Study: U.S. Automakers Need to Change Sourcing Strategy

Jan. 12, 2009
Supplier relationships critical for future success

U.S. automakers must embrace the practice of "cooperative sourcing" to improve innovation and efficiency across the supply chain, according to a study issued Jan. 12 by Russell Reynolds Associates and Booz & Company.

After decades of confrontational tactics, the survey revealed several leadership qualities that will be in high demand as the auto industry fights for survival and growth in the coming months, according to the study, "Navigating a Path to Change: A Leadership Strategy for Changing the Manufacturer-Supplier Relationship." Some of these characteristics include:

  • Commitment from the CEO and senior management to establish an atmosphere of trust and transparency with suppliers
  • Alignment of strategic goals and open sharing of critical data
  • A long-term commitment to developing supplier relationships as an investment and not an expense
  • Clarity of purpose between manufacturers and suppliers at the c-level to know precisely what can and cannot be accomplished with each relationship
  • Streamlined decision-making
  • A drive to understand each other's business

"While many of these findings may seem like common sense, it runs counter to the very nature of the U.S. automotive sector," said Frank Smeekes, head of the Automotive Practice for Russell Reynolds Associates. "The current financial crisis has provided automakers with the motivation to change the DNA of supplier relationships to approach synergy-based models seen with European and Asian manufacturers. Executive leadership that recognizes this need and responds proactively will be in demand as the industry retools for the future."

"Success for both parties must include involvement at the board level, which should expand from governing to challenging and coaching leadership through this critical period," added Smeekes. "As the culture of many automotive boards is typically consensus-driven, change is not happening fast enough. The silver lining of today's situation is the willingness to change the competencies and skills that exemplified leadership in the past. Executives who have proven they can create synergy, collaborate, see breakthrough opportunities and work internationally will be essential to this industry in transition."

The survey is the result of 43 in-person interviews of senior executives at nine major auto manufacturers and 19 suppliers in the U.S. and Europe with a focus on their global operations and practices.

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