Case Prompt:

The CEO of General Motors (GM) is interested in reducing the number of steering wheel types across their ten lines of cars. He noticed that Volkswagen uses the same steering wheel across all their models and believes that GM could benefit from doing the same. Your task is to determine how GM can consolidate its steering wheels into one model.

Exhibit:

  • Three stages of the steering wheel manufacturing process: Design, Sourcing/Manufacturing, and Assembling
  • No difference in the material requirement, engineering design, or assembly process for each type of steering wheel
  • No market requirement for different steering wheels on different cars
  • GM purchases all ten types of steering wheels from the same supplier at $10 each, with a 5% discount for every doubling of order size
  • The supplier offers a 20% discount if GM buys all steering wheels from one vendor
  • 100,000 steering wheels are purchased each year for each car line

Background:

GM currently uses ten different steering wheel types across their lines of cars. While the CEO believes that consolidating to one model could be beneficial, there is concern that this may negatively impact consumer demand or prevent GM from maintaining a competitive advantage. Additionally, there may be peculiar engineering requirements that make one steering wheel type unfit for certain car types.

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Analysis:

To maximize cost savings, it is recommended that GM consolidate their steering wheel types to one model and source from one vendor. This would result in cost savings of at least 32%. However, before executing this plan, GM must ensure that there are no peculiar engineering requirements that make the chosen steering wheel unfit for any car type and that it does not adversely affect car sales. It is also important to ensure that the chosen vendor has the capacity to meet predicted demand growth.

There may be other areas, such as headlights, tail lights, moon roofs, and dashboard components, that could also be consolidated to further save costs. The interviewer is looking for the ability to identify key issues, structure the problem in the context of the overall business, and make necessary recommendations. The ability to arrive at recommendations is important, but the interviewer is also interested in seeing how these recommendations were reached and how the lessons learned can be applied to other parts of the business.

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