Quality Magazine

STUDY RANKS AUTOMAKERS’ RELATIONSHIP WITH SUPPLIERS

September 1, 2003

BIRMINGHAM, MI—Results from the 2003 North American Automotive Tier One Supplier Study show that the domestic Big Three and the Japanese Big Three have fundamentally different approaches to working with their suppliers and suggest that this difference could be a major factor in the consistently high quality and competitive gains made by the Japanese.

The results are ranked on a new industry index called the “OEM-Supplier Working Relations Index” (WRI), which shows the Japanese automakers consistently moving up the scale toward better relations, and the U.S. automakers remaining at the bottom of the scale.

The 2003 index again shows Toyota and Honda at the top, with a ranking of 334 and 316, respectively, with GM at the bottom with a ranking of 156 and Ford at 161. The WRI shows that each of the Japanese Big Three improved and are well above the industry mean, while Ford and GM are below the industry mean and lost ground. Chrysler was also below the industry mean but improved slightly.

According to the study, the domestic Big Three consistently do three things that tend to degrade their relationships with suppliers: they alienate suppliers, do not involve suppliers in their businesses, and do not look to suppliers for support and help. The Japanese Big Three do just the opposite.

“The domestic OEMs have assumed that getting price reductions from their suppliers and having good supplier working relations are mutually exclusive,” says John Henke, owner of Planning Perspectives Inc., which conducts the annual study. “Nothing could be further from the truth. Honda and Toyota, and to some extent Nissan, recognize that they can pressure their suppliers for considerable price reductions and quality improvements and still have good working relations.”

The results of the survey also indicate why OEMs with good supplier relations gain a competitive advantage. “The further up the index an OEM moves, the more suppliers are willing to help the OEM,” Henke says. “Suppliers will share more technology with the OEM, are more willing to invest in new technology in anticipation of business, and they will provide higher quality goods and high levels of service.”