Supply Chain Management Failure of Gm - 852 Words

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†¦show more content†¦Also, their vehicles were less fuel efficient and were more expensive compared to Japanese vehicles - they were carrying not the type of vehicles that customers ideally look to buy at times of a financial crisis or rising petrol prices. As such, carrying higher inventory resulted in a lower inventory turnover ratio. GM also did not foster strong supplier relationships. This meant that even at times of lower demand, GM carried excessive raw material and spare-part supplies. This adversely affected the inventory turnover. GM had a higher cost due to its large range offering. A higher cost base meant less competitive in the market; in terms of pricing resulting in lower inventory turnover. Cash-to-Cash Cycle Time Cash to cash cycle time is the ‘time taken to convert a dollar of inventory into a dollar of cash’. GM experienced low rates of cash-to-cash cycle time due to the following reasons; 1. Low inventory turnover – GM took more days to sell their inventory since; * GM got their demand forecasts wrong * GM’s product mix was not ideal for the time of change * Pricing was not competitive since their cost base was too high 2. GM was taking more time to collect from the customer and their finance arm struggled to recover from huge losses on cars returned after lease. 3. GM could not practice JIT management practices, information management amp;Show MoreRelatedGeneral Motors : An Automobile Industry1470 Words   |  6 PagesBackground General Motors (GM) is an automobile industry founded by William Durant in the early 1900’s. GM’s market has grown to capture more than 20 other companies throughout its success as automobiles expanded to become a basic American need for transportation (GM, History Heritage). In addition, by the early 2000’s, GM was the largest manufacturer of automobiles and web-based communication, went on to buy Saab and created partnerships with other major car manufacturers, such as Suzuki and SubaruRead MoreSoybeans, Maize, And Rapeseed Essay1502 Words   |  7 Pageskept low. 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