The team of Abigail Fox, Tiereny Reilly, Kevin Roepe, and Marc Vinklarek had conducted a Total Enterprise Cost Analysis on a National case given to selected schools. The competition was held in Detroit at GM's headquarters. The presentation was 30 minutes long, with 15 minutes for questions.
Background on the case: The case was sourcing focus and was a choice between three suppliers: Pedro, Liger, and Talon. Through our cost analysis, we conclude that a package deal to Talon would be the correct choice for GM to meets a business functions.
1. R.H.D.&L.S. Consulting
GM/Wayne State Supply Chain Case Competition
Design, Build, and Sell the World's Best Vehicles
Abigail Fox
Tierney Reilly
Kevin Roepe
Marc Vinklarek
3. Case Requirements & Objectives
• Achieve Marketing's Increased Demand for ATS
• Achieve Marketing's New Demand for Sonic
• Meet Timing Requirements
• Perform Total Enterprise Cost Analysis
• Sourcing Recommendation
4. Assumptions
• Constant demand for Chevrolet Sonic's without Dockspot
• Every car manufactured is sold
• Supplier's will meet quality specifications
• Supplier's are responsible for second-tier supplier management
• Contingency plan for Tel Aviv
• Shipping cost based on per mile not load size
7. Recommended Strategy Sole Sourcing from Talon Interiors
PACKAGE VS. INDIVIDUAL
$56,886,181
$59,009,639
$59,500,000
$59,000,000
$58,500,000
$58,000,000
$57,500,000
$57,000,000
$56,500,000
$56,000,000
$55,500,000
Package Individual
Total Cost ($)
Options
4%
59,780,384
63,577,450
56,886,181
57,501,359
60,152,150
54,434,296
57,014,334
59,642,325
53,964,291
$- $50,000,000 $100,000,000 $150,000,000 $200,000,000
Pedro
Liger
Talon
Total Cost of Ownerships
S
u
p
p
l
i
e
r
s
Overview of Total Cost of Ownership
FY1
FY2
FY3
8. Pedro Industries Supplier Analysis
Beneficial Factors
• Long-standing
relationship with GM
• Proven quality record
Areas of Concern
• High political risk
• Potentially increased
lead times
• Frequent GM
involvement
• 5% greater costs
9. Pedro Industries Three Year Cost Overview
FY1 FY2 FY3
Total Cost: Package Award $ 59,780,384.21 $ 57,501,359.21 $ 57,014,334.21
Total Cost : Independent ATS Award $ 43,299,974.00 $ 41,539,774.00 $ 41,139,574.00
Total: Independent Sonic Award $ 17,481,864.00 $ 16,892,344.00 $ 16,797,584.00
10. Liger Industries Supplier Analysis
Beneficial Factors
• Geographic
proximity
• Top-rated supplier
• High service rating
Areas of Concern
• 12% higher costs
• History of price
creep
11. Liger Industries Three Year Cost Overview
FY1 FY2 FY3
Total Cost: Package Award $ 63,577,450.00 $ 60,152,150.00 $ 59,642,325.00
Total Cost : Independent ATS Award $ 43,933,832.50 $ 41,700,120.00 $ 41,294,295.00
Total: Independent Sonic Award $ 20,534,790.00 $ 19,673,010.00 $ 19,567,170.00
12. Talon Interiors Supplier Analysis
Beneficial Factors
•Most cost effective
•Experienced consumer
electronics supplier
•Lucrative technology
•ISO 14,001
Areas of Concern
• New supplier to
General Motors
• Unproven quality
13. Talon Interiors Three Year Cost Overview
FY1 FY2 FY3
Total Cost: Package Award $ 56,886,180.76 $ 54,434,295.76 $ 53,964,290.76
Total Cost : Independent ATS Award $ 42,903,299.00 $ 41,008,274.00 $ 40,613,249.00
Total: Independent Sonic Award $ 15,709,665.00 $ 14,641,305.00 $ 14,557,125.00
14. Supplier Cost Review Independent Awards
$44,000,000
$43,000,000
$42,000,000
$41,000,000
$40,000,000
$39,000,000
$38,000,000
ATS Independent Awards
FY1 FY2 FY3
Pedro Industries Liger Industries Talon Interiors
$25,000,000
$20,000,000
$15,000,000
$10,000,000
$5,000,000
$-
Sonic Independent Awards
FY1 FY2 FY3
Pedro Industries Liger Industries Talon Interiors
15. Supplier Cost Review Package Award
$64,000,000
$62,000,000
$60,000,000
$58,000,000
$56,000,000
$54,000,000
$52,000,000
$50,000,000
$48,000,000
FY1 FY2 FY3
Pedro
Liger
Talon
16. Packaged Deals Pedro Industries Liger Industries Talon Interiors
Strengths • Proven quality
• Relationship with GM
• Proximity to GM
• Service standards
• Order processing
• High quality
• Lucrative technology
• Prior industry experience
• Lowest Total Enterprise
Cost
Weaknesses
• Geographical risk
• No prospective innovation
• GM involvement
• Inventory and shipping costs
• Largest tooling lead time
• Price creep
• No prospective innovation
• No TS16949 certification
• Start up costs
• Furthest distance in miles
Opportunities • Relocate manufacturing
• Technological advancements
• Technological advancements
• Lower costs
• Influence over quality
management
• Future relationship with
Preston Inc.
• Increased market share
due to MR technology
• Relocate manufacturing
Threats
• Logistics and inventory risk
• Political risks
• Un-competitive pricing
• One manufacturing location
• Supplier to competitor
17. Key Success Factors
Become Market
Share Leader
Produce Quality
Products
Strategically
Source Parts
and Materials
Continuously
Innovate
18. GM Corporate Strategy
Current State
- Ensure economic viability
- Improve brand strength amongst
Millennials
- Reinvest in a self-sustaining cycle
Future State
- Use advanced technology
- Reinvent transportation
- Create world-class products
Key Success Factors
- Become market leader
- Produce quality products
- Strategically source parts and
materials
- Continuously innovate
- Transform our business
- Fortify our balance sheet
-Win in the marketplace
20. Implementing Future Values
• Sustain relationship
• Open-book and quarterly audits
• Supplier strategy development
• Tier 2 supplier development
• Heighten MR barriers of entry
• Negotiate for lower costs, fixed
pricing
• Redesign container increased piece
per shipment
• Protection against committed
spend
• Require TS 16949 Certification
Global Wireless Charger Handset
0.023
Sales (% of Total)
0.047
0.073
0.115
0.154
0.179 0.194 0.207
0.25
0.2
0.15
0.1
0.05
0
1 2 3 4 5 6 7 8
% of total sales
Years
Global Wireless Charger Handset Sales (% of Total)
21. Business Model
Value
Propositions
• Produce World-Class, Technologically-Advanced, Reliable Automobiles
• Wireless Charging
Channels
• Dealerships
• Rental Agencies
Customer
Relationships
• Customer Service
• Dependability
Revenue
Streams
• Vehicle Sales and Leases
• Rental Agencies
• Fleet Sales
Customer
Segments
• Millennials
• Young Professionals
• Tech-savvy consumers
22. Conclusion
• Sole sourcing Talon Interiors most economically sustainable option
• New supplier relationship brings innovation to GM
• Long-term relationship to ensure supplier sustainability
Talon
Future
State
25. KSF’s
KPI’s
Critical
Processes
Become Market
Share Leader
Consistently
produce quality
products
Strategically
source parts and
materials
Continuously
innovate
Increase Number
of Sales
Improve Margins
Decrease Costs
Minimize number of
recalls
Increase residual
value
Develop
Comprehensive
Supplier
scorecard
Utilize improved
technologies in
vehicles
Raise brand
awareness
Sell!
Implement 6
Sigma/Lean
practices
Perform
Supplier
Audits/
Development
Focus on Research
and development.
Customer
preferences
Use advanced technology to
reinvent the future of transportation
and create world-class products in
order to transform our business,
fortify our balance sheet and win in
the marketplace.
Integrity, individual respect
and responsibility
Innovative and trusting
Win with Integrity
Automotive manufacturer looking to
ensure economic viability through
improving brand strength amongst
millennials and continuously
reinvesting in a self-sustaining cycle.
Vision:
Future State
Mission:
Current State
Motivators:
Values
GM Corporate Strategy Map
26. Business Model Canvas
Key Partners
• Talon Interiors
• Preston
Incorporated
• Original
Equipment
Manufacturers
Key Activities
• Production
• Strategic
Sourcing
• Research and
Development
Value Propositions
• Produce world-class,
technologically-advanced,
reliable
automobiles
• Wireless charging
Customer
Relationships
• Customer
Service
• Dependability
Customer
Segments
• Millennials
(Sonic)
• Young
Professionals
(ATS)
• Tech-savvy
consumers
(Both)
Key Resources
• Innovative
technology
• Suppliers
Channels
• Dealerships
• Rental
Agencies
Cost Structure
• Manufacturing
• Labor
• Marketing and Sales
Revenue Streams
• Vehicle Sales and Leases
• Fleet Sales
• Rental Agencies
27. Transit Distances and Costs Pedro Industries
Pedro Industries
(Saltillo, MX)
Lansing, MI Orion, MI
Distance 1,771.5 Miles 1,844.2 Miles
Costs
53’ Standard $49,705.31 $29,024.54
53’ Drop Deck $46,211.60 $51,135.19
53’ Standard IM $49,049.84 $28,342.2
60’ Boxcar $95,664.66 N/A
86’ Boxcar $134,200.00 N/A
53’ Expedited $50,785.94 $30,149.52
28. Transit Distances and Costs Liger Industries
Liger Industries
(Michigan)
Lansing, MI Orion, MI
Distance Intercity Intercity
Costs
53’ Standard $46,895.00 $26,095.00
53’ Drop Deck $43,293.00 $48,093.00
53’ Standard IM N/A N/A
60’ Boxcar N/A N/A
86’ Boxcar N/A N/A
53’ Expedited N/A N/A
29. Transit Distances and Costs Talon Interiors
Talon Interiors
(San Diego, CA)
Lansing, MI Orion, MI
Distance 2,278 Miles 2,365 Miles
Costs
53’ Standard $50,535.92 $29,878.60
53’ Drop Deck $47,027.04 $51,973.20
53’ Standard IM $49,305.80 $28,601.50
60’ Boxcar N/A N/A
86’ Boxcar N/A N/A
53’ Expedited $52,176.08 $31,581.40
30. Containers per Transport Type
53’ Standard 53’ Drop Deck 60’ Boxcar 86’ Boxcar
Cadillac ATS 52 Containers 48 Containers 96 Containers 138 Containers
Arrangement (13L x 2W x 2H) (10L x 2W x 2H)
(2L x 2W x 2H)
(16L x 2W x 3H) (23L x 2W x 3H)
Orientation (48” x 45” x 54”) (48” x 45” x 54”)
(54” x 48” x 45”)
(45” x 54” x 48”) (45” x 54” x 48”)
Chevy Sonic 26 Containers 48 Containers 72 Containers 102 Containers
Arrangement (13L x 2W x 1H) (10L x 2W x 2H)
(2L x 2W x 2H)
(12L x 2W x 3H) (17L x 2W x 3H)
Orientation (48” x 45” x 60”) (48” x 45” x 60”)
(60” x 48” x 45”)
(60” x 48” x45”) (60” x 48” x 45”)
31. Transit Shipping Costs Pedro Industries
ATS – Package Sonic – Package ATS – Individual Sonic - Individual
53’ Standard $192,601.31 $56,628.54 $194,473.31 $57,864.54
53’ Drop Deck $178,115.60 $102,591.19 $179,843.60 $104,895.19
53’ Standard IM $191,945.84 $55,946.17 $193,817.84 $57,182.17
60’ Boxcar $359,452.66 N/A $362,908.66 N/A
86’ Boxcar $513,424.00 N/A $518,553.94 N/A
53’ Expedited $193,681.94 $57,753.52 $195,553.94 $58,989.52
32. Transit Shipping Costs Liger Industries
ATS – Package Sonic – Package ATS – Individual Sonic - Individual
53’ Standard $191,663.00 $57,324.60 $192,599.00 $58,395.80
53’ Drop Deck $176,925.00 $106,307.40 $177,789.00 $108,304.20
53’ Standard IM N/A N/A N/A N/A
60’ Boxcar N/A N/A N/A N/A
86’ Boxcar N/A N/A N/A N/A
53’ Expedited N/A N/A N/A N/A
33. Transit Shipping Costs Talon Industries
ATS – Package Sonic – Package ATS – Individual Sonic - Individual
53’ Standard $190,935.92 $53,939.40 $193,431.92 $54,722.20
53’ Drop Deck $176,627.04 $96,824.40 $178,931.04 $98,283.60
53’ Standard IM $189,705.80 $52,662.30 $192,201.80 $53,445.10
60’ Boxcar N/A N/A N/A N/A
86’ Boxcar N/A N/A N/A N/A
53’ Expedited $192,576.08 $55,642.20 $195,072.08 $56,425.00
34. Total Cost of Ownership Pedro Industries Package Award
Package FY1 FY2 FY3
Start-Up Costs - - -
Total Piece Price $49,420,500.00 $48,917,000.00 $48,493,500.00
Tooling Cost + Expedited Costs $1,500,000.00 - -
Expedited Costs $200,000 - -
Transportation Cost $757,621.00 $763,966.00 $781,560.00
Carrying Cost $7,413,075.00 $7,337,550.00 $7,274,025.00
Package: Total Less Expediting $59,091,196.00 $57,018,516.00 $56,549,085.00
Package: Total Cost $59,291,196.00 $57,018,516.00 $56,549,085.00
35. Total Cost of Ownership Pedro Industries Independent ATS Award
Independent: ATS FY1 FY2 FY3
Start-Up Costs - - -
Total Piece Price $35,844,000.00 $35,496,000.00 $35,148,000.00
Tooling Cost + Expedited Costs $1,200,000.00 - -
Expedited Costs $160,000.00 - -
Transportation Cost $602,152.00 $608,144.00 $611,177.00
Carrying Cost $5,376,600.00 $5,324,400.00 $5,272,200.00
Independent ATS: Total Less Expediting $42,420,600.00 $40,820,400.00 $40,420,200.00
Independent ATS: Total Cost $43,182,752.00 $41,428,544.00 $41,031,377.00
36. Total Cost of Ownership Pedro Industries Independent Sonic Award
Independent: Sonic FY1 FY2 FY3
Start-Up Costs - - -
Total Piece Price $14,659,200.00 $14,494,400.00 $14,412,000.00
Tooling Cost + Expedited Costs $400,000 - -
Expedited Costs - - -
Transportation Cost $287,651.00 $290,513.00 $291,962.00
Carrying Cost $2,198,880.00 $2,174,160.00 $2,161,800.00
Independent Sonic: Total Less Expediting $17,545,731.00 $16,959,073.00 $16,865,762.00
Independent Sonic: Total Cost $17,545,731.00 $16,959,073.00 $16,865,762.00
37. Total Cost of Ownership Liger Industries Package Award
Package FY1 FY2 FY3
Start-Up Costs - - -
Total Piece Price $51,708,000.00 $51,184,000.00 $50,748,000.00
Tooling Cost + Expedited Costs $1,600,000.00 - -
Expedited Costs $1,200,000.00 - -
Transportation Cost $305,970.00 $305,970.00 $305,970.00
Carrying Cost $7,756,200.00 $7,677,600.00 $7,612,200.00
Package: Total Less Expediting $62,264,200.00 $58,861,600.00 458,360,200.00
Package: Total Cost $62,264,200.00 $58,861,600.00 $58,360,200.00
38. Total Cost of Ownership Liger Industries Independent ATS Award
Independent: ATS FY1 FY2 FY3
Start-Up Costs - - -
Total Piece Price $36,075,750.00 $35,496,000.00 $35,148,000.00
Tooling Cost + Expedited Costs $1,000,000.00 - -
Expedited Costs $600,000.00 - -
Transportation Cost $305,970.00 $305,970.00 $305,970.00
Carrying Cost $5,411,362.50 $5,324,400.00 $5,272,200.00
Independent ATS: Total Less Expediting $42,793,082.50 $41,126,370.00 $40,726,170.00
Independent ATS: Total Cost $43,393,082.50 $41,126,370.00 $40,726,170.00
39. Total Cost of Ownership Liger Industries Independent Sonic Award
Independent: Sonic FY1 FY2 FY3
Start-Up Costs - - -
Total Piece Price $16,396,800.00 $16,217,600.00 $16,128,000.00
Tooling Cost + Expedited Costs $600,000.00 - -
Expedited Costs - - -
Transportation Cost $305,970.00 $305,970.00 $305,970.00
Carrying Cost $2,459,520.00 $2,432,640.00 $2,419,200.00
Independent Sonic: Total Less Expediting $19,762,290.00 $18,956,210.00 $18,853,170.00
Independent Sonic: Total Cost $19,762,290.00 $18,956,210.00 $18,853,170.00
40. Total Cost of Ownership Talon Interiors Package Award
Package
FY1 FY2 FY3
Start-Up Costs $500,000.00 $ - $ -
Total Piece Price $47,012,100.00 $46,532,200.00 $46,123,500.00
Tooling Cost + Expedited Costs $1,400,000.00 $ - $ -
Expedited Costs $ - $ - $ -
Transportation Cost $215,757.00 $215,757.00 $215,757.00
Carrying Cost $7,051,815.00 $6,979,830.00 $6,918,525.00
Package: Total Less Expediting $56,179,672.00 $53,727,787.00 $53,257,782.00
Package: Total Cost $56,179,672.00 $53,727,787.00 $53,257,782.00
41. Total Cost of Ownership Talon Interiors Independent ATS Award
Independent: ATS FY1 FY2 FY3
Start-Up Costs $500,000.00 $ - $ -
Total Piece Price $35,380,500.00 $35,037,000.00 $34,693,500.00
Tooling Cost + Expedited Costs $1,000,000.00 $ - $ -
Expedited Costs $ - $ - $ -
Transportation Cost $600,139.00 $606,111.00 $609,039.00
Carrying Cost $5,307,075.00 $5,255,550.00 $5,204,025.00
Independent ATS: Total Less Expediting $42,787,714.00 $40,898,661.00 $40,506,564.00
Independent ATS: Total Cost $42,787,714.00 $40,898,661.00 $40,506,564.00
42. Total Cost of Ownership Talon Interiors Independent Award
Independent: Sonic FY1 FY2 FY3
Start-Up Costs $500,000.00 $ - $ -
Total Piece Price $12,645,600.00 $ 12,499,200.00 $ 12,426,000.00
Tooling Cost + Expedited Costs $ 400,000.00 $ - $ -
Expedited Costs $ - $ - $ -
Transportation Cost $ 267,225.00 $ 267,225.00 $ 267,225.00
Carrying Cost $ 1,896,840.00 $ 1,874,880.00 $ 1,863,900.00
Independent Sonic: Total Less
Expediting $ 15,709,665.00 $ 14,641,305.00 $ 14,557,125.00
Independent Sonic: Total Cost $ 15,709,665.00 $ 14,641,305.00 $ 14,557,125.00
43. EOQ Delivery Pedro Industries
Orion, Michigan (Package)
FY 1 FY 2 FY 3
53' Standard $ 577,803.93 $ 577,803.93 $ 577,803.93
53' Drop deck $ 534,346.80 $ 534,346.80 $ 534,346.80
53' IM $ 575,837.53 $ 575,837.53 $ 575,837.53
44. EOQ Delivery Pedro Industries
Orion, Michigan (Individual)
FY 1 FY 2 FY 3
53' Standard $ 226,514.15 $ 226,514.15 $ 226,514.15
53' Drop deck $ 307,773.57 $ 307,773.57 $ 307,773.57
53' IM $ 223,784.69 $ 223,784.69 $ 223,784.69
58. Distance Calculations
• Distances Calculated using Google Maps
• Saltillo, MX to Lansing, MI
• Saltillo, MX to Orion, MI
• San Diego, CA to Lansing, MI
• San Diego, CA to Orion, MI
• Intercity distances were not calculated
59. Transportation Costs
• Transportation Costs = ((Unit Price * Units per Trailer) * Shipping
Costs)
60. Containers per Trailer
• Process for determining the number of containers that could fit in a specific trailer type
• Researched dimensions for all four trailer types
• Divide trailer length, width and height, by container length, width and height to identify
maximum number of containers per dimension
• Visually modeled containers per trailer to determine best orientations and arrangements
• Assumed that containers could be rotated on all three axis to determine best combination
61. Units per Trailer
• Units per Trailer = (Number of Containers per Trailer * Number of
Pieces per Container)
62. Shipping Costs
• The cost of shipping a truckload of sub-assemblies from supplier to
manufacturing site
• Shipping Costs = (( Distance * Rate per Mile) + (Cost per Container
* Containers per Trailer))
64. Percent Change in Global Handset Sales
• Used for supporting our choice of Talon Interiors based on the adaptation of
MR Technology
• Percent Change=(%2020-%2014)
Editor's Notes
Hektor
//Good morning ladies and gentlemen these are my colleagues Abigail, Tierney, Marc and I am Kevin and together we make up R.H.D.&L.S. Consulting. Before we begin our presentation, I would like to invite you all to take a moment to imagine stepping into a technologically advanced car, fresh of the assembly line. And to take a seat with us, throw your phone onto the wireless charging console, take in that new car smell and buckle up because we are about to drive you into the future of General Motors…
Hektor
Hektor
Probably need more assumptions. Don’t want to get caught by anything we missed
Really blank slide
Hektor
Marky Marc & the funky bunch
Most economically sustainable in package and independent awards
Access to MR technology is crucial to maintaining and improving market share
Possibilities for future technology innovation at GM-Long-term supplier advantage
Marky Marc
Marky Marc
Marky Marc
DJ T
//
Possible Dialogue:
Sustain relationship with Talon and Preston
Open-book and quarterly audits
Talon strategy development
Heighten MR barriers of entry
Negotiate for lower costs, fixed pricing
Redesign container increased piece per shipment
Blanket order protection for market shifts
Require TS 16949 Certification
Supplier improvements //bullet #1
Financials
AUDITS :D
Make it Corporate (you square) --> Market Share
Hektor
Hektor
//By ensuring these three areas we will be able to effectively achieve the increased demand for ATS, the new demand for Sonic, and meet timing requirements while also innovating GM as a corporation in order to appeal to the millennials.
Hektor
//We hope you have enjoyed your ride, and would like to take the time to answer any questions about the route we used to reach our final destination
//All information was inspired by the document titled Strat Map. Can be edited by team. Critical processes need to support KPI’s, KPI’s KSF’s, KSF’s Vision
We can smart art the shit out of this, bitches
Sell this like a rubber to a monk
Back on BMC 11x17
Hecktor
//Customer Relationship Business
The Value Proposition identifies what we will do
The right side shows how we will make it happen (efficiency)
The left side shows what problem we will solve (value add)
The bottom section shows how we will be profitable
The left side of the BMC shows how we can efficiently support our value proposition while the right side shows how we will create the value
“So, I guess you could say things are getting pretty serious between us”
Calculation for determining the maximum number of sub-assemblies that could fit in a trailer
Shipping costs are included in transportation cost
Calculation for determining the Inventory Holding Costs (aka Holding Cost)
Calculation for determining the Increase in Global Wireless Charger Handsets