Michael L. George Sr., M.S., Executive, Institute of Business Entropy, 3605 Beverly Drive, Dallas, TX 75205 and Dinesh Rajan, Ph.D., Dept of Electical Engineering, Southern Methodist University, POBox 750339, Dallas, TX 75275.
Abstract – Current restructuring of General Motors focuses on the reduction of hourly, legacy and debt costs and does not address the need for process improvement, the source of Toyota’s competitive advantage.
Objectives: This paper shows that, following current restructuring, GM will still face at least a 5% cost disadvantage vs. Toyota due to the larger plant size and associated capital, overhead, and distribution costs, and will not survive.
Data/Methods: We show that only by reducing the cycle time of the supply chain by 66% can GM compete with Toyota. Little’s Law shows that the long cycle time of GM is due to large Work In Process inventory. We show that this large Work In Process inventory causes internal Entropy resulting in irreducible waste, in analogy to a Carnot engine.
Results: Only by applying process improvement tools (e.g., Lean Six Sigma) to reduce Work In Process inventory throughout the Manufacturing supply chain and the Design Development process, can GM attain and sustain profitability.
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www.entropy2718.com/ibe011309_004.htm