Essay about Supply Chain Management Failure of Gm

851 Words Oct 12th, 2011 4 Pages
General Motors

1. Describe three SCM practises use by GM that would have negatively impacted their return-on-assets. Define this impact in terms of specific ROA components (e.g. sales, assets)?
The return on asset (ROA) is a percentage that measures how profitable a company’s assets in generating revenue. ROA can be computed as: Net Income / Mode of Total Asset. This number tells us what the company can do with what it has. Three SCM practices used by GM that negatively impacted their ROA are described below:
Poor Inventory Management
GM offered a vast range of vehicles, which resulted in extra production lines and GM had to keep a track of larger number of models, different manufacturing facilities and large number of suppliers
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As a result, many strategies and plans were diluted or made overly complex.
GM had so many management levels and a top-down organisation structure coupled with seniority-based management style. This was tough to make timely and effective decisions. GM’s committee often made inflexible decision and had to play catch-up to their more lean Japanese counterparts.
Mismanagement & Management arrogance & complacency
In the late 1980s, when the oil price declined, GM concentrated on building profitable pickups and SUBs rather than invest in low-margin cars. GM’s management spent a lot of time fighting change and were averse to risk; they obstructed new technology and were not quite ready to reduce complexities in their supply chains or to go lean. They were in a state of denial due to past success, but did not see the need to change as the consumer demand has changed over the time. GM's problems come over a long period; it was a slow erosion of market share.
Forecasting was a significant problem for GM. Long forecasting cycles were a traditional practice for the organization; which caused firms to miss important shift in the market demand. This has led to excessive inventory and sometimes stock-outs. 3. Describe how inventory turnover and cash-to-cash cycle time could have been used by GM to indentify supply chain management problems.
Inventory Turnover
In accounting, the Inventory turnover is a measure

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