GM’s use of forecasting and the way it drives the capacity planning strategy
Forecasting is necessary for generating the strategy and the plan for carrying it out because it is close to impossible to design the company’s development plan without trying to figure out the future prospects. The company might want to estimate the possible demand of the customers or market developments to forecast the volumes of output needed to meet them.
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Forecasting is crucial not only to the manufacturing process and performance but also to managing the resources and operating the whole organization. In the case of such influential company like General Motors, it is usually used for defining the short-term (1 week to 1 month) fluctuations in demand to manage the use of resources and materials and plan the workforce schedules; mid-term (3 to 18 months) fluctuations in demand to avoid strategic decisions that will hurt the company; and evaluate long-term (2 to 5 years) capacities to design facilities (Meredith & Shafer, 2013).
In general, there are different methods of forecasting, but the two primary groups are formal and informal (intuitive). The companies do not use informal methods. As of formal forecasting, it includes qualitative analysis including historical analogies, expert opinions, and different surveys that are not based on calculations and quantitative methods grounded on economic and mathematical computations (Meredith & Shafer, 2013).
At GM, forecasting is of extreme importance. Being a company that suffered from every economic crisis and has many competitors, it pays a lot of attention to estimating potential demand and output as well as market fluctuations using the wide range of formal methods of forecasting. The company may not be successful in predicting economic collapses but, at least, it does its best to succeed.
GM’s capacity planning, location planning, and scheduling
Capacity and location are the most significant factors influencing the company’s performance, success, and competitiveness. The primary reason for their importance is that if the company lacks adequate capacity and location, then there might be delays in the output resulting in the customers turning to its competitors. Together with that, capacity and location are some of the most expensive investments because they are usually made once, and it is complicated and costly to change them.
Capacity planning is driven by the potential demand and the estimated output while location planning is centered on many drivers such as proximity of potential customers, availability of natural resources, the level of infrastructure development, local legislation, political stability, various barriers to imports and exports, etc. (Meredith & Shafer, 2013). As of schedule, it is primarily about the timing of exploiting the company’s resource including employees, equipment, and raw materials, to reach the objectives defined in the plan for development.
At General Motors, planning and scheduling are a part of the company’s educational program (Song & Yao, 2002). The primary reason for teaching them is that GM wants to make sure that its employees have the skills necessary to develop plans for further development. As of the practical use of planning, the latest news from General Motors is that it plans to increase capacity in China by adding four new plants (Ramsey, 2013). First of all, this step proves that capacity and location are interconnected.
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Second, it demonstrates that GM realizes that it is more beneficial to invest in building manufacturing close to the customer than transport the finished products. Speaking of scheduling, GM has positioned itself as the company that focuses on continuous improvement of operational performance, that is why it pays significant attention to developing and optimizing schedules of assembling and manufacturing its vehicles according to economic and even weather conditions. Moreover, General Motors launched the online schedule system, so that it is available to all its employees and management.
The use of learning curves, bottlenecks analysis, and waiting-line theory by GM
The learning curve refers to the improvement with experience. It means that the employees become more productive and improve operational performance as they get new knowledge and skills. What is more, better can result from embodying the latest technologies or implementing the new strategy. That means that the learning curve effect can be achieved by reaching in-depth positive changes in performance through a new experience. That is why there are different types of this curve – improvement, experience, performance, and production progress functions. Next, bottlenecks are the slowdowns in the manufacturing process caused by the defects of the system whether it be a slow worker or machine or a lack of resources. Finally, waiting-line theory centers on the amount of time needed to satisfy the needs of the customers (Meredith & Shafer, 2013).
GM actively uses all types of learning curves. Recollect, for example, the embodiment of the so-called smart bolts into the manufacturing process, the use of lean principles or training it conducts for the employees. It demonstrates that the company does not want to miss the chance of gaining new knowledge and technologies and exploiting them for improving performance. As of the bottlenecks analysis, the company has shown that is works to eradicate them.
The smart bolts mentioned above and launching the site for gathering feedback from the customers invoked earlier in GM study are the examples that prove the statement the bottleneck analysis at GM is effective. Finally, waiting-line theory, I believe, cannot be fully implemented to GM activities because it is a car manufacturer, not a fast-food restaurant, and customers do realize that if they want individual orders, they should wait. It can be said that the company lives in accordance with the theory principle that states that valuable product is worth waiting for (Meredith & Shafer, 2013).
Meredith, J. R., & Shafer, S. M. (2013). Operations management for MBAs (5th ed.). Hoboken, NJ: John Wiley & Sons.
Ramsey, M. (2013). General Motors to expand China capacity. The Wall Street Journal. Web.
Song, J. S., & Yao, D. D. (2002). Supply chain structures: Coordination, information, and optimization. New York, NY: Springer US.