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General Motors Factory Relocation Program

General Motors Factory Relocation Program By Yudi Jin JP Park Company Overview Founded in 1908 World’s 2nd Largest Company presence in 140 countries Employs 244,500 worldwide Major Brands Buick, Cadillack, Chevrolet, GMC, HUMMER, Saab Problem? Stock Price April 28, 2000: 93.62

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General Motors Factory Relocation Program

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  1. General Motors Factory Relocation Program By Yudi Jin JP Park

  2. Company Overview • Founded in 1908 • World’s 2nd Largest • Company presence in 140 countries • Employs 244,500 worldwide • Major Brands • Buick, Cadillack, Chevrolet, GMC, HUMMER, Saab

  3. Problem? • Stock Price • April 28, 2000: 93.62 • May 1, 2009: 1.81 • Financial Statements • Net Loss • 2008: 30,860,000 • 2007: 38,732,000 • Decreasing Demand • 2008: 23% decrease in demand from 2007 • Hypothesis: Gross Inefficiencies

  4. Scope of Project • GM North America • United States • Top 10 Cities (Demand) • Factory Location • Service • Wages • Various Costs • Transportation

  5. GM Operations in the US • Total Employees: 97,067 • Factories: 86 • Cars and Trucks Produced • Q1 2009: 1,652,909 • 2008: 3,097,924 • 2007: 4,489,818

  6. Current GM Factory Locations

  7. Wage Tables

  8. 10 Cities with Lowest Production Wages (percent National) • Brownsville-Harlingen, TX (76) • Johnstown, PA (84) • Oklahoma City, OK, (85) • Orlando-Kissimmee, FL, (85) • Birmingham-Hoover, AL, (88) • Knoxville, TN, (88) • Lincoln, NE, (89) • Amarillo, TX, (91) • Dallas-Fort Worth, TX, (91) • Visalia-Porterville, CA, (92)

  9. Top 10 areas for GM sales • Total GM sales Rank Market (add 000) • 1. New York-Newark-Edison, NY-NJ-PA $22,756,490 • 2. Los Angeles-Long Beach- Santa Ana, CA $22,331,511 • 3. Dallas-Fort Worth- Arlington, TX $13,541,992 • 4. Chicago-Naperville- Joliet, IL-IN-WI $12,594,549 • 5. Houston-Baytown-Sugar Land, TX $12,575,414 • 6. Detroit-Warren- Livonia, MI $10,261,680 • 7. Washington-Arlington- Alexandria, DC-VA- MD-WV $10,068,928 • 8. Riverside-San Bernardino-Ontario, CA $9,007,470 • 9. Seattle-Tacoma- Bellevue, WA $8,870,930 • 10. Atlanta-Sandy Springs- Marietta, GA $8,684,820

  10. Project Locations

  11. Comparison

  12. Formulation • All demand in top 10 cities must be met 1. 534,575.4 2. 524,592.1 3. 318,116.5 4. 295,860 5. 295,410.5 6. 241,058.3 7. 236,530.4 8. 211,595.5 9. 208,388.1 10. 204,016.1 • Each factory on average employs 1115 employees costing $32,925,504 in wages (national average) per year • Each factory can produce 49,518 vehicles per year • Need to place roughly 63 factories in order to satisfy demand • Average cost of transportation is $.857 per vehicle per mile

  13. Distances between top 10 cities (mi.)

  14. LP Solution • Minimize factory location w/ respect to cost • Solution using Ampl: • 7 factories in Dallas shipping to Dallas • 11 factories in Visalia shipping to LA • 5 factories in Visalia shipping to Riverside • 5 factories in Visalia shipping to Seattle • 6 factories in Brownsville shipping to Houston • 11 factories in Johnstown shipping to NY • 6 factories in Johnstown shipping to Chicago • 5 factories in Johnstown shipping to Detroit • 5 factories in Johnstown shipping to Washington DC • 5 factories in Birmingham shipping to Atlanta • Objective Value - $2,750,998,404 • 5-25% cost decrease from current GM locations

  15. Local Search • With the unbounded problem there are an enormous number for potential factory locations, solving using an LP solver would not be feasible, another solution would be to use Local Search. After initially placing all factories, it is easy to shift one factory and recalculate costs • Ex.

  16. Resources • GM ANNUAL FINANCIAL REPORT • US Department of Labor • http://www.supplyexcellence.com/blog/2006/08/14/gm-drives-toward-cost-goals-with-new-supply-techniques • Racher Press Research  • http://jalopnik.com/340225/gm-sales-decrease-in-2007-but-people-love-the-aveo • http://www.domesticsale.com/autoclassified/prices.html

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