They Wanted a Non-American for This Job

Bo I. Andersson grew up in Falkenberg, a tiny coastal town south of Gothenburg on Sweden’s west coast. After completing his mandatory military service, he set out to become an officer and studied at the Borensberg military college. But in 1987, he left the army to become a buyer at Saab Automobile. Three years later, he was Saab’s top purchasing manager, but his mother was worried. Wasn’t there any better company to work for than one that lost several million dollars a day?

The year when he became Saab’s buyer-in chief, 1990, was the year that General Motors bought 50 percent of the company. His new boss, Saab’s first American CEO, David J. Herman, asked Andersson what he wanted to do next, to which he replied, “Work in the United States. ”But Herman said that he didn’t want to send any Europeans to the U.S: ”It’s too damn political!” In 1992 Herman left Saab to become CEO of Adam Opel in Germany and asked Andersson to follow. But Andersson was in the middle of the Saab 900 launch and had to decline. In 1993 Herman called from Germany and said that it was safe to go to the U.S. now that the company’s global purchasing manager from Spain, Jose Ignacio Lopez de Arriortua, was out.

Andersson rushed to America and became head of GM’s Worldwide Purchasing Electrical group, reporting to Lopez’s successor, Richard Wagoner, Jr., who 10 years later became CEO. The young, ambitious Swede moved up the hierarchy quickly, joining GM’s corporate board in 2001 (after a 1997–98 stint in Europe and a crash course in management at Harvard Business School). He then became second in command for purchasing, the supply chain and logistics, and the only non-American among the 15 members of the board.

Has anything you brought from Sweden been helpful in your career at GM?

“My best takeaway is that in a small company you deal with the same issues as in a large company, but you don’t have the resources. I had 150 people when I ran purchasing at Saab in 1990, and today I have 2,500, and maybe 5,000 globally.

“I have worked in all functions, and understand finance, engineering, manufacturing, public relations, and legal, because in a small company, you have to deal with them all.”

Some of these huge American companies can be very bureaucratic.

“Yes, exactly! And you may sub-optimize. But at the same time, we don’t get enough recognition for the fact that we’re doing extremely well in the emerging markets, where we don’t have the same bureaucracy. China is a great example, as is Russia, the Middle East, Mexico and Brazil. Here the big and heavy GM is doing better than anybody else, because it is working with small groups of people who know that they have to move fast. There is no legacy there. In the U.S. we’re a 99-year-old company carrying a load. We have 1.1 million retirees in the U.S. alone, while Toyota has 100.”

You’re rumored to be on track to become the next CEO….

“Next question….No, I don’t think that will happen, but somebody floated my name. Do I think that it’s going to happen? Absolutely not.”

How is it to work in the U.S.? You have your Swedish upbringing and attitudes.

“I try to keep the best of both. I love the U.S., or else I wouldn’t be here. It’s a great country with great opportunities. I don’t have a fraternity network, but what I bring with me is my discipline and the fact that I’m not afraid of anything. Another strength is that it’s easier for me to deal with Chinese, Japanese, Koreans, Germans, Brazilians, or Mexicans. They see me as neutral. I think I have a certain advantage in China, Japan, and Korea over my American peers. I also have the benefit of speaking several languages, but the biggest benefit might be that I understand history.

“The GM board wanted a non-American on this job. That was clearly spelled out, and it pissed some people off,” says a Swede who seems to have left the infamous Law of Jante behind.

The Right Stuff at the Right Place at the Right Time

Logistics may not be the hottest buzzword in town, but without it there wouldn’t be much of a town, or a business for that matter. As the Swedish king Karl XII, Napoleon and Hitler learned the hard way; armies can’t win the war without good logistics. And neither can corporations.

Back in the early 1990’s, I interviewed Lt. Gen. Gus Pagonis, who had just become head of logistics for Sears, Roebuck & Co., after having led the logistics effort of “Operation Desert Storm.” He did it so well that General Norman Schwarzkopf dubbed him the “Einstein of Logistics.” He saw many parallels between civilian and military logistics. One was that logistics should not be seen as a profit center. Cost is just one aspect of logistics, and it must be seen in the perspective of the overall goal, otherwise we will sub optimize, the general warned:

“If we produce a product and the marketing people advertise it on Saturday when the kids will be watching cartoon shows, then that product must be on the shelves when the mother and the kids go to the store. If the transportation person of that organization is profit oriented, he will try to find the least costly mode of transportation to get the item there. That can be by barge or boat. Well, the item doesn't get there for four weeks and you just wasted a million dollar marketing. Yet the transporter may ship that item for a penny a thing versus five pennies by air. What you do as a logistician, and that is why I think there should be a senior vice president of logistics in every firm. He must cross all functional areas and makes sure that he takes so many by barge and so many by air.”

That was over twelve years ago, and since then the world has gone global.

When I began planning Currents’ logistics issue, the first name that came to my mind this time, was Bo I. Anderson, who in 2001 became vice president of the General Motor’s worldwide logistics program and in 2005 became its top worldwide supply manager. He is also rumored to be the next CEO of the auto giant.

Getting the Goods Where They Are Needed

They Wanted a Non-American for This Job

I also interviewed Sten Wandel, an international expert on logistics. He has studied the topic for four decades and is currently professor of engineering logistics at the University
of Lund in southern Sweden.

Sweden's Logistics Paradox


Hans Sandberg

Getting the Goods Where They Are Needed

“Purchasing is the big dog — logistics is a support function,” says Bo I. Andersson, who has been running General Motors’ global purchasing and supply chain since 2005. It’s his job to bring in the stuff GM needs for production and get the products out to the dealers. The process has changed drastically over the past decade, thanks to free trade and technology, Andersson says.

“We buy parts for $86 billion a year, $15 billion’s worth of supplies, machines and equipment, fuel and natural gas, and so on. On top of that we spend $6 billion on logistics, $4.5 billion of which is for North America. So if you look at the big picture, purchasing has a much bigger impact on our profitability, while logistics is more of an operational issue.”

But as every general knows, weak logistics can undermine even the loftiest plans (just think of the failed attempts to conquer Moscow made by Napoleon and Sweden’s Charles XII). Andersson, a former army officer, doesn’t take logistics lightly, even though it only counts for a small fraction of the $105 billion in total expenditures he handles (revenue was $193 billion in 2005).

“Around Christmas 2005, after Hurricanes Rita and Katrina, we had 250,000 units in the pipeline on outbound logistics, and the railways and waterways were down,” he recalls. The circumstances forced Andersson and GM to find new solutions. “We started to ship short sea in the U.S.,” he says, referring to short-haul sea transport from Mexico to San Diego, which takes 30 days. “It was time consuming, but cost effective.”

The second solution to the crisis was “drive-aways,” the hiring of young drivers to deliver new cars to dealers within 50 miles of a GM plant. “They can sell these cars as new as long as the odometer reads less than 50. It costs $200 to $400 to send a car by truck or rail, but a drive where away only costs $50 per car. We saved a lot of money that way,” he says, noting that having this option also keeps some healthy pressure on water- and rail-transport companies.

At GM, logistics is increasingly being seen as an integral part of the supply chain, which is reflected in the fact that the term was dropped from Andersson’s title in 2005, when he became GM’s top general for global purchasing and the supply chain.

“I’ve spent a lot of time on logistics over the last two years, because of its complexity. We buy 160,000 parts globally and ship 9 million cars a year. Here in North America, we ship 19,000 cars every day, seven days a week. Material supply, production control, and logistics are all part of the supply chain.”

It’s been said that the earth is flattening, business-wise. But is it really that flat from a logistics and supply management perspective? Or is this just another media buzzword?

“I think it’s very real,” Andersson says. “If we take an example from components, 66 percent of our aluminum wheels, of which we buy more than a billion dollars every year, come from China. By [buying from China], we’re saving over 20 percent on a landed basis. If you take a $100 aluminum wheel, the logistics cost for me to bring it from China is $16. It’s not something I want to ship, but on the other hand, the shipping cost for the $3 billion of radios I buy, half of which come from China, is $2 per radio. That’s $2 out of $100. Ideally, I would like to ship more radios and fewer wheels.

“The earth is very flat, but on the other hand, we make all our decisions on a total landed cost, so it’s not that many parts costing $100 where you can allow $20 in logistics cost.” (Total landed cost = all costs to make and deliver a product to its revenue-generating stage.)

Bo Andersson came to the U.S. in 1993 as head of Worldwide Purchasing Electrical; a $15 billion unit that included Delphi, which was spun off in 1999. In 2001 he became number two in purchasing and joined the company’s 15-member board, where he is the only non-American. What do you see when you look in the rear-view mirror?

“The first thing is that competitive pressures have changed dramatically as a result of the various free-trade agreements. For example, we used to be the biggest player when it came to vehicles, but there were only 33 vehicles sold in Mexico then, as they had to be produced domestically. Today there are 133 vehicles sold on the Mexican market, which has been opened up more than anywhere else.

“The second thing is that the logistics and transportation industry has become globalized, and we have more people with full-fledged capabilities. Just look at FedEx and DHL, and shipping companies like the Norwegian Höegh and the Swedish Wallenius. Competitive pressure has created new needs for transportation solutions, and for tools and visibility. We are focusing very much on supply-chain visibility. We might tell suppliers, you can manage the supply chain, but we want visibility. We want to know where the 15 containers on the way from China to the U.S. are right now. We have an advanced control center in Detroit for the supply chain, and when we go into crisis mode, it becomes more like a military organization.” (Andersson notes that the retail giant Wal-Mart’s supply chain dwarfs that of GM and even the Pentagon. In 2002 Wal-Mart imported 292,000 forty-foot containers, compared to 182,000 by Home Depot and close to 100,000 by Heineken. GM imported 11,000, one quarter of Toyota’s exports to the U.S. Today, GM’s number is around 100,000, he says.)

The rise of China has been one of the biggest shifts in the world’s supply chain since you started at Saab in 1987.

“We’ve been in China for eight or ten years now, and we’ve been active in purchasing for export over the past five years. A lot of people are saying, Bo is buying everything from China, but what I am losing sleep over is how to supply parts to China domestically, because the Chinese automotive industry is growing by 100,000 units a month. We estimate it to be 8 to 8.5 million vehicles, and we have 10 percent of that market. We believe we will sell over a million vehicles in China in 2007. We sold 856,000 units there last year, and we are profitable. We make much more money in China than in any other country in the world. My primary focus is to supply China’s domestic market. My second is to export out of China, to Korea, Australia, India, Europe, and finally to the U.S. This is something we look at every day.”

Globalization is not the only global trend. Do the counter-forces increase the risk for a company such as GM? Does it affect your planning?

“Yes, and no,” he says. “I run a huge operation and we have purchasing people in 40 countries, but we run it in a both centralized and decentralized way, which means that I have four people sitting in Mexico buying seatbelts for the whole world. That doesn’t mean that they buy them from Mexico, but that they have centralized control of all the seatbelts we buy, and they figure out the best place to buy them from, whether they’re going to Europe, North America, Asia, or Latin America. We also do contingency planning every day. We use airplanes and helicopters somewhere in the world every day, because something always happens, whether it is a fire, a tornado, or a bankruptcy. We are very good at handling disasters, because if you move 35,000 vehicles and get 160,000 parts in every day, something will always happen somewhere.

“People are often very surprised over that we have such short product pipelines and never have more than one or two days’ inventory at our assembly plants,” he says, but adds that the auto industry still has far to go in taking advantage of the flattening earth compared with the white-goods industry and Wal-Mart.

New and tougher rules and inspections from the Department of Homeland Security (DHS) have not been a big problem for GM. Andersson says that the company has been working very close with DHS for three years and has been proactive; whether it concerns the $10 billion shipments the company receives from Canada every year or the container traffic it operates on its own from South Korea.

Andersson has won many battles to rein in and control GM’s costs, but there are areas that have stumped even this hard-charging Viking.
“We have not been successful in pharmaceutical, and healthcare costs are going up 15 percent a year. We are the largest buyer in the world of Viagra.”

Why — because it makes the cars go faster?

“No, it’s part of the union contract! UAW won free Viagra in the 1999 negotiations. I don’t like it, but that’s the way it is,” he says.

Well, it’s probably not something to lose sleep over, and certainly not a Waterloo.

Hans Sandberg