Amidst all the faddish publicity on
partnership which the industry has seen for the last ten years there has been some real
progress towards a different way of organisations collaborating in the manufacture of
automobiles. Unfortunately there has been a great deal more rhetoric than real progress –
particularly contained in the mission statements of automotive makers which now stretch to
supply relationships as well as traditional factors such as product quality, etc.

Before it has been realised, in most cases,
partnership in supply has been stifled by the evil of “lip service”.

In some cases, real efforts have been made
in “supplier development” – such as the schemes introduced in the UK by Nissan.
Other vehicle firms seem either cynical about embracing genuine supplier development –
practicing instead a stylised version of traditional “big stick” tactics – while
still others do not even pretend to alter their ways and carry on with aggressive vendor
assessment schemes which merely serve to isolate supplier and customer.

Some of the most loudly announced
initiatives are in fact the least genuine in their intent. The old imperative of a
long-term objective to be realised immediately is still present.

There have been cases of suppliers being
paraded in public for purely PR purposes – to say how much they benefited from the vehicle
manufacturer’s scheme. The emptiness of these exercises soon becomes known when in private
these same suppliers tell the truth: how shallow and short-term the whole campaign was,
and how they are planning to cease trading with that customer once the recession is over
and once the lean vehicle producers increase their volumes.

And yet to anyone with a slight
understanding of lean production it is clear that lean supply must be a thorough reality –
achieved gradually, not suddenly. Massive cost reductions achieved over a few months
cannot possibly represent lean supply. Partnership, meanwhile, has fallen into the
“lip service” trap: if companies talk about it for long enough, they begin to
believe they are doing it. The same thing happened with “total quality” and
“just in time”. In fact what is emerging as partnership is a situation in which
the customer becomes the senior partner and the supplier the junior. Transactions carry on
just as before, the supplier becomes involved in new models earlier, etc. but little has
really changed: the vehicle maker leads the supplier simply because of purchasing power
rather than technical or managerial merit. For lean supply to become a reality, the
customer and supplier have to go beyond this version of partnership (which is,
incidentally, close to what the Japanese have traditionally practiced) to a level of
behavior which could truly be called a collaboration of equals – lean supply. In lean
supply – just as in lean production – the cost of adding value is minutely controlled and
assets in the various companies (customers and suppliers) are rationalised to remove
duplication. Very often, because of the advance of product technologies, this means that
the supplier will take over responsibility for functions traditionally done by the vehicle
maker. This is a painful process for the vehicle maker, because many of the duplicatory
resources will be people. Nevertheless, duplication of capacity is waste and there is no
room for waste in lean production. Companies in all industries are “right
sizing” – growing smaller and more controllable by subcontracting responsibly for
major parts of the process. Vertical integration, upon which large parts of the European
industry is still based is the opposite of right sizing. Right sizing means selling off
parts of the organisation, transferring “sovereignty” of design and development:
not trying to be expert at everything. The usual response to this assertion is that
vehicle producers cannot become too reliant upon the supplier for technology, otherwise
how would they compete? The answer is that in the lean supply relationship the technology
is the product of the partnership: two different vehicle producers working with the same
supplier in a similar field will produce significantly different products because they
will inject their own ideas – as collaborators – to the technological development. The
lean supplier is the technological gatekeeper – or expert – while the vehicle manufacturer
is the applications engineer: knowing how to make the supplier’s technology enhance the
individual character of the specific vehicle or marque.

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By GlobalData

So, the lean enterprise vehicle maker will
have just the right amount of resource in each technology area to pick the right partners
and to rely on them; not through “trust” but through interdependence. The lean
industry consists of overlapping organisations which cannot function without each other.
Each inter-company tie is complex mix of past, current and future liaisons: partnership is
not a cosy affair but a high-pressure operation, involving purchasing, engineering,
manufacturing, strategic planning, etc.

All this is a far cry from the “get
tough” tactics of some current, well publicised, campaigns to reduce component prices
without really getting at long-term costs. As vehicle makers reduce the number of
suppliers with whom they deal directly they have to be careful to nurture relationships –
really to become “preferred customers”. Without such careful consideration it is
unlikely that the mass producers will ever build lean supply chains. And without lean
supply there can be no lean production.

Author : Professor Richard
C.I.P.S. Chair of Purchasing & Supply Management University of Bath, UK