GM Case Competition

Overview• Problem Identification • Assumptions• Recommendation• SWOT Analysis • Explanation

Pull Ahead DecisionTiresSeats

• Conclusion

Assumptions

• We are using a 40 ft. high ocean cube• ZP12 is shipped on order date• Every 2014 Malibu eco is sold off the manufacturing

line • Volt/Ampera contribution margin comparable to

2013 Malibu ECO• Cost of building ahead of shortage is negligible as

stated in case • Tires are available immediately and ship same day

Problem Identification

• Should the MY14 Malibu Eco launch be expedited after considering potential impacts and cost.

• Taking into consideration: Supply Chain

• Impact to JIT Supply Chain Structure• Impact to Suppliers & Dealer Network

Overall Pull Ahead Risk Potential Profit

Recommendations

1. Start DHam production on February 4th 2013.

2. DHam changeover will take place over December 2012 holiday shut down.

3. Lear will source seats from Brownfield.4. Z914 polymer is used if validated.5. The pull ahead will yield 123.6 million

incremental gross profits.

Market Factors Uncontrollable Factors

Controllable Factors

  ZP14 ZP12 American Brownfield Bay City+Greenfield

Strengths

• Increase in the incremental gross profit of 123.6 Million from SOP

• Early SOP of February 4th, 2013

• First to market

• 100% tire validation• Less risky in terms of –

lead times, overseas shipping

• Locally operated • Less ambiguous launch

date

• Within 12 miles of DHam facility

• Able to support SOP of February 4th, 2013

• Trucks released at FTL • JIT – lean manufacturing

• In perfect operating condition

• Allows continued construction at Greenfield

Weaknesses• Extended transit time • Additional $5/kg tire

compound cost

• Late SOP of April 4th, 2013

• Loss of potential net profit increase of $38.1 million

• Sunk cost of $2 million to scrap Greenfield

• Increase Lear’s manufacturing cost by $100 per seat set

• 108 miles to DHam• Late SOP of March 4th,

2013 – with a SOP at Greenfield of July 29th, 2013

• Additional logistics managers needed at $45 and hour

• $3 million to cover equipment at Greenfield

• Trucks need to be released at LTL – 45%

Opportunities

• Global trade • Supporting international

economies• Extended global

relationships

• Supports American economy

• Internal production pride

• Supports American economy • Internal production pride

• Supports American economy

• Internal production pride

Threats

• Validation outside of company’s control

• Potential risk for political or economic instability

• Risk of product theft

• Increase risk of early market competition

• Rental location

• Increased risk related to extended facility distance from DHam – potential transit issues

December 2012 Holiday Changeover

Why Changeover During Holiday

Malibu Production Lost PreBuilt Malibus Lost Malibu Sales Lost Malibu Revenue

8430 3445 4985 $ (9,720,750.00)

Volt/Ampera Production SavedRevenue from Volt/Ampera

SavedCost Savings Changeover Total Revenue

2540 $ 4,953,000.00 $ 3,000,000.00 $ 7,953,000.00

Potential loss represents the loss if validation fails. (20% probability)

Total Revenue is independent of validation, and guaranteed.

Difference between two is $1,767,750

Bottom Line: You are spending $1,767,750 to guarantee supply base continuity, avoid second shutdown, and secure an 80% chance of making

$7,953,000 through this decision.

Incremental Gross Profit by Launch Date

123.6 Million

85.5 Million

Difference = 38.1 Million

Flow Chart

Tire Validation

Yes

No

Ramp Up Production

Retool Dham

Begin Ordering ZP14 1/1

Begin Production 2/4

Begin Production on 4/1

Inform Lear: Brownfield

$85,556,496.00

$123,678,825.60

Switch to ZP12 4/1

Incremental Gross Profit before 7/29/12 (SOP)

The Chain of Supply

+

Detroit-HamtramckAssembly

Conclusion

RAM ConsultingRAM: Risk Avoidance Management

?

Appendix A

Japan to Bridgestone – Transit Time

Service Type Transit Time

Ocean: Full-Container Load (FCL) 34 Days

Ocean: Less than Container Load (LCL) 49 Days

Air Freight (Normal/Planned, non-premium)

6 Days

Expedite Air Freight 112 Hours

1

Container Load Plan Pallet 20 ft.

Ocean Container

40 ft. Ocean Container

40 ft. High Ocean Container

Height 484848

2349294

4699294

46992106

Supported weight

2,500 lbs. 44,000 lbs. 44,000 lbs. 44,000 lbs.

Pallets per container (size)

N/A 4 9 18

Pallets per container (weight)

N/A 17.6 17.6 17.6

Overall pallets by container

N/A 4 9 17

Tire sets per container

N/A 368 828 15642

Week Tire Sheet – Ocean FCL

Potential Launch Dates

ZP12 Tire Option

True Cost Per Car

ZP14 Ocean FCL

ZP14 Ocean FCL Order Date

2/4/2013 Not Possible $100.32 $1,701,446.40

1/1/2013

2/11/2013 Not Possible $104.53 $1,551,265.60

1/12/2013

2/18/2013 Not Possible $110.15 $1,401,084.80

1/15/2013

2/25/2013 Not Possible $118.01 $1,250,904.00

1/22/2013

3/4/2013 Not Possible $129.80 $1,100,723.20

1/29/2013

3/11/2013 Not Possible $149.46 $950,542.40 2/5/2013

3/18/2013 Not Possible $188.76 $800,361.60 2/12/2013

3/25/2013 Not Possible $306.69 $650,180.80 2/19/2013

4/1/2013 Launch 3

Week Tire Sheet – Ocean LCL

Potential Launch Dates

ZP12 Tire Option

True Cost Per Car

ZP14 Ocean LCL

ZP14 Ocean LCL Order Date

2/4/2013 Not Possible Not Possible Not Possible 12/17/2012

2/11/2013 Not Possible Not Possible Not Possible 12/28/2012

2/18/2013 Not Possible Not Possible Not Possible 12/31/2012

2/25/2013 Not Possible $122.20 $1,295,305.28

1/7/2013

3/4/2013 Not Possible $133.99 $1,136,244.22

1/14/2013

3/11/2013 Not Possible $153.65 $977,183.17 1/21/2013

3/18/2013 Not Possible $192.95 $818,122.11 1/28/2013

3/25/2013 Not Possible $310.88 $659,061.06 2/4/2013

4/1/2012 Launch

4

Week Tire Sheet – Standard Air

Potential Launch Dates

ZP12 Tire Option

True Cost Per Car

ZP14 Standard Air

ZP14 Standard Air Order Date

2/4/2013 Not Possible $168.33 $2,854,834.94

1/29/2013

2/11/2013 Not Possible $172.54 $2,560,480.58

2/9/2013

2/18/2013 Not Possible $178.15 $2,266,126.21

2/12/2013

2/25/2013 Not Possible $186.02 $1,971,771.84

2/19/2013

3/4/2013 Not Possible $197.81 $1,677,417.47

2/26/2013

3/11/2013 Not Possible $217.46 $1,383,063.10

3/5/2013

3/18/2013 Not Possible $256.77 $1,088,708.74

3/12/2013

3/25/2013 Not Possible $374.70 $794,354.37 3/19/2013

4/1/2012 Launch

5

Week Tire Sheet – Expedite Air Potential Launch Dates

ZP12 Tire Option

True Cost Per Car

ZP14 Expedite Air

ZP14 Expedite Air Order Date

2/4/2013 Not Possible $189.40 $3,212,259.95

1/30/2013

2/11/2013 Not Possible $193.61 $2,873,227.46

2/10/2013

2/18/2013 Not Possible $199.23 $2,534,194.96

2/13/2013

2/25/2013 Not Possible $207.09 $2,195,162.47

2/20/2013

3/4/2013 Not Possible $218.88 $1,856,129.98

2/27/2013

3/11/2013 Not Possible $238.54 $1,517,097.48

3/6/2013

3/18/2013 Not Possible $277.85 $1,178,064.99

3/13/2013

3/25/2013 Not Possible $395.77 $839,032.49 3/20/2013

4/1/2012 Launch

6

Incremental Gross Profit By Launch Date

Launch Date:Cars Sold Before Current SOP Profit From Car Sales

Incremental Gross Profit Brownfield/ZP14

Incremental Gross Profit Bay City/ZP14

Incremental Gross Profit Brownfield/ZP12

Incremental Gross Profit Bay City/ZP12

2/4/2013 55120 $139,997,000.00 $123,678,825.602/11/2013 53000 $134,803,000.00 $118,484,825.60

2/18/2013 50880 $129,609,000.00 $113,290,825.60

2/25/2013 48760 $124,415,000.00 $108,096,825.60

3/4/2013 46640 $119,221,000.00 $102,902,825.60 $101,894,906.24

3/11/2013 44520 $114,027,000.00 $97,708,825.60 $97,090,524.37

3/18/2013 42400 $108,833,000.00 $92,514,825.60 $92,286,142.50

3/25/2013 40280 $103,639,000.00 $87,320,825.60 $87,481,760.63

4/1/2013 38160 $98,445,000.00 $82,126,825.60 $83,177,378.76 $85,556,496.00 $83,177,378.76

4/8/2013 36040 $93,251,000.00 $76,932,825.60 $78,222,816.09 80578524 $78,222,816.09

4/15/2013 33920 $88,057,000.00 $71,738,825.60 $73,268,253.42 75600552 $73,268,253.42

4/22/2013 31800 $82,863,000.00 $66,544,825.60 $68,313,690.75 70622580 $68,313,690.75

4/29/2013 29680 $77,669,000.00 $61,350,825.60 $63,359,128.08 65644608 $63,359,128.08

5/6/2013 27560 $72,475,000.00 $56,156,825.60 $58,404,565.41 60666636 $58,404,565.41

5/13/2013 25440 $67,281,000.00 $50,962,825.60 $53,450,002.74 55688664 $53,450,002.74

5/20/2013 23320 $62,087,000.00 $45,768,825.60 $48,495,440.06 50710692 $48,495,440.06

5/27/2013 21200 $56,893,000.00 $40,574,825.60 $43,540,877.39 45732720 $43,540,877.39

6/3/2013 19080 $51,699,000.00 $35,380,825.60 $38,586,314.72 40754748 $38,586,314.72

6/10/2013 16960 $46,505,000.00 $30,186,825.60 $33,631,752.05 35776776 $33,631,752.05

6/17/2013 14840 $41,311,000.00 $24,992,825.60 $28,677,189.38 30798804 $28,677,189.38

6/24/2013 12720 $36,117,000.00 $19,798,825.60 $23,722,626.71 25820832 $23,722,626.71

7/1/2013 10600 $30,923,000.00 $14,604,825.60 $18,768,064.04 20842860 $18,768,064.04

7/8/2013 8480 $25,729,000.00 $9,410,825.60 $13,813,501.37 15864888 $13,813,501.37

7/15/2013 6360 $20,535,000.00 $4,216,825.60 $8,858,938.70 10886916 $8,858,938.70

7/22/2013 4240 $15,341,000.00 -$977,174.40 $3,904,376.03 5908944 $3,904,376.03

(SOP)7/29/2013

2120 $10,147,000.00 -$6,171,174.40 -$1,050,186.65 930972 -$1,050,186.65

7

Production Schedule—Validation Unsuccessful

ECO capacity 10/29/2012 11/5/2012 11/12/2012 11/19/2012 11/26/2012 12/3/2012 12/10/2012 12/17/2012 12/24/2012 12/31/2012Dham Max 2120 2120 2120 1277 2120 2120 2120 0 0 1700Dham Planned 1500 1500 1500 1500 1500 1500 1500 0 0 0FF Max 1000 1000 1000 700 1000 1000 1000 0 0 800FF Planned 1000 1000 1000 1000 1000 1000 1000 0 0 1000Total 2500 2500 2500 2500 2500 2500 2500 0 0 1000

ECO capacity 1/7/2013 1/14/2013 1/21/2013 1/28/2013 2/4/2013 2/11/2013 2/18/2013 2/25/2013 3/4/2013 3/11/2013 3/18/2013Dham Max 2120 1700 2120 2120 2120 2120 2120 2120 2120 2120 2120Dham Planned 0 0 0 0 0 0 0 0 0 0 0FF Max 1000 800 1000 1000 1000 1000 1000 1000 1000 1000 1000FF Planned 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000Total 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000

ECO capacity 3/25/2013 4/1/2013 4/8/2013 4/15/2013 4/22/2013 4/29/2013 5/6/2013 5/13/2013 5/20/2013 5/27/2013 6/3/2013Dham Max 1700 2120 2120 2120 2120 2120 2120 2120 2120 2120 2120Dham Planned 0 2120 2120 2120 2120 2120 2120 2120 2120 2120 2120FF Max 800 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000FF Planned 1000 0 0 0 0 0 0 0 0 0 0Total 1000 2120 2120 2120 2120 2120 2120 2120 2120 2120 2120

8

Production Schedule—Validation Successful

ECO capacity 10/29/2012 11/5/2012 11/12/2012 11/19/2012 11/26/2012 12/3/2012 12/10/2012 12/17/2012 12/24/2012 12/31/2012Dham Max 2120 2120 2120 1277 2120 2120 2120 0 0 1700Dham Planned 1500 1500 1500 1500 1500 1500 1500 0 0 0FF Max 1000 1000 1000 700 1000 1000 1000 0 0 800FF Planned 1000 1000 1000 1000 1000 1000 1000 0 0 1000Total Planned 2500 2500 2500 2500 2500 2500 2500 0 0 1000

ECO capacity 1/7/2013 1/14/2013 1/21/2013 1/28/2013 2/4/2013 2/11/2013 2/18/2013 2/25/2013 3/4/2013 3/11/2013 3/18/2013Dham Max 2120 1700 2120 2120 2120 2120 2120 2120 2120 2120 2120Dham Planned 0 0 0 0 2120 2120 2120 2120 2120 2120 2120FF Max 1000 800 1000 1000 1000 1000 1000 1000 1000 1000 1000FF Planned 1000 1000 1000 1000 0 0 0 0 0 0 0Total Planned 1000 1000 1000 1000 2120 2120 2120 2120 2120 2120 2120

ECO capacity 3/25/2013 4/1/2013 4/8/2013 4/15/2013 4/22/2013 4/29/2013 5/6/2013 5/13/2013 5/20/2013 5/27/2013 6/3/2013Dham Max 1700 2120 2120 2120 2120 2120 2120 2120 2120 2120 2120Dham Planned 2120 2120 2120 2120 2120 2120 2120 2120 2120 2120 2120FF Max 800 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000FF Planned 0 0 0 0 0 0 0 0 0 0 0Total Planned 2120 2120 2120 2120 2120 2120 2120 2120 2120 2120 2120

9

Appendix BFormulas

Z914 Tire Formulas

• Polymer weight per tire: Tire Weight (11kg) x percent of weight polymer (.28) = 3.08

• Increased cost per car to use Z914 polymer: Polymer weight per tire (3.08) x Incremental cost per kg ($5.00) x Tires per car (4) = $61.60

• Polymer’s per pallet: Max. pallet weight (1134 KG) = 368.18Polymer weight per tire (3.08KG)

10

Z914 Tire Formulas

• Cars per pallet: Polymers per pallet = 92.044 (polymers per car)

• Pallets needed to produce 2120 cars: 2120 = 23.03

Cars per pallet (92.04)

11

Lear Seats Formulas

• Incremental Annual Inbound Transport Cost (AITC) for Bay City:

Standard AITC($4,049,000)*excess charge (1.35) = $1,417,150

• Weekly Inbound Transportation Cost: AITC

52 weeks

12

Lear Seats Formulas

• Shipping cost per seat:Shuttle Rate per trip

Car sets per trailer

• Accumulated costs per seat set:((((Incremental Shipping cost + Excess fee per set)*2120)+Weekly

ITC)*# of weeks operating) + Additional cost to option

• Total cost per seat: ((((Incremental Shipping cost + Excess fee per set)*2120)+Weekly

ITC)*# of weeks operating) + Additional cost to option Total # of cars produced

13

Profitability Formulas

• Gross Profit:Total cars produced*Cont. Margin

• Net Profit:Gross Profit – (Cost of tires + Cost of seats)

14

Greenfield break-even point• Incremental Net Profit from Brownfield:

Net Profit from 2/4 – Net Profit from 4/1 (Date to save Greenfield)

100 (Incremental cost per seat set at Brownfield)

• Time to break even (in weeks):Net Profit from 2/4 – Net Profit from 4/1 (Date to save Greenfield)

100 (Incremental cost per seat set at Brownfield) ______________________________________________________

2500 (Weekly Production) = 144.49 weeks

15

Greenfield break-even point

• Number of years to break even:

144.49 weeks 52 weeks = 2.78 years

16