E-Procurement and E-Commerce at General Motors - Case Study Example

E-Procurement and E-Commerce at General Motors Case As one of the companies that truly represent the United s automobile sector, General Motors has several characteristics that enhance its fit for e-business, in this case e-procurement and e-commerce. It also provides a workable example of how both e-commerce and e-procurement have reshaped manufacturing in the United States. To begin with, the firm is a crucial part of a large chain of supply. GM’s role in this supply chain and the scope of this supply chain is reflected in their annual $60 billion expenses in procurement, which makes the savings in cost related to e-procurement significant (Khosrow-Pour, 2012: p34). In addition, the company’s ability to adopt e-commerce and e-procurement at major links of its chain of supply has increased sales volume by up to $350-$550 billion annually. Undoubtedly, this will generate further value creation and cost savings that are associated with the company’s sales and purchasing across the entire chain of supply. Finally, General Motors, possibly due to its familiarity with electronic data interchange and its benefits, as well as the dominant position they occupy in the chain of supply, is recognized as one of the pioneering adopters of e-business (Khosrow-Pour, 2012: p34). Utilization of E-Procurement and E-Commerce at General Motors E-Procurement E-procurement implementation has raised expectations at General Motors, including the reduction of time and procurement systems implementation and development cost at the company’s partner’s facilities and increased flow and sharing of information in the chain of supply (Khosrow-Pour, 2012: p36). In addition, it has also enabled substantial reduction in costs per item and ordering costs of purchased goods, while also enabling improved planning and forecasting for General Motors and its partners. Moreover, it has also optimized the company’s supply chain and ensured better customer service, shorter cycles of product development, and its build-to-order capabilities. Finally, it has also enabled a favorable environment for joint research and development, such as in product design. A web-based system of procurement, from a technological point of view, destroys many supply chain barriers of entry related to existing technological barriers. The company’s supply chain is composed of over a thousand suppliers, which means that transforming their purchasing function to an internet-based one with competitive bidding processes driven by software will substantially reduce ordering costs and costs of goods (Khosrow-Pour, 2012: p36). Also, the suppliers will also have the ability to cut costs as they can source supplies and communicate in a business-to-business marketplace. E-Procurement has also enabled GM to improve information flow and extensively share information across the chain of supply, which has resulted in significant planning and forecasting quality improvements for General Motors, as well as its suppliers. With time, their need to buffer inventory at various levels of their supply chain has diminished with a concurrent increase in inventory turns (Huff et al, 2011: p61). The traditional chain of supply, in other words, with all levels having buffer inventories, has sped up GM’s progress towards a lean chain of supply. E-procurement’s internet-based nature ensures that there is increased customization of products, while also developing the company’s build-to-order capabilities. In fact, GM already predicts that they can, in the future, deliver cars that are customized to the consumer in less than 15 days following reception from customers. Additionally, GM’s capabilities due to e-procurement to exchange rich information via their electronic data interchange platform has created advantageous conditions for the various divisions at the company, as well as their suppliers, to collaborate in product planning and design as part of R&D (Huff et al, 2011: p61). General Motors alliance with DaimlerChrysler and Ford in their e-procurement systems initiatives has led to increased benefits in economies of scale. Most industry analysts and suppliers have noted that the benefit most attached to this is the ability to work within one system that has common protocols, as compared to using multiple purchasing networks in the same sector (Huff et al, 2011: p62). General Motors and its business-to-business partners have been testing e-procurement’s benefits. For instance, in a brief period of time in the mid-2000s when TradeExchange was expanded to include other car manufacturers, General Motors was able to purchase over $4 million of supplies contained in the catalogues of suppliers who had enrolled in the expanded network. The company also sold seven presses at a price of $1.8 million in late 2007 through an online auction (Huff et al, 2011: p62). In addition, GM was also able to buy over $2 million worth of materials at yet another auction. Prior to taking part in the joint initiative, Ford was also involved in this type of auctioning. Auctions involving mainstream but undisclosed parts have led to double-digit savings on their deal, which was worth $78 million. E-Commerce E-commerce’s rapid advent has led to dramatic changes in General Motors and the automotive industry’s business environment. Because of these technologies’ unique, innovative, and dynamic structure, General Motors has found more opportunities to benefit from the advances in these technologies (Khosrow-Pour, 2012: p42). By using these technologies of e-commerce, GM has the ability to reach potential customers and suppliers across the globe. General Motors, with its headquarters in the American City of Detroit, has more than two hundred thousand employees in most major regions of the globe, while it also does business in over one hundred and twenty countries. As a result, they have adopted e-commerce technologies through the implementation of supply chain integration and business-to-business models. E-commerce based business-to-business models have enabled GM to achieve daily operations’ efficiency, which can be evidenced by their improved ability to conduct sales (Khosrow-Pour, 2012: p42). This has enabled GM to cut paper-based systems, while also reducing the use of staff in the mailroom. Additionally, business-to-business concepts have aided GM to reduce potential errors that employees make so as to improve the accuracy of their sales data. Without the electronic data interchange system, GM would face possible losses, particularly since the system is able to transfer and define standard data without need for human intervention. Through adoption of e-commerce and a supply chain integration model, General Motors and the automobile industry have been able to efficiently manage information, as well as to create smooth information flow to suppliers, distributors, customers, and their internal divisions (Khosrow-Pour, 2012: p43). General Motors today uses Customer Relations Management and Enterprise Resource Planning systems as a way to manage their supply chain processes. With Enterprise Resource Planning at GM is a broad set of activities that aid the business in managing some crucial parts and functions of their operations. Results from ERP can help the managers at GM to evaluate how the company is performing with regards to sales, as well as to compare its sales with the company’s corporate objectives. Customer Relations Management as a model used at GM aids the company to easily reach customers and receive their feedback. Because CRM integrates the information of the customer to the overall company, the efficiency of supply chain management is improved substantially (Khosrow-Pour, 2012: p43). E-commerce platforms at GM are commonly used to sell materials online to distributors and the end-user. The company uses e-commerce to divide their suppliers into different levels on the basis of car components. This enables them to reduce inventory levels and save transaction costs. References Gobetto, M. (2014). Operations management in automotive industries: From industrial strategies to production resources management, through the industrialization process. Dordrecht: Springer Huff, S. L., Schneberger, S., & Wade, M. (2011). Cases in electronic commerce. Boston: McGraw-Hill Publishing Company. Jäger, A.-L. (2013). Global Purchasing Processes in the Business Sector Automotive Aftermarket: Development of a Reference Model. Dordrecht: Springer. Khosrow-Pour, M. (2012). Cases on electronic commerce technologies and applications. Hershey, PA: Idea Group Pub. Read More