Every year, the North American Automotive OEM-TIER 1 Supplier Working Relations Index releases data pinpointing supplier relationships with Detroit’s Big Three (Ford, GM, and Fiat Chrysler Automotives [FCA]) and the Japanese Giants (Toyota, Honda, and Nissan). When comparing last year’s results with this year’s, we see that five of these brands have dropped, especially Nissan, coming in last.
These data points translate into a direct reduction of profit from each vehicle, totaling tens or even hundreds of millions for each manufacturer. Nissan received the lowest rating, despite the fact that they exerted the most pressure to reduce prices. A senior Nissan executive acknowledges that the company takes a cost-out approach to suppliers, and didn’t put enough effort into establishing long-term relationships in hopes of co-development and innovation.
With the amount of disruption in the automobile industry currently, strong supplier relationships are more important than ever. Manufacturers should consider continuing business success through an open innovation culture, which is when companies actively seek and take on product development ideas from suppliers. Boston Consulting Group found that strong innovators are three times more likely than weak innovators to fuel growth through ideas and expertise from their suppliers.
Suppliers are the key players as they know every detail about the product. By connecting them to the technical experts in engineering, quality, manufacturing, and R&D, true innovation and effective solutions are achievable in a fast and cost-efficient manner.
In conclusion, it is obvious that there is a positive correlation between the strength of the relationship with suppliers and the benefits manufacturers can expect to receive. These benefits include:
- Better pricing
- Faster problem-solving
- Earlier access to technology and innovation
By establishing strong supplier relationships, companies may find the process of adapting to the changes in modern technology to be a little easier.