ago it was dethroned by three other companies who produce much smaller vehicles.

So what happens when a plant is closed down for a short period of time, what happens to the hundreds of suppliers that may be based around these plants supplying parts on a 24 by 7 basis.  More importantly from a B2B or IT infrastructure point of view how do you manage your IT infrastructure so that you can effectively turn a key and close down a plant’s IT infrastructure and restart again as smoothly as possible?  The upgrade to GM’s IT infrastructure has been a significant undertaking including the standardisation of software and processes at every plant, updating networks and creating four command centres in the U.S, Latin America and Europe, each designed to let experts look into any GM factory around the world and help get idled production lines back up and running much faster. In the past, an economic downturn would mean that OEMs would probably look to sell off plants, but advances in IT and production related technology and processes means that it is far easier to just idle a plant for a few weeks.

Over the past few years GM has been slowly overhauling its entire global IT infrastructure to provide a much more simpler, flexible and fully integrated IT platform to link all of its 160 manufacturing plants together.  In parallel to this, GM has been adopting the infamous ‘Just in Time’ (JIT) principal of supplying parts to its plants, a supply process invented by the Japanese automotive industry and one which has helped to make Toyota the market force that it is today.  GM’s new IT infrastructure includes 25,000 plant floor Windows XP based PCs, 11,000 printers, 3,500 servers and 14,000 network switches.  Ironically, just as GM complete the updates to their IT infrastructure, so Microsoft put out a press release saying that they will no longer be providing copies of Windows XP to PC manufacturers after 30^th June this year. This is Microsoft’s attempt to begin phasing out Windows XP.

No doubt GM will have signed a significant support contract with Microsoft to guarantee upgrades to its new Windows XP platform, which is interesting given that Microsoft is trying extremely hard to get businesses to adopt its Vista based operating system.

The new IT infrastructure has allowed GM to experiment with a number of new technologies, many of which have been implemented to help improve the visibility of parts and other materials around their global plants.  For example using a system from a company called  Wherenet that allows RFID based tracking of parts within its plants.  GM are now able to locate parts in warehouses and storage areas much more quickly, allowing their fork lift drivers to get parts to assembly lines much more quickly.  A similar Wherenet RFID based system was also implemented at Land Rover to allow them to track the position of any vehicle within its Solihull plant in the UK.

GM’s parts inventory has also been reduced considerably due to the JIT supply of parts and materials trackside.  This has been achieved through the implementation of a new in-plant order management system  which links suppliers directly to a production line.  This new system allows GM to keep assembly lines running just four hours before new shipments are required. To meet these aggressive deadlines many suppliers have setup plants on supplier parks next to GM plants around the world.  To run a lean production operation like this means that GM will be putting an extra emphasis on improving visibility across their supply chain and monitoring the performance of key suppliers and logistics carriers. 

Stock outages, as proven by the recent UAW strikes, can have serious impacts on GM’s production capacity and in a similar manner an unreliable IT infrastructure can also impact production capacity.  GM estimate that since implementing their global IT infrastructure, production outages due to IT related issues has dropped from 50% in 2005 to less than 5% so far this year. 

The most interesting piece of information that I picked from the InformationWeek article was that GM’s four global command centres, used for monitoring all 160 of its production plants around the world, are managed by a piece of software that is on nearly every Windows PC today, Microsoft Excel.  Sure, this is probably heavily customise with Macros developed my Microsoft’s Skunkworks Team but it just goes to show that with all the technology that is available today, Excel still has a significant hold on many manufacturing companies.   

From a GXS perspective,  we are continuing to see a growing trend for companies looking to improve their B2B infrastructures, provide support for new B2B technologies and provide better visibility into the shipment of spare parts from one location to another.  Of course we cannot forget the all important integration to the one software application that helps to keep the manufacturing industry ticking over on a daily basis, Microsoft Excel

GXS has B2B solutions to help any automotive company, no matter what their size or where they may be located in the automotive value chain.  A typical representation of the automotive value chain is shown below. But what happens when the customer picks up their new car and six months down the line they need their car serviced or require a replacement part to be fitted.  Is the supply chain in the aftermarket sector radically different to the one used up until a new car arrives in a showroom?

Last year GXS worked with a Japanese company to implement an aftermarket parts visibility solution to help them manage their spare parts shipments to their dealer network around the world.  This implementation, based on GXS’ Logistics Visibility solution was implemented to allow them to trace the shipment of spare parts as they made their way between their factory in Japan and, in the initial part of the project, to their dealer network in North America.  As with many automotive dealers, this company has their own dealer management system and GXS’ Logistics Visibility solution was fully integrated to their web based platform to provide a single, seamless environment for improving the distribution of spare parts across their dealer network.  The diagram below could almost apply to any automotive OEM looking to improve their aftermarket B2B infrastructure.

In addition to improving the visibility of PO transactions, this implementation also allowed this company to monitor the efficiency of their third party logistics providers.  GXS, through the Logistics Visibility solution, is linked to nearly 80% of the global freight carriers, in addition GXS has direct links with many government cross border and customs facilities around the world.  The most significant benefit obtained and one which every company strives to improve, is customer satisfaction.  They are now able to respond more quickly to dealer requests for spare parts and at the same time, they are able to realise better cost control by optimising their usage of carriers. 

The research analyst AMR recently defined this aftermarket supply chain activity as Service Lifecycle Management and it is an area that many companies, especially in the automotive and high tech sectors are looking to improve.  Provision of spare parts is a big business in itself and it was estimated last year that GM made more profit on $9billion of aftermarket related spares sales than they did on $150billion of OEM car sales. The service parts business becomes more important for products or projects that are expected to stay in service for a long period of time.

For example in the UK the Defence Logistics Organisation is solely responsible for the distribution of spare parts to the British Army, Royal Navy and Royal Airforce. The DLO provides a crucial service, making sure that spare parts get shipped anywhere in the world, anytime of day and they have to provide this spare parts replemishment service for the  entire life of the jet fighter, tank or warship, which could be anything up to 30 years. 

Increased globalisation of the automotive industry is putting more pressure on the car manufacturers to improve their aftermarket supply networks and I will be taking a closer look at this sector over the coming weeks to see how GXS can help more companies, such as the Japanese  manufacturer highlighted above, to improve their aftermarket / service part area of their business.