Orlando Cicerone, director of worldwide purchasing within General Motors Corp.'s chemical group, works with plastics suppliers globally. Some companies under his watch do in excess of $20 million in business with the world's largest automaker, others less than $1 million.
Cicerone's office wall at GM's Warren, Mich., complex includes block charts noting the ``metrics'' of various suppliers. The information tracks performance, ability to meet demands on everything from delivery to product launch, and quality, which is noted by shades of green for the best, yellow for areas of concern and red marking failures.
As the carmaker seeks out suppliers for future products, it is looking beyond the responses of those easy-to-measure hard metrics, though, Cicerone said during a May 27 interview.
Q: How important is it for a company the size of GM to pare down its base of suppliers?
Cicerone: We don't look at paring down. The way we look at it, our main concern is actually in growing our business with the best suppliers. So we look at the best suppliers, we measure them and we have clear targets. That's a natural situation. Of course sometimes we have way too many suppliers for certain commodities, but our focus is not in paring down the numbers, but in growing the best suppliers, the best in terms of quality, based on launch, based on costs and of course on delivery. For us to be the best, we need to make sure that we have support from the best suppliers.
Q: What are you looking at to identify those suppliers who will move forward?
Cicerone: We treat them all the same way. They all have targets, they all have to perform. A lot of my hard metrics measure them in performing in these same ways, on the same hard metrics.
When we start any meeting with suppliers, the first thing we look at is their metrics. Every supplier has a chart and we start every meeting by putting the box chart on the table. We need to know what they are doing, where the problems are and what the reasons are for the problems. It's really very data driven, this discussion.
Q: But what is it beyond the numbers in delivery, quality, launch and other hard metrics that separates highly capable companies from the best-in-breed?
Cicerone: Of course we look beyond that. Those are the base level competencies, but we are looking at more, the soft metrics if you will, whether there is a superior culture, a ``can do'' attitude, whether a company can say ``no'' in the right way, whether they are able to stretch the targets.
When it comes to the cost-reduction targets, we are looking at 20 percent cost reduction over three years, but we aren't just looking at year-over-year improvements in performance and cost. We want to work with them on new technologies that may reduce costs in another year. We want our suppliers to think outside the box, look at creative things. This is why we also need a good relationship with engineering, when we work together, we can tie all this together, maybe [the supplier] can bring us new ideas in terms of material change, process change.
Q: What are you looking at when you mention ``superior culture''?
Cicerone: It's that superior organization, their ability to bring best-in-class products and technology. It's all part of seeing suppliers beyond the hard metrics. Hard metrics may be too focused on the specific moment, but we need to look beyond these metrics. Behind all of that is good management. You need strong management who can drive an organization into bringing superior technology, that can bring the best-in-class value.
Q: So there is such a thing as saying ``no''? How does a company say ``no in the right way''?
Cicerone: We've seen companies that did not say no and put us at risk. Other ones have said no the right way, in that if we lay out something that's too much of a stretch for them, they can say no, but also help us find alternatives. To say no the right way is to bring alternatives for us to debate and find other ways to accomplish a target. Sometimes a supplier says no way too late. He'd told us yes in the beginning, but now we're about to launch and he tells us he can't do it. That's saying no the wrong way. Bring us alternatives, bring us other points to debate and create alternative solutions. That's the behavior we expect.
Q: Isn't there a risk of missing out on technology breakthroughs in the midst of all these demands for metrics?
Cicerone: We have to have a great relationship with engineering from our side. We need to really make sure that we have suppliers who are comfortable enough to bring to us whatever they believe would benefit them and us, and that goes back to growing the best suppliers. We have ``tech world'' and promote that to encourage people to show us their technology. We have awarded more than 36 contracts in the last two years to suppliers who were able to bring us good technology. We have extensive forums to discuss it. It's not just a matter of company size. It's a matter of coming to us and utilizing our process and relationships to bring those to us.
Q: Where does global competition fall into finding those best-in-breed suppliers?
Cicerone: Our process, our company, is global. We will measure suppliers from a global perspective. We will always be measuring the competitiveness of the suppliers in Michigan against the suppliers in China, but that doesn't mean I'm going to buy everything from China. We're going to buy from the most competitive company that can offer me everything that I need to achieve.
We do good assessments. We look at the cost structure. We know that clearly there are going to be times when suppliers can and cannot be at a competitive advantage. We push suppliers to be competitive, but we also take into consideration any logistics that are associated with shipping plastic parts, painted parts, those with Class A finishes. We know where that comes in.
We may have a shoot-and-ship type of part in which the material cost may be over 50, 60 percent of the total cost. Then you may have some times where the material cost is influenced a lot by the labor, by the additional components that are used. It's difficult to say that there is only one recipe in the global strategy. It's on a case-by-case basis.
We are also trying to work with suppliers on a long-term basis.
We want to look at our cost targets together. If you give suppliers the ability to develop their own capabilities and processes and materials we can develop a plan that considers more than just year-over-year performance. But in this whole process, they have to keep being competitive.
Q: What is the status of the bulk resin purchasing program first discussed three years ago?
Cicerone: This is ongoing. We look today at the quotes we get from suppliers, from our molders and we look at their cost breakdowns. Sometimes they can do a better job at getting prices on resin than we can. Some of them are buying in such numbers that they get a better deal. Sometimes we've been able to offer or help a supplier find alternative sources. We may have a [resin] supplier in [South] Korea, say, that can do better.
With resin costs going up, we are looking for alternatives. We've found some in the Far East that are more competitive than the traditional suppliers. It is on a case-by-case basis, but there are alternatives out there.
Q: In the midst of the demands to perform, does GM consider a supplier's long-term fiscal stability before awarding a contract?
Cicerone: When we have our sourcing decisions, we look at their quality rates, their delivery rates and we look at their financial stability. We do look at that. When I was in Brazil, we had to put a lot of effort into helping suppliers because of financial instability. Here we try to make sure that suppliers are financially stable so that they can continue working with us. Of course, you also have situations where you see a company that is not going to be successful, then you have to make the decision about whether you are going to keep supporting that supplier forever.
Q: How would a small business, say one with interesting technology or processing, go about getting the interest of a company the size of General Motors?
Cicerone: There are a lot of companies that will come to us and present themselves as new suppliers, interested in having us as customers. The No. 1 thing that we will look at is their competence. We run our own internal analysis. We do an assessment on their plant even before we offer them a chance for a quotation. We do a lot of preparation ahead of time before we include these guys in our business. If they show they have a different process, and a different product, then we move ahead. A lot of companies see our volumes and they think it's a great opportunity, but there's a lot of work to be done before you can begin to supply us.
The auto industry today is a very tough industry. There's a lot of push from the marketplace and from the competition. For us to survive, to be in the place we need to be, we have to perform. And for us to perform, [suppliers] need to perform at the same level. Material cost represents such a huge overall cost of the vehicle. It's imperative the suppliers perform. If they can follow our directions, our priorities, if they align with us, that's the key. Alignment is really the first key metric of suppliers. They need to align with GM - and when we say align that means following the metrics, the objectives that we have.
The plastics industry requires some things that say the casting industry does not, but each group has its objectives and measurements. For some companies to be globally competitive, then they may need to have something [in low wage countries].
If they see that building somewhere else is the only way they're going to be globally competitive, then that's what they're going to have to do. We can see where we have our global capabilities and presence. It's on [suppliers] to take the next step to perform at that level.