"If we build it, they will come." For many manufacturers, that way of thinking fell by the wayside — rightly so — a long time ago. For others, especially those in more complex businesses such as automobile manufacturing, change has come more slowly. But change they must.

The traditional business model in the automotive industry has been one of mass production — that is, automakers would sell what they made. But as competition intensified — and as customers grew savvier and more demanding — that approach led to high inventory levels, increased financial incentives, and customer compromise. All of that, in turn, led to eroded margins for OEMs.

General Motors, for one, began tackling these problems head on as early as 1999, when it decided to move from the traditional model of "pushing" vehicles into the marketplace to a "pull" model, whereby market demands determine what's manufactured and sold. In other words, GM was changing course to move away from a "Make and Sell" culture to one of "Sense and Respond." We at Deloitte Consulting are proud to have teamed with the auto giant in these efforts.

Change management challenges for a global giant
Changing course is not an easy task for any large organization, much less for the world's largest vehicle manufacturer. GM has US$185 billion in revenues and a complex operational web that includes a vast global network of suppliers, extensive production and assembly processes, and an expansive sales distribution network of independent dealers.

That makes the company's results from its change efforts all the more impressive. From a significant reduction in its own bottom-line costs, to lower material cost and finished goods inventory levels, to product delivery times cut in half, and reliability measures that have more than quadrupled, the improvements are driving significant benefits to GM, its customers, dealers and other members of its supply chain.

How has GM done it? How has it shifted its focus from traditional mass production to a mind-set that allows customers to buy the vehicles of their choice with no inconvenience — not to mention radically reshaping business processes, redesigning its organization, and putting the necessary technologies in place to make that happen?

Teamwork and planning to execute the vision
It began, straightforwardly enough, by building the right team. GM pulled together representatives from all of the geographic regions in which it operates and relevant functional areas and then combined that team's insight with market and competitive perspectives. This resulted in a clear vision and go-forward plan of how to change its business — a vision and plan that were wholeheartedly endorsed by senior management.

GM also knew from past experience that a "project team" could not accomplish such a daunting task, so it formed an operating organization called Order-to-Delivery (OTD) to implement the strategy. The OTD organization integrates the company's customer- and manufacturing/supplier-facing activities, allowing GM to sense customer demand and respond efficiently and quickly, without constraints. Along the way, OTD has worked closely with dealers and suppliers to ensure they have input into changes and are involved as the changes are implemented.

GM is also taking full advantage of its strong functional areas of expertise by using OTD to integrate cross-functionally to optimize its entire system.

The automaker has indeed made great progress in changing its business model from push to pull. It has improved its margins and drastically cut costs while meeting market needs more quickly and reliably than before. With OTD, GM is building greater dealer and customer confidence by delivering the right vehicle, at the right time, at the right cost.

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