The case study “Jose Ignacio Lopez de Arriortua” outlines the automotive’s executive success and tribulations among GM and Ford, known for his charismatic, competitive, innovative and controversial manufacturing practices and sourcing strategies. Lopez was responsible for the emergency of GM as one of the most cost competitive operations in Europe, by working with suppliers to cut component costs. Companies selected to do business with GM would have to bid among each other, being the lower bid the winner. This tactic enabled GM to build a large network of suppliers from an operation that was before limited only to German companies. After working for GM in Europe, Lopez was appointed as Vice President for Worldwide Purchase in Detroit, where he worked closely with his assistants who he called “warriors”. Cost cutting was at the center of his tactic, and it was somewhat controversial to some that believed that he was eliminating GM core capabilities. Lopez developed the PICO (Program for Improvement and Cost Optimization of Suppliers) where suppliers would work against each other to achieve the lower costs as opposed to the lean manufacturing concept where suppliers work closely to manufacturers to lower costs. Lopez had low regard for intellectual property, taking his suppliers plans and research to its competitors. Suppliers were forced to take the losses as for most of them GM was their main source of revenue, and as time passed they were getting more and more unhappy with GM practices. On 1993, Lopez left GM to join Volkswagen as Chief of Product Optimization and Purchasing and also nominated for the company’s board. At Volkswagen, Lopez dream, The Plant X, had been given more attention by Ferdinand Piech the CEO of the company. In the past, he had presented the project to GM, but was refused. He envisioned a manufacturing facility such as the modular consortium where suppliers would perform the actual production assembly. This plant was later build by Volkswagen in Brazil. Lopez created a battle between GM and Volkswagen where GM accused Lopez to take proprietary material from the company and taken to its competitor. It also procured legal measures to avoid Lopez from taking any more employees with him. He was charged of industrial espionage and racketeering. They finally settled the charges with Volkswagen having to pay over 100 million in damages. Lopez and the Field of Sourcing
Jose Ignacio Lopez de Arriortua was born in the city of Amorebieta in Spain in 1941. In 1966 he received his doctorate in industrial engineering from the school of Industrial Engineers in Bilbao, Spain. From 1969 to 1980 he worked for Firestone, moving to GM in 1980 in the city of Zaragoza. Ignacio had the nickname the “Grand Inquisitor” of the auto industry due to his innovative sourcing practices (Moffett & Youngdahl, 1999). His focus was on cost cutting saving techniques on procurement, applying global sourcing, and bidding techniques to realize the most cost reduction. Purchase components are the major part of car manufacturing, therefore once this process is improved higher profits can be realized by the company. Ignacio sourcing method consists of: •
Analyze the potential savings
Implement Global Sourcing
Implement Purchasing System Matrix
In the article by Moffet and Youngdal (1999), the authors emphasize Lopez new sourcing techniques brought to GM where the buyer has the ultimate power over suppliers, driving the prices down and saving the company billions of dollars over the years by breaking the long standing relationship that GM had with supplier. Inaki, the name he preferred to be called, was then very successful at GM in reducing cost and improving the quality of General Motors procurement practices, envisioning one day to build a plant called Plant X, where suppliers would be responsible for parts of the manufacturing process. Lopez was promoted to head of purchasing...
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