Study shows who has best relationships with suppliers
General Motors is playing nicer with its suppliers; Nissan is not, according to an annual study on supplier relations that gauges the all-important automaker-supplier relationship that affects how likely a supplier is to provide its latest innovation and grant some price concessions, both of which impact a car maker’s profitability and competitiveness.
With the rapid advances in autonomous vehicles, connectivity, and electrification, automakers rely on suppliers for research and development in areas such as sensors, battery cells, radar, and LiDar. Each automaker not only wants the supply chain’s latest and greatest, but also at an affordable price. And to pay for all the high-tech, automakers seek cost concessions on other parts to keep the price of a vehicle down.
Additionally, automakers need a reliable supply chain to make sure the parts are always there, just in time, to keep the assembly lines running. The auto industry, which has been on an unusual seven-year upward swing, is finally showing signs of tapering off, but it is still on track to sell more than 17 million vehicles in the U.S. alone this year. And automakers have sped up the pace of introducing new models. Buyers who can’t get the vehicle they want because of a supply issue are quick to shop the competition.
This is the 17th annual North American supplier study by John Henke of Planning Perspectives and it shows GM has jumped to the third spot, its highest perch to date, ahead of both Ford (fourth) and Fiat Chrysler Automobiles (fifth). Nissan has fallen to last place, part of a three-year slide. Topping the list is Toyota, followed closely by Honda. The study only covers the six largest automakers.
The study is based on an annual survey of suppliers and provides a snapshot of who is playing well with others and benefiting from that collaboration. There are good and bad ways to demand cost cuts, for example. The study concludes that Nissan’s adversarial approach and poor relations has cost them “tens of millions of dollars in supplier contribution to profits.”
The study scores each company on 16 variables such as trust, openness and how often a car maker demands expensive late-spec changes. The answers are used to gauge working relations, the level of communication, whether the automaker is a help or hindrance, and the potential for the supplier to make a profit on a contract.
“Every few years, an automaker will come up with some new program aimed at improving their supplier relations – but they rarely have a lasting effect,” says Henke. “The reason is quite simple: Supplier relations start at the top, but must be driven down to the Buyers – and effectively reinforced — to get the Buyers to change their behavior with supplier salespeople. Such an effort must be part of the corporate culture. Buyers will not change their behavior unless improving supplier relations is part of their performance measures.”