In the week that the purchasing and supply management community is meeting at the Institute for Supply Management (ISM) annual conference being held here in Indianapolis, is a disappointing report of business as usual supplier relationship management challenges across the U.S. automotive industry.
The Wall Street Journal reports Lukewarm Supplier Ties Hamper Auto Makers (Paid subscription required), reflecting a recent survey involving many suppliers to the U.S. automotive industry. The report concludes that: “top U.S. and Japanese auto makers are losing out on hundreds of millions of dollars in potential cost savings because of lackluster relationships with their parts suppliers.” This 16th annual survey, conducted by Planning Perspectives Inc. polled 647 salespeople from 492 top suppliers.
According to the survey results, four out of the six auto makers operating manufacturing plants in North America experienced erosion in their supplier rapport over the past year, a year in which auto sales have been booming in North America.
Among the top five ranked automakers in supplier relationships were brands such as Toyota, Honda and Ford Motor.
Noted as having the largest erosion in supplier relationships was Nissan Motors, which intensified pressures on suppliers to reduce costs. Cited as most improved in supplier relationships was General Motors which reportedly resulted in suppliers contributing more than $3,000 to the profit GM realized on every vehicle manufactured and sold in North America last year. However, GM was ranked just 25 points above Nissan. The report notes that GM hired a new procurement chief in 2014 with previous executive experience at parts supplier Delphi Automotive, who asked suppliers for input as to what GM was doing that, was not contributing to a win-win relationship.
Coming in with the lowest supplier ranking was Fiat Chrysler which reportedly has improved many of its internal processes but those processes still lag behind those of its competitors. The automaker has recently reorganized its quality and purchasing management teams including recruiting a new chief purchasing officer.
From our lens, the takeaway seems to be that for U.S. automotive OEM’s, when it comes to fostering more positive supplier relationships, the trend remains one of business as usual, namely singular cost reduction pressures flowing down the tiers of North America automotive supply chains. The more times change, the more behaviors remain the same, despite learning to the contrary including unprecedented industry product recall incidents