Trends-May 2009
Lean times call for equal measures. The U.S. automotive industry has been decimated by a slumping domestic economy and increasing global competition. While some cash-strapped manufacturers join government “bread” lines, still others are turning to their assembly lines.
In what amounts to a corporate mandate to level production and lean out its supply chain, General Motors Corporation (GM) recently announced it would schedule multiple down weeks at 13 assembly operations in North America later this year. Under this plan, approximately 190,000 vehicles will be removed from the manufacturer’s North American production schedule in the second and early third quarters.
The strategy comes as dealer vehicle inventories remain high and the opportunity to bring production in line with current market demand warrants action. Essentially, the company is streamlining its planned and existing pipeline inventory to become more responsive to actual demand.
“We’re taking aggressive steps to accelerate our inventory initiatives that have worked well since the first of the year,” says Troy Clarke, GM North America president. “While sales have been performing at or close to our plan estimates, and dealer inventories have been reduced accordingly, we want to more closely align inventories with more conservative market assumptions.
“Reducing our inventories aggressively reduces pressure on GM and our dealers, and sets us up for a clean 2010 model year start-up,” he adds.
The plant down weeks will be staggered and vary in duration, based on current inventory levels and expected product demand. Corresponding down weeks are also scheduled at GM’s stamping and powertrain facilities. The scheduling actions do not impact operations that are in the process of launching products, including the all-new Chevrolet Camaro built at Oshawa, Ontario, Canada, and the Buick LaCrosse launching soon at the Fairfax, Kansas, assembly plant.
At the end of March, approximately 767,000 vehicles were in U.S. dealer stock, down about 108,000 vehicles (or 12 percent) compared with the same period last year, and down 105,000 vehicles from year-end 2008. These new scheduling actions will help reduce U.S. dealer inventories to approximately 525,000 vehicles by the end of July.
Avon’s Extreme Makeover
The Avon lady knows a thing or two about how to sell customers on door-to-door makeovers. Apparently, Avon’s supply chain strategists have taken a page out of its own catalog—and the changes are anything but cosmetic.
The New York-headquartered cosmetics company, which flaunts products in more than 140 countries worldwide, recently announced a two-phase global restructuring program expected to achieve savings approaching $900 million.
“Over the past three years, we have been dramatically transforming our cost structure and exceeding our original savings estimates as we fix the fundamentals of our business,” says Charles Cramb, Avon’s vice chairman, chief finance and strategy officer.
Based on this progress, Avon expects the original restructuring program, initiated in 2005, to deliver total savings of approximately $430 million by 2012. It also projects annualized benefits from product line simplification and strategic sourcing initiatives in excess of $200 million and $250 million, respectively, in 2010.
Encouraged by this return, the cosmetics company is launching a new restructuring program to target increasing efficiency and organizational effectiveness across its global operations.
“This initiative reflects both our constant turnaround mentality and our determination to aggressively manage our cost structure as we address the current macro-economic challenges,” adds Cramb.
The new program focuses on the company’s global supply chain operations, realigning certain local business support functions to a more regional basis to drive increased efficiencies and streamline transaction-related services, including selective outsourcing.
Over the past decade, Avon has sought an appropriate balance between decentralized country-specific supply chains and a more integrated and aggregated approach.
By forecasting future demand pockets, and locally positioning manufacturing to best serve these markets, the company is taking cost out of the supply chain while continuing an aggressive global strategy in a recessive global economy.
A Matter of Degrees
Where are tomorrow’s brightest logistics leaders now? According to U.S. News and World Report, they’re at the Massachusetts Institute of Technology. In its annual list of top supply chain graduate programs, the magazine gave top honors to MIT’s Sloan School of Management. Here are the other schools that made the grade:
Massachusetts Institute of Technology
(Sloan School of Management) Cambridge, Mass.
Michigan State University
(Eli Broad Graduate School of Management) East Lansing, Mich.
Carnegie Mellon University
(Tepper School of Business) Pittsburgh, Pa.
Stanford University
(Graduate School of Business) Stanford, Calif.
Arizona State University
(W.P. Carey School of Business) Tempe, Ariz.
Pennsylvania State University—University Park
(Mary Jean and Frank P. Smeal College of Business) University Park, Pa.
Ohio State University
(Max M. Fisher College of Business) Columbus, Ohio
University of Pennsylvania
(Wharton School) Philadelphia, Pa.
University of Tennessee—Knoxville
(Graduate School of Business) Knoxville, Tenn.
Northwestern University
(Kellogg School of Management) Evanston, Ill.