Skip to main content
Sister Publication Links
  • European Rubber Journal
  • Plastics News
  • Tire Business
Subscribe
  • Login
  • Register
  • Subscribe
  • News
    • Tire
    • Airless Tires
    • Non-Tire
    • More News
    • Suppliers
    • Silicone
    • Latex
    • Technical Notebooks
    • Opinion
    • Online Exclusive
    • Special Reports
    • Automotive
    • Executive Action
    • Government/Legal
    • Sustainability
    • Blogs
      • Products
      • Wacky World of Rubber
    • PFAS
    • Best Places to Work
    • War in Ukraine
    • International Tire Exhibition & Conference
    • Women Breaking the Mold
  • Rubber Division IEC
  • Custom
    • Sponsored Content
    • White Papers
  • Resources
    • Directory
    • Classifieds & Mold Mart
  • Data
  • Events
    • RN Events
    • RN Livestreams/Webinars
    • Industry Events
    • Past Events
    • Rubber News M&A Live
    • PFAS Live
    • Ask the Expert
    • International Tire Exhibition & Conference (ITEC)
    • Women Breaking the Mold Networking Forum
  • Advertise
  • DIGITAL EDITION
MENU
Breadcrumb
  1. Home
  2. Automotive
April 23, 2019 02:00 AM

Auto makers outline the key to healthy supplier relationships

Chris Sweeney
  • Tweet
  • Share
  • Share
  • Email
  • More

    Toyota's Robert Young at an Original Equipment Suppliers Association event.

    Trust and communication are the foundation of a strong relationship, and the auto maker/supplier dynamic is no different.

    Original equipment manufacturers that foster clear, open communication are rewarded with an energized supply base, and that in turn leads to success.

    "It's really important that we recognize our suppliers as an extension of Honda," said Pam Heminger, vice president of purchasing at Honda of America Manufacturing Inc., overseeing the Japan-based OEM's North American purchasing division.

    "They're part of our team. These supplier relationships are more than a manufacturer/supplier relationship. It's about having a partnership. Having a good partnership will allow us to continue to have open and transparent communication, which is the foundation of our relationship."

    Heminger was one of four executives who provided insight toward the OEM/supplier dynamic, along with executives at Toyota, General Motors and Ford. Nissan declined to comment for this story and executives with Fiat-Chrysler were unavailable for an interview prior to publication.

    Those six companies are annually evaluated through a major industry study—the Working Relations Index, which seeks to measure the strength of their supplier relations. The study was founded by John Henke and his company, Planning Perspectives Inc., but going forward the study will be implemented by Plante Moran, which acquired Planning Perspectives earlier in 2019.

    Toyota has finished first in the study for the last eight years. Honda has been second during that span and the only other OEM to hold the top position since the study was founded in 2001. GM finished third and Ford fourth in 2018 with FCA and Nissan a distant fifth and sixth, respectively.

    "We love our suppliers," said Hau Thai-Tang, Ford executive vice president of product development and purchasing. "We recognize that 75 percent of our value-add is provided by our suppliers. I think it's a good relationship, one that's built on trust and co-dependency for success."

    Keys to success

    Suppliers represent anywhere from 60-75 percent of an OEM's cost structure and about 50 percent of the vehicle's innovation. All OEMs interviewed said it's impossible for them to meet their customer expectations without strong supplier contribution.

    "The supplier business is very complex and challenging," said Robert Young, Toyota group vice president of purchasing, supplier engineering development and cost planning. "We have very high expectations of our partners. But as long as we can communicate, collaborate and be consistent in our approach, our partners understand what our expectations are and can align their processes and resources to meet them."

    Steve Kiefer, senior vice president of GM's global purchasing and supply chain, has made strengthening supplier relations a priority since he took over the post in 2015. At the time, the auto maker was tied with FCA for the lowest score in the Working Relations Index. That has changed rapidly—improving by 66 points to 290, a B-minus, in 2017 and taking just a slight hit in 2018 to 287.

    His team made establishing open and transparent communication with suppliers a main priority, then worked on broadcasting a consistent message throughout the company. He found that not only were suppliers getting different feedback from different parts of the organization—purchasing compared to engineering—but in different regions of GM's global footprint.

    "I had a perspective of which OEMs treated suppliers well and which ones did not," Kiefer said. "I also had my own ranking and benchmarking of what tools they used that I thought were effective and helpful in the supplier relationship. When I joined GM, I was pretty openly critical with our global purchasing and supply team on some of the things I saw with other OEMs that I thought could improve the relationships we had with our suppliers."

    Talk it out

    Communication is a two-way street. OEMs must be clear and consistent in their expectations and suppliers need to feel that their concerns are taken seriously.

    General Motors' Steve Kiefer at an Original Equipment Suppliers Association event.

    Kiefer said GM put in place a strategic supplier engagement process, a scorecard that allows the firm to make it very clear to suppliers what business and behavior attributes the firm is looking for.

    The firm uses the same scorecard throughout its operations.

    "It allows us to be very clear on what the expectations are on the GM side, but it also allows us to be very clear on how the supplier is doing, how they're progressing toward our metrics," Kiefer said.

    "As we've been earning that right to have a better relationship, we're finding all kinds of incredible opportunities to take cost out of the product by not just dropping price, but by finding elements in the value stream and eliminating the waste. The supplier and General Motors can be more profitable."

    Toyota, Honda and Ford have similar expectations with regards to quality, delivery, cost, technology, improvement and safety. Thai-Tang said he's found that suppliers want to do business with a partner that exemplifies three main characteristics: Someone who will give them opportunities for business growth, who acts fair and honorably, and is consistent and predictable.

    "We always look at how we can improve our business and our relationship with our suppliers," Thai-Tang said. "Some of it really correlates back to those three things. Ford was struggling in some regions outside of North America in terms of profitability (in 2018) and that impacted our suppliers and their business."

    Communication was at the top of Toyota's list. Young added that strong collaboration and consistency were two other tenants the OEM looks for in suppliers, and in turn tries to exemplify.

    "Our suppliers are engaged with multiple functions of our plants day in and day out," Young said. "We try to have a level of consistency with how we treat our supplier partners. Based on their importance to our overall business, we must treat them with respect and we must work with them to solve problems."

    Heminger said Honda expects its suppliers to be proactive, focusing on creating successful opportunities while also implementing innovative business practices that can contribute to loss of waste and modernizing the supply chain.

    While she just took over her current post on April 1, Heminger has been with Honda for 23 years, beginning in purchasing. She's found the main reason Honda has consistently posted high supplier relations marks is because the firm treats its supply base as an extension of its manufacturing lines.

    "We want to be that company that suppliers want to work with," she said. "We want our suppliers to want to have a relationship with us. Working proactively with them is something we're committed to every day, from me to our junior associates."

    Supplier development

    When dealing with about 1,000 different suppliers globally, there are bound to be mistakes, and OEMs go to great lengths to develop suppliers.

    "When we have problems—and we do, nothing's ever perfect—we have a fairly large organization within purchasing and supply chain that will come in to help," Kiefer said. "We've brought in some of our own to help the suppliers, and then we have a group of external consultants we rely on quite heavily to help manage difficult launches."

    Ford also has a supplier technical assistance team whose job is to help suppliers when they struggle, be it operationally, with quality or in launching a new technology. When needed, Thai-Tang said that team is deployed into suppliers' plants to help, most often in the case of major launches where suppliers are pushed to meet requirements.

    He added that Ford also has helped financially distressed suppliers secure financing or provided temporary relief on payments to keep them solvent. And smaller-scale suppliers with less resources can take advantage of Ford's joint technology program, which Thai-Tang said allows those companies access to some of the OEM's patents, enabling them to ride up the technology curve.

    Toyota's supplier support steering committee provides feedback to suppliers regarding quality and delivery performance. Like GM, it also uses a grading system and Toyota helps struggling suppliers in a variety of ways.

    Young said if it's a systemic issue, Toyota will engage at the corporate level. If it's more focused on one plant, a line or a specific part, Toyota take a different approach. And if a supplier is trending unfavorable in Toyota's rankings, the firm will give the supplier a self-assessment and engage to try to avoid the company from tipping into that ranking.

    "If a supplier fails, we fail," Young said. "It's our responsibility to ensure the success of our suppliers. That doesn't mean that every supplier at the end of the day can meet our expectations, but for the most part we have a level of understanding and patience with our supplier partners. When performance starts to deteriorate, we collaborate fully with them to help improve their overall performance. Nobody can be perfect, we understand that."

    Heminger said when issues arise, Honda seeks to understand the supplier's conditions and then work through the situation. Some are more extreme than others, citing Hurricane Florence as one recent example of a major event that impacted its suppliers in North and South Carolina.

    She said when these things happen, Honda deploys its associates to those regions to make sure suppliers have the capability to stabilize their situation as quickly as possible.

    "When your family needs help, you go," Heminger said. "That's what you do. We don't think twice about it. That is the culture and the nature of Honda. Any time we see a supplier might be needing assistance, we don't question our involvement. We are involved, and we want to help them through any kind of challenging situation they have."

    Balancing act

    The automotive industry is facing significant disruption—increased fuel efficiency standards, a shift to electric engines and the dream of fully autonomous vehicles. Some of these are closer to fruition than others, but all are driving significant investments and new partnerships.

    "Innovation is critical to our long-term success," Heminger said. "We don't have any kind of contractual requirements, but it's our desire that suppliers have innovation and continuous improvement as part of their business culture. We want them to bring these ideas to the table and we're always looking for suppliers who can help us take on these new technologies."

    The earlier suppliers are engaged, the more efficiencies they can put into the vehicle design, but there is a balancing act. Integrating driver assisted technology will have a very different approach than deciding between floor mats, and the gambit of other categories fall somewhere between that spectrum.

    Kiefer said it recently brought in a seat supplier very early on one of GM's truck and SUV platforms because it had an innovative second row seat design, one that ultimately drove the design for the rest of the vehicle's cabin.

    "In some of those areas we're being forced to work with new suppliers," Thai-Tang said. "Software is a great example. Traditionally many of these suppliers would be in the sub-tier. In a traditional model, we'd go to a Tier 1 supplier and they'd select the sub-tier suppliers. We're finding that in many of these areas we have to deal with these sub-tier suppliers directly because in many cases they're on the critical path in terms of what we can deliver in feature and function."

    Young said Toyota seeks to get suppliers involved as early as possible, anywhere from 12-24 months prior to concept of an upcoming vehicle program to best avoid putting in unnecessary constraints on suppliers.

    Thai-Tang said when a part is changed, the firm begins with the incumbent supplier to help it understand the manufacturing process—what capital equipment will be needed and how it can re-design the part to provide the best value.

    There are always going to be trade offs in the industry, but Kiefer said early involvement is the best way to get into production quickly and for suppliers to produce a cost-effective part.

    "We may have very high expectations, but our approach and willingness to work with our partners is consistent globally," Young said.

    Letter
    to the
    Editor

    Rubber News wants to hear from its readers. If you want to express your opinion on a story or issue, email your letter to Editor Bruce Meyer at [email protected].

    Most Popular
    1
    Meet the world's top 5 tire makers
    2
    Digest
    3
    Holcim adding capacity, looks for growth in roofing sector
    4
    The Dune Express: Ram Enterprise installing enormous belt project
    5
    Technical Notebook: Devulcanizing scrap OTR tire rubber for compounding, molding solid tire idlers
    SIGN UP FOR NEWSLETTERS
    EMAIL ADDRESS

    Please enter a valid email address.

    Please enter your email address.

    Please verify captcha.

    Please select at least one newsletter to subscribe.

    Get our newsletters

    Staying current is easy with Rubber News delivered straight to your inbox, free of charge.

    Subscribe Today

    Subscribe to Rubber News to get the best coverage and leading insights in the industry.

    SUBSCRIBE
    Connect with Us
    • LinkedIn
    • Facebook
    • Twitter

    MISSION

    To serve companies in the global rubber product industry by delivering news, industry insights, opinions and technical information.

    Contact Us

    2291 Riverfront Pkwy, Suite 1000
    Cuyahoga Falls,
    OH 44221

    Customer Service:
    877-320-1726

    Resources
    • About Us
    • Digital Edition
    • Staff
    • Advertise
    • Order Reprints
    • Privacy Policy
    • Privacy Request
    • Terms of Service
    • Careers
    • Ad Choices
    • Sitemap
    Partner Sites
    • Tire Business
    • European Rubber Journal
    • Plastics News
    • Urethanes Technology
    • Automotive News
    • Crain Brands
    Copyright © 1996-2023. Crain Communications, Inc. All Rights Reserved.
    • News
      • Tire
      • Airless Tires
      • Non-Tire
      • More News
        • Automotive
        • Executive Action
        • Government/Legal
        • Sustainability
        • Blogs
          • Products
          • Wacky World of Rubber
      • Suppliers
      • Silicone
      • Latex
      • Technical Notebooks
      • Opinion
      • Online Exclusive
      • Special Reports
        • PFAS
        • Best Places to Work
        • War in Ukraine
        • International Tire Exhibition & Conference
        • Women Breaking the Mold
    • Rubber Division IEC
    • Custom
      • Sponsored Content
      • White Papers
    • Resources
      • Directory
      • Classifieds & Mold Mart
    • Data
    • Events
      • RN Events
        • International Tire Exhibition & Conference (ITEC)
        • Women Breaking the Mold Networking Forum
      • RN Livestreams/Webinars
      • Industry Events
      • Past Events
      • Rubber News M&A Live
      • PFAS Live
      • Ask the Expert
    • Advertise
    • DIGITAL EDITION