General Motors Case Study
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Apr 3, 2024
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General Motors: Supplier Selection for Innovation
General Motors (GM), an automotive manufacturing business, has launched a new
project to transition to autonomous vehicles. The Chevrolet Bolt EV was General Motors’s first
autonomous vehicle, with significant technological advancements created to enhance the
customer experience. In February 2017, GM announced that the 2020 Chevrolet Bolt would
become the platform for their first autonomous vehicle, which would require a new braking
system integrated with artificial intelligence. Angela Hanna, a commodity buyer at GM has been
tasked to select the most appropriate supplier for the e-boost brake module, a component crucial
to the safe operation of the autonomous vehicle.
This case will navigate the complexities of the GM supplier selection process, evaluating
factors that encompass cost, innovative capabilities, intellectual property, and supplier
relationships.
The suppliers in contention – Rosie Automotive International, Elroy International,
R.U.D.I. Braking Systems, and Orbitty International Manufacturing & Technology Co. – each
present unique propositions with their own set of advantages and trade-offs. Rosie Automotive
International offers proprietary technology with a competitive edge but demands a larger share of
GM's business. Elroy International brings a willingness to share intellectual property but lacks a
long-standing relationship with GM. R.U.D.I. Braking Systems, while an established prototype
supplier for GM, exhibits reticence in sharing IP information. Orbitty International showcases
industry-leading expertise but at a premium cost and with a history of strained customer
relations.
Based on costs alone, R.U.D.I. Braking Systems offers the most competitive bid for the
e-boost system, quoting $43 for the electric vehicle (EV) version and $53 for the autonomous
vehicle (AV) version. Rosie Automotive International indicated a price increase due to rising
costs. It required a larger percentage of GM business along with a long-term contract, suggesting
a higher overall cost of engagement. Elroy International is a recent addition to GM’s supplier list
and, while open to sharing IP, might have additional costs associated with establishing a new
supply chain relationship. Orbitty International Manufacturing & Technology Co. offers a
premium cost service, especially as they are recognized as a global powerhouse in automotive
design and engineering. Given these considerations, R.U.D.I. Braking Systems emerges as the
least expensive option based on the direct costs quoted. However, cost considerations should also
account for the value of IP rights, the potential for collaborative innovation, long-term strategic
relationships, and the total cost of ownership which includes integration, operation, maintenance,
and potential risks associated with each supplier. Hence, while R.U.D.I. has the lowest
immediate cost, a thorough cost analysis should include these additional factors to ensure the
most cost-effective decision over the vehicle’s lifecycle.
On a non-qualitative analysis of the pros and cons of the 4 suppliers, Rosie Automotive
International (RAI), already has an established history with GM, being their regular supplier.
They also can provide the necessary e-boost modules with the added confidence of their IP,
suggesting competitive cutting-edge technology. However, RAI’s IP is proprietary and they are
unwilling to share, which would limit GM’s control over the technology. RAI requires a larger
GM business share along with a long-term contract, reducing GM’s ability to negotiate and
increase costs. For Elroy International, they are willing to share their IP, mitigating GM’s risk of
dependency and their acquisition of U.K. supplier Cogswell Braking Systems can be
advantageous to technological advancement. However, they would need to establish new supply
chain logistics, as they have not been a previous supplier to GM. R.U.D.I. Braking Systems
offers GM a long-standing relationship with experience in prototype supply, technical alignment
with GM’s requirements, and competitive pricing for EV and AV. Their unwillingness to share IP
details for the bid may hinder internal development and future innovation for GM. Orbitty
International Manufacturing & Technology Co. is known for its engineering and design process.
They provide an in-house manufactured e-boost system, which could result in more cohesive
system integration, but the premium costs might be too high for GM. In addition, Orbitty lacks in
its customer service, which could result in difficult collaborative efforts, including its resistance
to sharing software development changes.
In the context of the GM case, outsourcing innovation to develop an autonomous vehicle
involves creating technology that has not been commercialized yet, managing new IP, investing
in cutting-edge research, and forming strategic partnerships that are likely to redefine GM’s
future offerings and competitive standing in the automotive industry. When evaluating the
product development capabilities of the four suppliers, GM should consider firstly technical
expertise. GM would need to look at the supplier’s history with innovation and their expertise in
helping them reach their goal of an autonomous vehicle. This includes the supplier’s capacity for
research, development, and quality assurance to assess if they have the necessary infrastructure
to undertake GM’s project. In any strategic partnership, it requires alignment so that their efforts
are mutually beneficial. In terms of Intellectual property (IP), it is especially important to GM
because it ensures control of the technology to modify without any legal or financial
implications. A supplier owning the IP would lead to consequences such as GM’s dependence on
the supplier for any future developments, less control over the product’s lifecycle, and higher
costs in the long term. A supplier might hold the right to their IP because it holds economic
value, competitive control, and security. GM would need to balance their need for a supplier’s IP
against the risks and challenges they are willing to handle.
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Regarding the buyer-supplier relationship, the geographic location of the suppliers should
be a consideration in GM’s decision as a supplier in closer proximity can offer efficiency and
lower transportation costs and delivery times. Suppliers from the same market would also have a
better understanding of local regulations and economic conditions. Collaboration history is
another factor that should play a role in GM’s decision as there already exists a strategic
alignment and problem-solving relationship. To continue doing business with a previous
supplier, would strengthen the investment both businesses have with each other. GM should also
consider whether they would like a single or multi-sourced supply. While a single source offers
better integration and coordination, there is not a single supplier that meets all the needs of GM.
A multi-sourced supply would allow GM risk mitigation, competitive pricing, and room for
innovation.
All things considered, GM might lean towards a multi-source strategy, selecting R.U.D.I.
for their competitive pricing and established relationship for a portion of the supply,
complemented by Elroy for their willingness to share IP and potential for innovation, with
perhaps a strategic engagement with Orbitty to capitalize on their strong R&D capabilities. Rosie
could be kept as a backup option or for non-critical components, given the cost and long-term
contract concerns. This hybrid approach would balance cost, IP control, innovation potential, and
risk mitigation, aligning with GM’s strategic objectives for the autonomous vehicle project.