GM’s supply chain spans over 20,000 businesses around the world. We spend approximately $100 billion—two-thirds of our automotive costs—on about 200,000 items representing a wide variety of raw materials, parts, supplies, freight, transportation and other services. These are delivered or provided to more than 150 manufacturing operations in 30 countries. Despite its great breadth, scope and complexity, we’ve found that working with our suppliers to improve our mutual performance leads to rapid and significant improvements in our overall impacts.
As an example, life cycle analysis reveals that greenhouse gas (GHG) impact is 10 times greater in our supply chain than in our own operations. By working with suppliers to reduce their own GHG emissions, we are able to reduce overall impact.
Our supply chain is built on strong, transparent and trusted relationships, which are critical to ensuring product quality, availability and affordability for our customers. By seeking to be the partner of choice to suppliers, GM is better positioned to:
GM committed in recent years to work toward exemplary supplier partnerships built on integrity and shared values.
GM promotes shared growth with its suppliers.
Our Senior Vice President of Global Purchasing and Supply Chain (GPSC) is a member of GM’s senior leadership team, which drives the company’s strategy. This leader is responsible for working with suppliers to accelerate innovation, eliminate waste and deliver superior financial performance, while ensuring that supply chain standards are defined and understood.
GPSC is reshaping how the company and its suppliers work together, partner for mutual success and deliver greater value for our customers. Priorities for this group include:
GPSC has two primary forums for formal supplier engagement. The GM Supplier Business Council consists of 12 global suppliers who meet monthly with our GPSC leadership team. In addition to our Supplier Business Council, we also have a Diversity Council that is comprised of seven companies. The second forum is a global GM Supplier Business Meeting that we webcast to our suppliers several months out of the year to gain input and a consensus approach on GM-specific topics. Suppliers who participate in this webcast represent approximately 80 percent of our annual purchases for parts and services. This group also meets in person once a year. In addition, we have a dedicated internet portal for our suppliers to facilitate discussions on important issues, including policies, guidelines, standards and even our Sustainability Report.
We also place high expectations of excellence and ethical conduct on our suppliers, who are expected to act in a way that is consistent with our principles and values. Likewise, GM employees must hold suppliers they work with accountable for acting in a manner that is consistent with our Code of Conduct, Winning with Integrity.
Direct or Tier I GM suppliers must require their direct suppliers to meet in-country environmental and safety standards, as well as GM quality standards.
Beyond our Supplier Code of Conduct, we outline our expectations for supplier conduct in purchase contract terms and conditions, which clearly state our prohibition against any use of child labor or any other form of forced or involuntary labor, abusive treatment of employees or corrupt business practices in the supplying of goods and services to us. Furthermore, our contracts lay out expectations for lawful compliance with data protection and privacy, wages, hours and conditions of employment, subcontractor selection, discrimination, occupational health/safety and motor vehicle safety. By choosing to do business with GM, our suppliers accept our terms and conditions which include our Supplier Code of Conduct, and for our largest suppliers we also expect that they annually certify compliance with these provisions of our contract. We follow up with those suppliers who do not confirm compliance. We also provide our suppliers with access to the same communication tools—the GM Aware Line, Speak Up for Safety, Global Response Incident Reporting and others—that our own employees use to raise concerns.
China launches 2017 Green Supply Chain project.
Compliance within our supply chain is mandatory. When suppliers act responsibly, we reward them with greater business opportunities. Conversely, when suppliers act in a noncompliant manner, they may lose current work, future opportunities and/or their contract can be terminated. We monitor and receive feedback on supplier performance through various tools such as Strategic Supplier Engagement and supplier business review meetings. Our Supplier of the Year program recognizes best performers.
Across the globe, we hold various workshops and provide external training to improve supplier operations, primarily in the areas of efficiency, environmental management, workplace conditions, ethics and human rights.
We require our direct or Tier I suppliers on a global basis to also require their direct suppliers to meet in-country environmental and safety standards, as well as quality standards. However, visibility into supplier relationships, especially at lower levels of the supply chain, is a challenge. We are working to better understand how to manage the risks associated with a multitiered supply chain and continue to collaborate with others in the industry to improve these areas.
GM's approach is to drive tiered supplier visibility as the key to moving from a traditional reactive crisis management approach to one of proactive crisis avoidance. Over the past few years, we have developed a robust in-house, customized supply chain visibility tool, which integrates GM plants, Tier 1 suppliers, known Tier 2 suppliers and logistics nodes. This tool gives us the capability to map the geographic locations and relationships across the GM supply chain. The tool also incorporates 24x7 monitoring—Global Incident Mapping (GIM)—of potential disruptive events that could impact our supply chain partners worldwide. Our Global Crisis Management approach has significantly improved the response to disruptive events in the supply chain through using innovative tools and real-time data analysis. We monitor for both catastrophic events (earthquakes, hurricanes) and isolated disruptions (factory fires, labor strikes), reporting all potential impacts to our Command Center's Global Crisis teams for supplier follow-up. This approach supports zero production losses keeping material pipelines full, reduced premium transportation, alternative supply allocation planning and overall protection of supply for foreseen risks. We also provide risk scores to the Purchasing team, which are factored into the sourcing process and support mitigation plan development for high-risk areas.
We hold suppliers to the same high standards as we do our own operations.
Supply chain risks are also managed through our broader enterprise risk management functions and processes. All enterprise-level risks are assessed, updated and reviewed by senior leaders at least twice a year. Within our Strategic Risk Management team, we utilize and offer a variety of decision-support tools, such as war gaming, game theory, scenario analysis, stress testing, sensitivity analysis and lessons-learned analysis. These techniques are applied across risk, functions and regions.
An ongoing challenge for us is striving for a sustainable and socially responsible supply chain without adding more complexity and burdens to our supplier relationships. Collaboration among auto manufacturers makes sense, particularly given the level of common suppliers among the major automakers. This approach also helps ensure that automotive suppliers are not overburdened by duplicative OEM efforts and have a shared understanding of the key issues up and down the supply chain. GM works closely with many industry and supply chain–focused organizations, including the Automotive Industry Action Group (AIAG), the National Institute of Standards and Technology (NIST), iPoint and the International Automotive Task Force (IATF).
Industry collaboration groups are a primary forum for developing and sharing responsible supply chain practices across other automotive OEMs, Tier I and sub-tier suppliers. For example, in the U.S., GM employees maintain leadership positions in AIAG, provide direct financial support to the organization and leverage our sponsored membership program to enable free membership for small sub-tier suppliers. This allows key information and tools such as responsible supply chain training materials, self- assessments, best practices and standards, currently available to Tier I suppliers, to cascade to the sub-tier supply base. Each tier is responsible to ensure that their sub-tiers have compliance programs. We also require all of our supplier quality employees who visit supplier facilities to take AIAG training regarding responsible working conditions, including child labor.
GM was an active participant in the development of the AIAG’s Guiding Principles to Enhance Sustainability Performance in the Supply Chain. These principles target the entire automotive supply base. GM’s director of sustainability represented the company on the AIAG Corporate Responsibility Steering Committee and contributed to the development of the principles, which in turn were communicated to GM suppliers.
In addition, very specific requirements regarding responsible supply chain practices have been added to the new IATF 16949 Quality Standards. These requirements include:
This was the result of global industry collaboration between several standard-setting bodies, OEMs and Tier I suppliers. Compliance to the IATF 16949 is a requirement for GM suppliers. Our corporate goal is for 100 percent of our direct suppliers to be compliant by the end of 2018 and we are on track to meet this goal. Currently 37 percent of our direct suppliers are certified compliant to IATF 16949 standards.
Localization is another important tenet of our value chain. When we build where we sell, and buy where we build, our vehicles are more competitive because they enjoy pricing benefits and can be built to suit unique local requirements that drive customer enthusiasm and brand loyalty.
Localization also lowers risks by increasing the flexibility of our supply chain to respond to disruptions caused by natural, political or other causes. Furthermore, when we work with local suppliers, we also support the local economies of communities where we operate and realize environmental benefits by helping to minimize shipping, thus reducing fossil fuel use, carbon emissions and material use. GM works cross-functionally through its product development activities, sourcing activities and logistics planning to maximize the benefits of localization.