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Computing

From...

How just-in-time technology put the brakes on GM line productivity

July 7, 1998
Web posted at: 12:10 PM EDT

by Bob Wallace

IDG --What's good for General Motors now has the company on its knees.

Just-in-time (JIT) manufacturing -- a popular high-tech practice with most automakers today -- turned out to be an effective tool in the arsenal of striking workers at two General Motors Corp. parts plants in Flint, Mich., earlier this month.

Once the company began to run out of parts, GM started idling plants until the bulk of them were closed.

When an automaker adopts high-tech JIT inventory practices, there is no "Plan B," industry analysts said last week. JIT manufacturing is intended to save money and boost production efficiency by keeping just a few hours' or days' supply of parts on hand.

By striking, the United Auto Workers set off a chain reaction that saw 26 of 29 North American plants closed, more than 140,000 workers laid off and estimated losses that top hundreds of millions of dollars.

If the strike continues, GM's technology spending could be slowed as well. "I don't think we've delayed any IT spending [because of the strike] yet, but I can't say we won't ever," said a spokesman for the automaker's information systems group. GM is trying to cut costs as the strike drags on, he added.

GM's information technology budget is $4 billion annually.

Most U.S. automakers adopted JIT manufacturing practices to compete with foreign rivals, so it isn't a GM-specific problem.

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Yet GM said that, upon reflection, it will stick with JIT.

"The benefits far outweigh the disadvantages," said GM spokesman Alan Adler. "[JIT] is an ingrained part of what we do. For example, we only keep a four-hour supply of seats on hand. When you have a disruption, the backup is almost immediate. But we're committed to JIT -- warts and all."

"What GM can't afford to do is go back to a bloated parts supply inventory just to protect against a strike," said Tony Friscia, president of AMR Research, Inc., a manufacturing research and consulting firm in Boston. "And stockpiling parts in anticipation of a strike isn't a solution."

GM saves hundreds of millions of dollars with JIT, analysts estimated.

UAW strategy

The UAW may have hand-picked the two Flint parts plants to strike as part of a strategic plan. "It was probably a factor, but I think the original driver was local issues," said Hal Stack, director of the Labor Studies Center at Wayne State University in Detroit. "GM has other plants that make different components where a strike would also do serious damage."

UAW spokespeople didn't return multiple telephone calls last week.

GM couldn't have stockpiled enough parts to keep the plants running during a lengthy strike, Adler said. The company spends $70 billion annually on parts from more than 30,000 suppliers, though one, Delphi, accounts for about 65% of that business, he added.

Analysts said GM should work more on labor relations as the solution.

"GM needs to realize that people are as important as raw materials," said Richard Henderson, an auto analyst at the Pershing division of Donaldson, Lufkin & Jenrette, Inc. in Jersey City, N.J. "What you want is happy employees because they don't strike."

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