American car manufacturers have come to embody the “hammer your supplier to the wall” school of procurement strategy – something that has been exacerbated by their perilous financial state. For the past seven years, objective evidence of the effect of this one-sided approach on automotive suppliers has been provided in the form of a fascinating annual survey by a Michigan-based consultancy, Planning Perspectives (PPI).
Its latest research among over 300 suppliers in North America found that the Japanese trio of Honda, Toyota and Nissan continue to enjoy a big lead over their domestic rivals, General Motors, Ford and Chrysler, in terms of how suppliers perceive the quality of their working relations. In this issue, PPI’s president, John Henke , explains in detail why this is the case, going beyond company philosophy to look at variables such as communication, trust, buyer help and hindrance, and supplier profit opportunity. This analysis offers valuable insights for CPOs in all sectors, not just the car industry, who are looking to develop better supplier relationships.
One of the most significant findings in the 2007 study was a big improvement in General Motors’ relations. The world’s largest auto maker is still ranked well below the likes of Toyota, but it is moving in the right direction. As one supplier comments: “General Motors has done a 180-degree turnaround in its approach with us, from being distrustful and mean-spirited to treating us with a reasonable amount of respect.”
To dig a little deeper into this change, I talked to GM’s CPO, Bo Andersson . During our interview he was quite frank about the fact that his buyers had not performed well in the past on the “softer” elements of the job, particularly visiting suppliers’ plants and investing time to overcome problems and develop more effective solutions together. Within GM he is leading what amounts to a cultural revolution to instill this ethos.
At the same time, Andersson makes it clear that this is no touchy-feely exercise but one based on the hard performance metrics of cost, quality and delivery. When asked if GM is seeking to be a “customer of choice” (to use a fashionable term), his reply was unequivocal: “No, absolutely not.” Money is still power, and GM spends $110 billion of it every year.
The notion that greater collaboration is not a soft option is picked up by Jon Hughes in the second of a series of three articles on SRM . He and co-author Lars Mikkelsen examine how negotiation with strategic partners differs from tactical forms of purchasing – a distinction that they argue has not been adequately addressed. Strategic negotiation requires a more sophisticated approach (and therefore a higher level of interpersonal skills and behaviour among procurement professionals) than simply thumping the table and demanding concessions. Just ask the folks in Detroit.
Geraint John
geraint.john@cpoagenda.com
