Auto suppliers rank major buyers, show cost-cutting initiatives do not always hinder relations

Dive Brief:

The 2017 North American Automotive OEM - Supplier Working Relations Index revealed cost-cutting priorities do not always lead to poor supplier relations, if good treatment persists, Industry Week reported last week.
The index ranks six major automotive buyers on various categories. Toyota and Honda continue to top the list while Nissan's supplier working relations hit an all-time low. General Motors, meanwhile, has dramatically improved its position rising from the bottom of the list to a top-three buyer in two years.
Comparing Nissan's downturn with GM's surge reveals the importance of attitude and culture to supplier working relations. Supply Management reports Nissan's "adversarial approach" and dropping suppliers for profit concerns deteriorated its ranking, meanwhile GM pushes its suppliers hard but works closely with them.

Dive Insight:

A closer look at the indicators used to rank suppliers' perspectives of buyers reveals the importance of close partnerships to establish a successful supply chain.

The index ranks the automotive buyers based on five tiers: original equipment manufacturer (OEM) supplier relationship, OEM communication, OEM help, OEM hindrance and supplier profit opportunity. However, it also takes into account a rating of buyers' as well as vice presidents' initiative to build better relations, and improvement in relations within specific purchasing areas.

The report's detailed scope and results reveal two main lessons: purchasing professionals at every level drive relations and supplier relations improvement initiatives pay off. Just as Nissan's relations have deteriorated due to an "adversarial culture," Supply Management adds, GM's vice president of purchasing very publicly speaks to the importance of good relations, which ripples down to how the company's buyers interact with suppliers.

Recent reports support the idea behind this report, that the degree to which a buyer and supplier collaborate marks the difference between a successful or inefficient supply chain. Planning Perspectives, which releases the index, notes good relations yield "more supplier sharing of innovation; greater price concessions; more supplier investment in OEM-related innovation; and greater supplier support; among others."

Communication, both in quality and frequency, cannot be underestimated as a tool to improve buyer-supplier relations. Cost-cutting priorities are part of the industry, but sharing goals, establishing joint growth strategies and establishing clear terms of collaboration and profit-sharing may help priorities buy into long-term plans.

If Toyota, long the standard for lean production, continues to top the list of preferred customers and GM could rise as quickly in the rankings, good relations are not necessarily correlated to profit strategies but rather company culture.