How Will The Coronavirus

Impact General Motors?

Workers assemble a General Motors vehicle at its Shanghai GM plant.
BLOOMBERG NEWS

On Monday, my colleague Chris Cunnane and I had the opportunity to speak with Razat Gaurav,
CEO of LLamasoft. Because LLamasoft’s network design solutions and services are used by
some of the largest automotive companies in the world, the company has unique insights into the
potential impacts on this industry. Supply chain network design allows for complex, nonintuitive
tradeoff analysis focused on total landed costs and service levels.
Mr. Gaurav stated that the timing of this epidemic was in one way fortunate. It occurred during
the run-up to the Chinese New Year. Factories normally shut down for the holiday, which means
that lots of inventory has been shipped ahead of time. In the two weeks
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a shutdown in its South Korea facilities. Fiat Chrysler warned it may need to halt production in
one of its European plants due to a shortage of parts. While we have talked a lot about the
manufacturers themselves, the impact on the supplier base is significant as well.”
How Will General Motors Be Impacted?
USA Today is reporting that General Motors (GM) will be one of the automotive companies
most significantly impacted because of the way their supply chain is constructed. GM sells more
cars in China than it does in the United States.  There are essentially no GM personnel traveling
in China. The company is looking to restart
US automotive OEMs, including GM, will be looking at alternative sources of supply from
suppliers across Europe, Japan and other locations to mitigate the impact of diminished supplies
from China. Different actions need to be taken in different planning horizons.
Quickly finding answers to the following questions is the first step.
1. What part of my supply and how much of it is coming from the impacted areas in China?
Further, it is not just the immediate Tier 1 supplier, the auto company needs to think
about. Organizations need to understand whether production will be at risk if Tier 2 and 3
companies can’t produce their components.
2. What finished products are these components and subassemblies going into?
3. What is the revenue at risk and the total profit impact per day based on idling production?
GM Has Worked to Develop Sophisticated Supply Chain Resiliency Capabilities
Some automotive companies are better able to answer these questions than others. For example,
the tsunami of 2011, which triggered the meltdown at the Fukushima Daiichi Nuclear Power
Plant, was a wakeup call for General Motors (GM). GM learned that their business continuity
plans at the plants were too “tactical.”
Following the tsunami, GM learned it is not enough to appoint “the person who will call the fire
department.” You need to identify how an event will affect plants and respond quickly! “Most
business continuity plans fall short in their ability to support a quick response.” GM responded in
a traditional way to the catastrophe, “We circled the wagons and tried to figure out how to
respond.” But their response teams were not sufficiently cross-functional and the response took
too long. Companies that are slow to respond, are at a disadvantage in securing alternate sources
of supply.
One of the tactics GM uses to avert, or at least quickly mitigate significant risks, is to have Blind
Spot Workshops. At these workshops executives across the company are asked “What keeps you
up at night?” Based on these meetings, the 30 top risks are identified, and each risk is assigned
functional leaders. Every key functional area at GM – procurement, product development, etc. –
has embedded risk officers. Each of these top risks has a mitigation plan. And many of these
risks must contain detailed resumption planning in their contingency (kemungkinan) plans.
After the catastrophe (malapetaka) GM has invested in new analytic tools that help them analyze
the risks associated with suppliers and catastrophic events. They worked with Resilinc to develop
these tools. Resilinc is cloud provider of supply chain resilience solutions. Resilinc helped them
geocode supplier’s plants and logistics hubs across their multi-tier supply chain. What this allows
GM to do is to draw a circle around an event like an earthquake and answer the question “Which
of our suppliers are located within 100 miles of the epicenter? Within 200 miles?” GM can also
look at suppliers located within the flood plain of a river and ask question like “Are all of our
key suppliers of a particular component located in that flood zone? What happens if they all go
down all at once?”
LLamasoft executives point out that “it is a given that as auto parts start going on allocation,
being the first mover to lock in on the parts allocation will significantly reduce the risks.”
Once the impacts are understood, network design and supply chain planning tools are used to
understand how profitable alternative supply chains will be and what the ongoing service level
impacts will be.
General Motors uses LLamasoft as their network design solution. Indeed, when ARC has
attended LLamasoft’s user conferences, it became clear that GM is considered one of the most
sophisticated users of network design tools in the world.
Final Thought
The coronavirus continues to spread throughout China the human toll cannot be ignored. Nor
should it be. This epidemic will have adverse financial effects on most major companies in this
industry, including GM. The reliance upon buffer inventory can only last so long. As Mr. Gaurav
said at the end of our call, “Thank God for buffer inventory. If it gets depleted, it will create huge
demand-supply imbalance in the global landscape.” And, unfortunately, ramping up sourcing
from new locations will take time, perhaps months. But some companies, like GM, appear to
have better tools and better processes in place to deal with this crisis than others in the industry.
This article was cowritten by Chris Cunnane.
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Bagaimana Dampak Coronavirus terhadap General Motors?

Pekerja merakit kendaraan General Motors di pabrik Shanghai GM-nya.
BERITA BLOOMBERG
Di Cina, total infeksi mencapai 44.653, termasuk 2.015 kasus baru yang dikonfirmasi. Jumlah kematian di
daratan naik menjadi 1.113 pada akhir Selasa. Sementara aspek manusia dari wabah ini jelas merupakan
kisah terbesar, virus ini juga menyebabkan gangguan besar dalam rantai pasokan global.
Pada hari Senin, rekan saya Chris Cunnane dan saya memiliki kesempatan untuk berbicara dengan Razat
Gaurav, CEO LLamasoft. Karena solusi dan layanan desain jaringan LLamasoft digunakan oleh beberapa
perusahaan otomotif terbesar di dunia, perusahaan memiliki wawasan unik tentang dampak potensial pada
industri ini. Desain jaringan rantai pasokan memungkinkan untuk analisis tradeoff yang kompleks dan
tidak intuitif yang berfokus pada total biaya mendarat dan tingkat layanan.
Mr. Gaurav menyatakan bahwa waktu epidemi ini menguntungkan satu arah. Itu terjadi selama menjelang
Tahun Baru Cina. Pabrik biasanya tutup untuk liburan, yang berarti bahwa banyak inventaris telah
dikirim sebelumnya. Dalam dua minggu menjelang liburan, ada lonjakan umum dalam volume karena
perusahaan tahu bahwa untuk rentang dua minggu, tidak banyak yang akan terjadi dari sudut pandang
produksi. Ini memastikan bahwa kargo meninggalkan Tiongkok sebelum wabah melanda.
Dalam email tindak lanjut yang dikirim oleh LLamasoft, mereka menunjukkan bahwa “sementara industri
otomotif AS telah berada pada kecenderungan menuju kapasitas produksi yang lebih besar dan sumber di
dalam negeri atau dari Meksiko, keterlambatan produksi di China yang disebabkan oleh virus Corona
pada akhirnya akan memiliki berdampak pada tanaman di AS juga setelah
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