Implementing Change in Procurement & Supply Chain Management - General Motors - Case Study Example

Implementing change in supply chain management Name: Tutor: Course: Date: Executive Summary Supply chain management requires appropriate approaches to enable a company gain sustainable competitive advantage over its rivals. General Motors (GM) is one of the few companies that adopted disruptive change to its sourcing, design, manufacture and sales of automobiles using web technology. While many rival companies were stuck to traditional supply chain approaches, GM was steadfast in taking to planned change or transformative change to turn around its profitability and market share. Based on the concepts and models of Lewin it shows how unfreezing examines the status quo to determine if when change is needed then moving is when change is initiated. Refreezing as well establishes equilibrium by making changes permanent and rewarding desired outcomes. The sources of power to leaders in organizations are derived from status, education attainment and political importance. Based on Kotters change model and Kübler-Ross models, change in organizations is supported by strong culture and vision of leaders. The organizational management also has to buy into the change process for anything feasible to come into reality. From this report, it is evident that the large changes exhibited in GM were generated by disruptive innovation. The leaders had vision and imagination, after which they established a sense of urgency and the changes were able to leap forward the business. This report is one piece of evidence of how transformative change when accepted and implemented company-wide can disrupt the market and improve to the organization’s internal workings. Table of contents Executive Summary 2 1.0 Organizational change and approach to change 5 Figure 1: Kurt Lewin’s three stage model 6 Figure 2: Kotter’s change model 7 2.0 Strategy and value addition in supply chain and procurement 7 Figure 3: Innovation flows in the organization 9 3.0 Improvements sought by General Motors in supply chain 9 4.0 Techniques used to obtain the buy in to the change 10 Figure 4: Kübler-Ross stages model 11 References 13 List of figures Executive Summary 2 1.0 Organizational change and approach to change 5 Figure 1: Kurt Lewin’s three stage model 6 Figure 2: Kotter’s change model 7 2.0 Strategy and value addition in supply chain and procurement 7 Figure 3: Innovation flows in the organization 9 3.0 Improvements sought by General Motors in supply chain 9 4.0 Techniques used to obtain the buy in to the change 10 Figure 4: Kübler-Ross stages model 11 References 13 1.0 Organizational change and approach to change Firms undertaking in a mission to implement change under integrated supply chain management strategy faces numerous challenges. To make the supply chain redesign successful, there should be significant change in internal culture because it is difficult to re-condition people to accept change (Leigh, 2013). However, when directed by a knowledgeable and strong leaders change may be accomplished and implemented successfully (Anderson, 2011). Such leaders understand the tools or techniques available to initiate, achieve and sustain positive change. General Motors (GM) is one example of successful change management in Supply Chain Management. Previously, GM was ridiculed for having dysfunctional processes, arms-length dealer and supplier relationships and archaic management structures. Over the last three decades, the market share of GM’s car and light-truck market in the United States has been diminishing significantly (Handfield, 2014). GM hit the press as a company that adopted ‘innovative’ management strategies just like DaimlerChrysler, Toyota, Honda and other automotive competitors. Although it is a traditional automotive company, GM provides exemplary understanding of a radical culture change that impact supply chain (Handfield, 2014). Moreover, GM’s accomplishments have been boosted by the press, making it a global e-business supply chain leader. From a theoretical perspective Kurt Lewin identified three stages at which change agents take in order to become part of a system. To start with, Mitchell (2012) shows that unfreezing is examining the status quo to determine if when change is needed then moving is when change is initiated. Finally, refreezing is establishing equilibrium by making changes permanent and rewarding desired outcomes. (Source: Mitchell, 2012) Figure 1: Kurt Lewin’s three stage model From the model above, there are certain forces, under force-field analysis, that can affect change such as improved distribution, lowered production and maintenance costs and reduced training time. Modified by Rogers in 2003, Lewin's work was expanded to include five phases of planned change: adoption, trial, evaluation, interest and awareness (Mitchell, 2012). At GM, change leaders did not necessarily follow the traditional company hierarchy but instead brought together a team or coalition of influential people (Cavanagh, 2011). Their source of power is political importance, expertise, status and job title. GM adopted the Kotter model as it is an all top-down change processes where decisions are made at the top management level. (Source: Cavanagh, 2011) Figure 2: Kotter’s change model According to Kotter, change becomes a success when 75 percent of the organization’s management ‘buy into’ the change (Kelley, 2012). Alternatively, the leaders take a lot of time in establishing urgency before creating coalition, vision and empowering people. For GM to have a mature supply chain, greater integration and closer collaboration was required among players in the value chain. Success in logistics and procurement at GM began with the involvement and collaboration of service providers in the supply chain. Effective implementation begins with early project planning and scheduling phases in the client organization (Leigh, 2013). With various supply chain partners, GM was able to incorporate and understand its planning aspects such as taxes and monetary regulations, timing and legal complexities of moving automobiles around the world and accurate pricing. 2.0 Strategy and value addition in supply chain and procurement Sustainable competitive advantage is founded on winning business strategies. Whenever it has an edge over rivals, Colins and Porter (2003) observes a company has having competitive advantage when it is able secure its customers and defend against competitive forces. Sources of competitive advantage can be providing buyers more value for the money, designing a better performing product than competing brands and achieving lower costs than rivals (Lynch, 2006). It can also about making a more longer-lasting and reliable product, providing superior customer service and making the highest-quality product. GM implemented a competitive strategy consisting of all the approaches and moves to improve its market position, withstand competitive pressures, and attract buyers. The firm’s strategy was mostly offensive although it shifts depending on market conditions (Kim & Mauborgne, 2005). GM strives to be a low-cost manufacturer because many automobile buyers are price-sensitive. With this powerful competitive approach in the market, GM opened up a sustainable cost advantage over competitors. Lowered cost became a basis for gaining market share and under-pricing competitors to earn higher profit margins (MacMillan, 2009). By assuming a cost advantage and aggressive price-cutting efforts, GM was able to generate superior profits from sales than rivals. By achieving low-cost leadership relative to competitors, low-cost strategy became the reigning theme of the entire business strategy (Colins & Porter, 2003). Moreover, innovation is about change. GM innovated successfully its design and manufacturing processes using web technology in a repeatable fashion. Although good at managing change, disruptive innovation was feasible. From the realm of implementation, small changes that employees, customers, organization and other stakeholders adapt is basically incremental innovation (Zekiri & Nedelea, 2011). However, the large changes exhibited in GM were generated by disruptive innovation. Originating from imagination, these changes leapt forward the business, disrupted the market and the organization’s internal workings (Kayser, 2012). Indeed, the change injected into GM by innovation flows and ebbs throughout the whole ecosystem of the organization as sown in the figure 3 below. (Source: Kelley, 2012) Figure 3: Innovation flows in the organization From the figure above, disruptive innovation changes the status quo and requires suppliers cooperate in new ways. With disruptive innovations, suppliers are compelled to make drastic changes in order to support just-in-time manufacturing (Wootton, 2011). Consequently, GM’s success in manufacture and distribution of automobiles success involved partnerships with suppliers in sourcing components at shorter lead times required and at higher volumes. 3.0 Improvements sought by General Motors in supply chain In the last five years, GM has made a strong commitment to stay focused on supply chain agility through a radical change in its management structure globally. Although a number of firms have initiated e-business strategies GM created a three-pronged strategy in its supply chain improvements (Kayser, 2012). The aim was to use internet technology to support its intention of ‘leaning’ the supply chain. Manufacturing and selling ‘bricks and mortar’ products like automobiles on the web is not a popular idea among the masses. Poised for a disruptive change, GM embraced this strategy in which its full impact has been felt in the entire organization. Using the Web to buy, build and design innovative new vehicles GM’s strategy made strides that were never imagined would materialize. To ensure that this new strategy is realized, a solid global supply chain structure was put in place (Lunenburg, 2012). A transformative leader, Richard Wagoner, led GM through this radical change by ensuring that management structure was lean and always believed in the change. These change efforts have paid off and the company, although still facing a number of challenges, is viewed as the most innovative of the “Big Three” automotive companies. In fact, it is making steady progress against BMW, Honda and Toyota who are real global competitors. Moreover, GM assessed employee skill and knowledge level to determine their readiness for change (Handfield, 2014). At first, they found that they needed to provide their employees with adequate training for them to be better equipped to meet the demands in lieu of the new changes. Mastery of new processes and skills required adaptation to the changes. By being alert to its impact upon staff, GM has been able to manage change most effectively by fostering an environment of openness (Handfield, 2014). Other concerns involved tools for two-way feedback, willingness to listen to all feedback and establishing through open-door policies an environment of trust. 4.0 Techniques used to obtain the buy in to the change GM has been able to undergo transformational change by having partners who also support the change process. A strong organisational culture is required to overcome organizational resistance to change (Cavanagh, 2011). These include strong values and norms that have all along established the status quo. The company adopted a consultative or collaborative style where charismatic transformation strategy was needed to drive major adjustments to environmental conditions (Leigh, 2013). In such a case, there was support for radical change but little time for participation. According to the ‘Five stages’ model, all change initiatives have been used to understand reactions of people and loss at some level. In this model, it depicts an individual pattern which people feel through reactive emotional responses when coming to terms with great loss or trauma, bereavement and death. One of the theorists, Kübler-Ross designed a model that recognizes people as capable of passing own individual journeys to overcome death and bereavement journeys (Cavanagh, 2011). Later, the person is able to cope after a general acceptance of reality. (Source: Chelst, 2012) Figure 4: Kübler-Ross stages model As shown in the model above, it is inevitable that as management and employees work to implement change, some failure will occur. A positive message to employees is send when the learning process accepts the inevitability of failure. For GM to manage innovation and change, it had to take time to celebrate and recognize success. However, change is acknowledged as requiring extra effort, long hours and can be stressful (Wootton, 2011). By doing so, employees become motivated and will continue to respond positively. The vision should be right. To drive service and efficiency, the team to establish a simple strategy and vision that focuses on creative and emotional aspects. Change process requires communication for buy-in and the involvement of many people as possible (Chelst, 2012). Besides, there is need to communicate the essentials that respond and appeal to the needs of the people. Make technology work for the company by de-cluttering communications (Kayser, 2012). Also, reinforce the value of successful change by making change to stick through measures like new change leaders, promotion and recruitment. It is important that this change is weaved into the organization’s culture. Although it is very confusing for executives to deploy, change management is necessary. There are so many effective tools available, but the difficulty arises in determining the right combination of tool (s) for different situations. In this case, benchmarking is an appropriate process and valuable means to learn how supply chain performance of one company compares to other organizations in the same industry (Eikenberry, 2011). Through this process, GM is able to focus their supply chain management efforts and clearly identify performance gaps on the areas that urgently need improvement. On the other hand, Six Sigma tool can also be used to improve quality throughout the supply chain of automobiles parts and raw materials (Balzac, 2011). Moreover, lean enterprise may be used eliminate waste within the supply chain or streamline processes. References Anderson, D. (2011). Beyond change management: Advanced strategies for today’s transformational leaders. New York, NY: Wiley. Balzac, S. R. (2011). Organizational development. New York, NY: McGraw-Hill. Cavanagh, R. R. (2011). Building engaged team performance: Align your processes and people to achieve game-changing business results. New York, NY: McGraw-Hill. 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