Industryweek 2011 17299towerauto
Industryweek 2011 17299towerauto
Industryweek 2011 17299towerauto
Industryweek 2011 17299towerauto
Industryweek 2011 17299towerauto

Tier 1s Say Toyota is Tops in Supplier Relations

Sept. 12, 2008
Annual study evaluates supplier working conditions at six major OEMs.

Manufacturers are always evaluating supplier performance. But those relationships are a two-way street, and it's important that both sides are doing their part. In a recent study conducted by research firm Planning Perspectives Inc., companies supplying the automotive industry were given a chance to rank the six major North American automakers to evaluate the quality of the other side of the supplier relationship.

Now in its eighth year, the firm's annual Working Relations Study determines supplier working conditions in numerous areas at three North American domestic OEMs (General Motors, Ford Motor Co. and Chrysler) and three foreign domestic OEMs (Toyota Motor Corp., Honda Motor Co. and Nissan Motor Co.). This year, 284 Tier 1 suppliers -- representing 54% of the OEMs' annual buy -- responded to the survey.

In the 2008 results, supplier relations at Chrysler, Nissan and Toyota dropped to their lowest levels in five years, which now puts Honda in a virtual tie with Toyota for the best working relations. Despite Toyota having the most dramatic overall decrease in the study's eight-year history, Toyota and Honda still have a commanding lead in good working relations with suppliers and are by far the automakers with whom they prefer to do business.

How Suppliers Rank the Top 6 Automakers

1. Toyota
2. Honda
3. Nissan
4. Ford
5. General Motors
6. Chrysler

Source: Planning Perspectives Inc., 2008 Working Relations Study

Coming from last place in 2007, Ford made steady gains in areas such as supplier trust, which is now at a five-year high, and improved 18% to move into fourth place. As a result, Ford has become the most preferred domestic automaker with whom suppliers want to do business, while General Motors was ranked the least preferred. Chrysler, which was ranked No. 1 by suppliers 15 years ago, has seen its results decrease by 26% in just the last two years, which drops the company to last place behind GM.

"In the years we've been conducting this study, we've never seen such dramatic year-over-year shifts in the rankings of the six domestic and foreign domestic automakers," says John Henke, Jr., president and CEO of Planning Perspectives and professor of marketing at Oakland University in Rochester, Mich. "This could signal a new chapter in OEM supplier relations going forward."

According to Henke, these rankings mean much more to the OEMs than winning or losing a popularity contest. Poor supplier relations can have serious long-term consequences at a time when the U.S. automakers can least afford any more bad news. "Now is not the time to take an adversarial approach to working with suppliers," he explains. "The challenges of rampant increases in material costs, poor economic conditions and increasingly intensive competition require that each OEM works more closely than ever with its suppliers to maximize [their] chances for success."

An employee from Tower Automotive, one of the suppliers manufacturing onsite at Ford Motor's Chicago Assembly Plant, loads a rear floor pan onto a delivery rack. Ford jumped two spots since last year's survey.Despite the apparent turmoil in supplier relations, there is good news for the auto industry, Henke believes that some purchasing vice presidents have simply forgotten a fundamental premise of supplier relations. Now they need to go back to the basics of human behavior and develop the kinds of relationships they need to survive.

"By putting in place performance metrics that drive the behaviors of the personnel who interface with suppliers, the needed supplier relations will occur," he says. "With the right performance metrics, every OEM can improve its supplier relations to the benefit of both itself and its suppliers."

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