Issue: June 2003
Domestic
Disconnect
Supplier
and domestic OEM communication failing while Japanese turn up the talk.
by Andrea Wielgat
Communications between
According to a survey by Planning Perspectives,
“The approach that domestic OEMs are taking appears to be alienating
suppliers,” says John W. Henke, head of Planning Perspectives and facilitator
of the survey. Domestic OEMs are not involving suppliers and are not looking to
suppliers for help and support, he says.
On the opposite side, Japanese automakers with plants in the
Planning Perspectives asked suppliers to share their experiences with the U.S.
Big 3 (General Motors, Ford and Chrysler) and the Japanese Big 3 (Nissan,
“We have a very good representation of the supply base,” Henke says.
Planning Perspectives also used the information to develop a ‘supplier working
relations’, index that assigns a number to an automaker’s relationship to
suppliers. The higher the number the better the relationship
between the OEM and supplier community. Starting at zero and topping off
at 500, the industry’s mean was 203 in 2002 and 218 in
2003.
Henke says the seven percent increase in relations for 2003 was due to better
relationships between Japanese automakers and suppliers. For example, Nissan’s
working relations increased 15 percent, while
Both Ford and GM saw relations worsen slightly while Chrysler had a narrow
increase. “The Japanese are clearly following a different approach when they
are working with their suppliers,” Henke says.
Domestic OEMs have publicly said they want supplier help and support but the
message is not being put into play throughout the automaker’s buying
organizations. “At the buying level nothing is being done to reinforce the
behavior,” Henke says. Domestic companies are being run by the finance
departments and that is only hurting suppliers, he says.
“Part of it is it is easy to keep doing what they are doing,” Henke says. “It’s
going to be a task to change it.”
In comparison, some of the Japanese automakers are striving to make changes.
Henke says Honda saw the results of the survey last year and even though they
were ranked good the company felt they weren’t high
enough. The automaker then put 700 buyers through a training program to improve
supplier relations.
Actions like this have suppliers reducing their business with domestic OEMs
while increasing business with Japanese companies.
U.S. OEMs have not responded like Honda has, say Henke. Furthermore, revenue
problems cannot be used as an excuse. “Chrysler in the early 90s improved
relations even though they were cash strapped,” Henke says. “In the 90s,
Chrysler was rivaling
Instead the suppliers say they are not being asked for support and trust of the
domestic OEMs has dropped rather dramatically, he says. But when it comes to
dealing with the Japanese Big 3 the trust has grown.
Some of the domestic distrust may have come from dealing with Covisint. “The trust of Covisint
virtually does not exist,” Henke says. “There was not and there is not much
trust of Covisint.”
When it comes to concern for the supplier’s profit margin, the study suggested
the domestics just don’t care while Japanese companies want their suppliers to
be profitable.
The domestic OEMs renegotiate prices each year while the Japanese feel they got
the best price at the beginning and just ask for productivity increases.
“The domestic say if they can get it cheaper somewhere else they will,” he
says.
Additionally, on average suppliers are saying they are reducing quality to take
the costs out. The two areas where this is easiest to do without affecting
safety are the interior and exterior. A supplier may reduce carpet density or
reduce the number of coatings on a substrate, he says.
“When you look at cost vs. quality of a supplier,” Henke says “the domestics
look at cost instead of quality. The Japanese find a way to balance cost and
quality.”
The survey did show that U.S. OEMs do a good job of getting suppliers involved
with their product development. But, points out Henke, the Japanese are also
starting to get their suppliers involved as well.
“The earlier you can get your supplier involved there’s a higher probability
you can take cost out of the system,” he says. Henke also says that several of
the Tier 1 suppliers realize they also need to have better relationships with
their suppliers and are reorganizing to make this a reality.
“But a majority of Tier 1s are becoming more aware of the problem,” he says.