The GAMC Profile

GAMC is a producer of major structural subsections, such as wings, for the prime airframe manufacturers. The company supplies subsections for both defense and civil aircraft using a single supplier management system across both sectors. The experience of the company reflects, at a microlevel, many of the issues discussed earlier at a macrolevel—including the mind-set of "if not us, then someone else will get the business" and a lack of data. However, their strategic outsourcing initiatives have come about due to pressure from commercial, not defense, customers.

The company also illustrates the turmoil in the industry, having reorganized many times under various new owners. Both employment and the number of suppliers declined between 1991 and 1995 as the company went from a size of $1 billion to $650 million before being absorbed by a larger firm. The company's mix of business has shifted from 60 percent defense to 40 percent defense.

Mid-Tier Squeeze

The company has undertaken a whole range of supplier management actions normally associated with lean manufacturing, such as collaborating closely with their suppliers, building long-term relationships, and assisting in improving suppliers. Applying these principles while internationalizing the supplier base leads to a situation for a mid-tier company in which the company ends up essentially working to help improve firms that are and will be their competitors. Dr. Watkins labeled this situation "mid-tier squeeze."

GAMC has become more attractive to its customers because it is a leader in applying these principles. GAMC is moving away from a loosely organized supplier system to a much more closely controlled structure, with a number of long-term partnerships with both customers and suppliers. Because more than 80 percent of their suppliers service both defense and commercial products, the company uses one single supplier management and quality control system across both sides of the business.

A clear goal of their supplier management system was to increase the number of foreign suppliers. All of the pressure for this internationalization of the supplier base was coming from commercial customers. By contract, GAMC was required to increase the number of foreign suppliers to a certain percentage. The reason for this pressure was that the company was supplying subsections to aircraft targeted to Pacific Rim markets.

Beginning in the mid-1980s, under severe pressure from their customers, the company went searching for foreign suppliers. Their first strategic outsourcing arrangement was with what Dr. Watkins labels "Nagoya Aerospace," a consortium of five Japanese companies. GAMC transferred to Nagoya the production of a particular substructure that they had been doing in-house for a number of years.

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