Honda is Number One in Auto Supplier Study

May 26, 2009
Toyota slips to number two spot in annual survey of working relations between automotive suppliers and largest auto companies.

Honda has taken over the top spot in an annual study of the automakers' supplier working relations. Toyota slipped to number two after holding the top spot since 2002 in the annual North American OEM-Tier 1 Supplier Working Relations Study.

Ford, which two years ago was rated as having the worst working relations with suppliers, showed improvement and has the highest rating ever achieved by a U.S. automaker in the study.

The study ranks OEMs' supplier working relations based on 17 variables across five areas: OEM-supplier relationship, OEM communication, OEM help, OEM hindrance and supplier profit opportunity. Honda achieved an overall score of 349 out of a possible 500. The other suppliers had the following ratings: Toyota (339), Nissan (268), Ford (232), GM (183) and Chrysler (162).

While Toyota had been the industry leader in supplier relations, said John Henke, Ph.D., president and CEO of Planning Perspectives, which conducts the annual study, the company has lost "significant ground in the last two years."

One reason cited by suppliers for the drop, he added, is "a younger, less experienced staff in Toyota's purchasing group for whom the 'Toyota Way' is not yet the way of doing things."

Henke noted that the transfer of Ford's head of European purchasing to North America two years ago brought a dramatic improvement in supplier working relations. "The number of suppliers that say they have 'good to very good' relations with Ford increased by 50% this year, while the number of suppliers indicating they have 'poor to very poor' working relations with Ford is down by 25%," said Henke.

Favorable supplier rankings of the automakers have a real impact on the OEM's fortunes. The better the WRI rating, the study has shown, the more likely that the automaker will receive benefits such as lower costs, higher quality and innovation from its suppliers. For example, the study showed that suppliers were more willing to share new technology with Honda and Toyota than with the other OEMs. Moreover, suppliers were more willing to invest in new technology that benefits Ford and Nissan than they were for Chrysler or GM.

While Henke said the study showed that Ford and GM were starting to understand the value of better supplier relations, Chrysler must change its ways or face "big trouble, regardless of how it comes out of bankruptcy."

At the OEM purchasing group level, the study showed Honda's Electrical and Electronics Group has the best supplier working relations in the industry while Chrysler's Body-in-White Group has the worst relations. Henke said this shows that it is the OEM personnel with day-to-day responsibility for working with suppliers who are the primary determinants of the company's supplier relations. Companies must put in place performance metrics that drive these individuals to improve supplier working relations, Henke said.

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