GM to Automate Parts Supply Chain

Computerworld - General Motors Corp. is turning to automation to improve its distribution of auto parts to dealers, ending practices that produced a bumpy ride for its parts supply chain.

By the end of 2007, GM expects to have about 8,000 U.S. and Canadian dealers using the Retail Inventory Management, or RIM, system, which relies on intelligence gleaned from nationwide parts-sales data to recommend restocking policies at dealerships.

Today, GM parts distribution relies heavily on the judgment and practices of parts managers at individual dealerships, who typically wait until the end of the week to submit parts orders in batches. The result: A large percentage of parts orders arrive all at once at GM distribution centers, increasing overtime costs while workers rushed to fill orders.

"Our order variation from Monday through Friday was 21%. Monday and Tuesday, we're working overtime, and toward the end of the week, we're looking for volume," said Bryan L. Burkhardt, global director of retail inventory management at GM Service and Parts Operations.

Earlier this year, a pilot program involving 350 dealers and a regional distribution center in Jacksonville, Fla., showed the benefits of the RIM technology. Instead of operating as a batch-ordering system, the RIM system responded to actual daily demand, which cut the Monday-through-Friday order variance to 2% at that center, Burkhardt said.

More important for GM is ending the customer satisfaction problems created by its legacy ordering system.

Since the nationwide launch of RIM in August, about 1,000 GM dealers have been active on the new system. Another 3,500 will soon be active, followed by the remaining North American dealerships in 2007.

According to Donna Colorito, process information officer at GM Service and Parts Operations, GM uses ebXML as its communications protocol and BEA Systems Inc.'s WebLogic Server to distribute parts data. The system also requires interfaces built into dealer management systems.

There are about 28 dealer management system vendors, but the six largest—covering about 85% of GM's North American dealerships—have completed the RIM integration, GM officials said.

A key aspect of the system is recommending what parts to stock. GM has 1.3 million parts, and a dealership typically has 5,000 to 12,000 on its shelves, said Mike Nicholes, a parts management consultant and head of Nicholes Capital Management LLC in Portland, Ore.

Ordering misjudgments can leave a dealer without a needed part or carrying one that isn't often used. RIM recommends restocking policies for particular parts. Once the dealer agrees to a recommendation, RIM automatically fills the orders on a daily basis.