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QUESTION & ANSWER

FROM OUR ARCHIVES: Andersson: 'I'm never going to be satisfied'

GM's Bo Andersson: "I'm always looking for how to improve."
Bo Andersson, General Motors' group vice president for purchasing and supply chain, has helped save the automaker billions of dollars during his tenure.

He remains one of the most powerful people in the auto business, with control over a global annual purchasing buy of about $85 billion.

He sat down with Staff Reporter Robert Sherefkin to talk about the obstacles and opportunities facing GM's global purchasing strategy.

How do you contrast GM's purchasing strategies with those of other North American automakers?

It's been easier for GM because we have a global reach. I have been doing this for more than 5 years, and they (suppliers) like that we have the same expectations. They like that we have the same metrics, and they like that we are very consistent in our expectations. But we are flexible in our approach on how to get there.

If you are successful in certain segments, like the way we continue to be successful in the truck segment, that helps, right? A lot of this depends on how successful you are with your product strategies and how successful you play that back to the supply base.

GM scored higher in a recent survey of how well it deals with suppliers. Are you satisfied with your supplier relations? How can they be improved?

First, we are not satisfied. I am not satisfied. I'm never going to be satisfied.

What I am happy about is the focused approach that we have been using over the past 5 years. I'm always looking for how to improve. I have been very consistent for 5 years. We may have overstressed on "what" and maybe did not spend enough time on "how."

There is much more to do. What I don't like is the variation (from the targets involving Andersson's four priorities: quality, launch, supply chain and technical/commercial savings). We have variation in the supply base, and I have variation in my global organization. And that's what they are looking at.

Suppliers are giving us feedback that we have too much variation, how we deal with it.

The second area is on technical savings and commercial savings. I said two out of four we get good ratings on standardized work and less variation. Two out of four we have opportunities. We may have fixed the two easy ones (quality and launch), and we have the two hard ones (supply chain and technical/commercial savings) to fix.

What does GM expect from suppliers in terms of parts quality measured by the defective-parts-per-million standard?

We say that we measure initial quality. We measure warranty improvements. We measure - if we have any major disruptions - what we call spills.

In general, we have been driving for a 50 percent improvement in PPM year over year.

Secondly, we know that being below 25 in many areas is competitive. In some areas, like electronics, you may need to be at one digit.

Where I spend most of my time is really on driving warranty improvements. And this is more complex because it means going to the field to find parts from the dealers, understanding the root cause and taking corrective action. But when you find the sweet spot, the reward is much bigger.

First, you have customer satisfaction. Secondly, you avoid a lot of expenses.

I just conducted a study with our four wiper systems suppliers. Being world class in the wiper business means you typically have two field incidents per thousand vehicles. To be world class on front wipers, you have to be below eight. And each of these four suppliers had one of each - they were world class in one application and worst in class (in the other).

Do you expect to purchase more parts made in Mexico?

We are growing in Mexico, so we are trying to be more self-sufficient for our Mexican operations and buy more Mexican parts from local Mexican suppliers.

Typically, the best-performing suppliers in Mexico are the Mexican entrepreneurs.

I have said that the U.S. and Canadians have maybe been too reliant on importing parts into Mexico and just doing final assembly there. Then it is very hard to be competitive. So what I am saying is yes, we would like more parts in Mexico for the domestic market. I think we may export fewer parts to the U.S. because the rest of the U.S. supply base is becoming more competitive.

Are Mexican suppliers becoming more "value added" than before by purchasing components and assemblies rather than individual parts?

We want them to become much more vertically integrated and much more domestic. I still think it's a tough journey for them because they don't really have a tradition. I met with the Mexican government a couple of times, and I asked them to compare themselves with Korea, India and China. In Mexico, they have a lot of strengths, but one of the weaknesses is the lack of a tiered supply base.

I was speaking at the annual conference in Mexico City last week (the week of July 8). We buy $10.3 billion in Mexico today. So we are the largest buyer in Mexico. And I challenged them. I say it is a little bit strange that we are bringing in parts from Korea to Mexico.

You may e-mail Robert Sherefkin at rsherefkin@crain.com

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