A major survey of working relations between North American OEMs and Tier 1 suppliers shows that suppliers think GM is getting better while Ford is getting worse.
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The wide-ranging survey of suppliers undertaken annually by Planning Perspectives Inc this year included some 308 Tier 1 suppliers and some 1,317 buying situations (OEM-commodity area combinations).
It quantifies working relations between OEMs and suppliers in areas such as trust, communication, OEM ‘help’ to reduce suppliers’ costs and improve quality, ‘hindrance’ (things like excessive and late engineering changes) and the supplier profit opportunity.
The survey has been undertaken annually since 2002 and therefore tracks changes over time.
The 2007 survey confirms that the Japanese brand OEMs continue to lead Detroit, but the apparent divergence in supplier relations with Ford and GM is particularly significant as both makers wrestle with US turnaround strategies.
GM and Ford both instituted new programmes to improve relations with suppliers in 2005.
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By GlobalDataThe survey results showed that both Ford and GM were rated better by suppliers in 2006. However, in 2007 GM continued to improve but Ford slipped back.
Supplier industry specialist John Henke, president of Planning Perspectives Inc, told the SupplierBusiness conference in Germany yesterday that GM’s ‘Working Relations Index’ (WRI) improvement since 2005 is from a very low base – lower than Ford’s.
But GM showed considerable improvement across the two-year period across a wide range of measures.
“By 2007 respondents were saying that GM communication was a lot better. Help given by GM to its customers was a lot better and on ‘hindrance’ – things like involving suppliers in the product development process, it’s getting better. Late or excessive engineering changes are going down. Suppliers are feeling much more involved and when it comes to profit opportunity they are seeing that GM is providing an opportunity for them to make profit.
“And simple things like if we know we’re doing well we know we’re going to be selected for the next job or at least be given very good consideration for it, sharing savings on our proposals for savings and so on.
“Obviously over the last couple of years, things have been going very well for General Motors.”
So why is Ford not doing as well?
“The results show that it’s not down to a difference in pressure applied on suppliers to reduce prices,” Henke said.
“If we look at one measure of the WRI, the supplier willingness to share new technology without the assurance of a purchase order, we can see that as GM’s relations with suppliers improved, suppliers – especially the larger ones – became more willing to share. They took the view that in sharing technology with GM they would benefit in the future – even if there is no certainty of it – there’s a higher probability that we will get business in the future. It’s to our benefit as well as our customer’s benefit.
“That’s certainly not the case at Ford. Bearing in mind Ford’s precarious position, not taking advantage of Ford’s suppliers’ capabilities doesn’t seem to be in Ford’s long-term best interests.”
Henke said that GM’s programme to improve relations with suppliers has been successfully implemented, whereas Ford’s has not.
“Ford had a programme but they somehow lost direction. From what we can deduce the VP of purchasing said one thing but the buyers ended up doing their own thing. Our feedback from suppliers said that Ford buyers were focussed on price reductions and price reductions from an adversarial standpoint. Ford admitted that they did not have the performance metrics in place to drive the behaviour that is needed in their supplier relations.
“The challenge for Ford is to turn the situation around and walk the talk.”
Dave Leggett
