At the same time GM has divested itself of much of its manufacturing by spinning off into a separate company, called Delphi, the making of parts and accessories that together account for 60-70% of the cost of producing a car. Instead of owning — or at least controlling — the suppliers of parts and accessories, GM will in future buy them at auction and on the Internet. It has joined up with its American competitors, Ford and DaimlerChrysler, to create an independent purchasing co-operative that will buy for its members from whatever source offers the best deal. All the other car makers have been invited to join.
GM will still design its cars, it will still make engines, and it will still assemble. It will also still sell its cars through its dealer network. But in addition to selling its own cars, GM intends to become a car merchant and a buyer for the ultimate consumer, finding the right car for the buyer no matter who makes it.
The Toyota Way
GM is still the world’s largest car manufacturer, but for the past 20 years Toyota has been the most successful one. Like GM, Toyota is building a worldwide group, but unlike GM, Toyota has organised its group round its core competence in manufacturing. The company is moving away from having multiple suppliers of parts and accessories, ultimately aiming for no more than two suppliers for any one part. These suppliers will be separate and independent companies, owned locally, but Toyota will in effect run their manufacturing operation for them. They will get the Toyota business only if they agree to being inspected and “advised” by a special Toyota manufacturing consulting organisation. And Toyota will also do most of the design work for the suppliers.
This is not a new idea. Sears Roebuck did the same for its suppliers in the 1920s and 1930s. Britain’s Marks & Spencer, although in deep trouble now, was the world’s most successful retailer for 50 years, maintaining its pre-eminence largely by keeping an iron grip on its suppliers. It is rumoured in Japan that Toyota intends ultimately to market its manufacturing consultancy to non-car companies, turning its manufacturing core competence into a separate big business.
Yet another approach is being explored by a large manufacturer of branded and packaged consumer goods. Some 60% of the company’s products are sold in the developed countries through some 150 retail chains. The company plans to create a worldwide website that will take orders direct from customers in all countries, either to be picked up in the retail store nearest to them or to be delivered by that store to their home. But — and this is the true innovation — the website will also take orders for non-competing packaged and branded consumer products made by other, and especially smaller, firms. Such firms have great difficulty in getting their wares on to increasingly crowded supermarket shelves. The multinational’s website could offer them direct access to customers and delivery through an established large retailer. The pay-off for the multinational and the retailer would be that both get a decent commission without having to invest any money of their own, without risk and without sacrificing shelf space to slow-moving items.