The three US automakers continued to show steady improvement in supplier relations while the top three Japanese automakers operating in the US continued to slip, according to a new survey.
Ford led the US automakers in having the best relations with its suppliers, staying in third place overall, while GM and Chrysler continued to improve, the 2011 North American OEM – Tier One Supplier Working Relations Study by Planning Perspectives found
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Chrysler, while remaining in last place, had its second straight year of significant improvement. Among the Japanese automakers, Honda, which was in first place overall for the last two years, continued to drop and slipped to second behind Toyota which appears to have bottomed out, while Nissan remained stuck in fourth place.
The annual study tracks supplier perceptions of working relations with their automaker customers in which they rank the OEMs across the six major purchasing groups broken down into 14 commodity areas. The results are used to calculate the Working Relations Index (WRI) based on 17 working relations variables. This year, 451 suppliers participated, representing 63% of the six automakers’ annual buy.
Comparing the six automakers overall, Toyota was in first place, followed by Honda, Ford, Nissan, GM and Chrysler.
For the first time this year, Planning Perspectives also included the top three European automakers with manufacturing operations in North America: Volkswagen, Mercedes-Benz and BMW.
However, they were not included in the Working Relations Index because one year’s worth of data doesn’t provide the depth of information necessary to explain trends and relationships relative to other OEMs.
If all nine automakers were ranked, Mercedes would be first, followed by Toyota, BMW, Honda, Ford, VW, Nissan, GM and Chrysler. Ford, Mercedes and Toyota were first within their respective groups.
“In the last several years the US automakers, realising that an adversarial approach to working with suppliers won’t work, have been working hard to work more collaboratively with their suppliers,” said study author John Henke. He is president and CEO of Planning Perspectives and also professor of marketing at Oakland University, Rochester, Michigan.
“Given their continuing improvement over the last two to three years, it appears that they have made the internal management changes necessary to change the way their buyers are working with suppliers. They have begun to realise the benefits of trusting supplier relations, which should cause them to work even harder to be better.”
Since 2008, Ford, GM and Chrysler have each reduced the number of suppliers ranking them as having “very poor – poor” working relations, while increasing the number saying they have “good – very good” working relations. It’s roughly the opposite for Toyota and Honda, with Nissan showing slight improvement.
Similarly, in the four working relations categories of OEM Communication, OEM Help, Supplier Profit Opportunity and Relationship, the Detroit Three have all shown significant improvement since 2008, with the Japanese Three remaining roughly the same.
“Nevertheless, the traditional leaders – Toyota and Honda – continue to have the best supplier relations, still well ahead of the US OEMs,” Planning Perspectives said.
While the US automakers are showing big gains in several areas, the one area that they are lagging in is OEM Trust, according to the study.
For instance, one area where Toyota and Honda still have a meaningful lead over the US Big Three is in their respect for suppliers’ proprietary information and intellectual property such as patents and confidentiality of technical innovations. Another is in the supplier’s willingness to share new technology without assurance of a purchase order.
“With the continuing need for innovation and technological leadership on both the product side and manufacturing side, the financial and competitive value of ‘trust’ cannot be discounted,” said Henke. “The US automakers need to move toward mutually beneficial contracts that protect suppliers’ intellectual property a lot better than they’re doing. If the Japanese automakers can do it, surely the US automakers can do it.”
All three European automakers ranked higher than the US automakers in “trust” as well, with Mercedes and BMW having the greatest supplier trust of the nine.
“The Working Relations Index is not a popularity measure,” noted Henke. “The respondents to the study are supplier sales personnel who have commercial responsibility for their OEM customers. Subsequently, the WRI measures how suppliers perceive their OEM customer works with them on a day-to-day basis. As we’ve seen in every industry in which we have done similar studies, suppliers act toward their customers as they perceive their customers are acting toward them.”
