OEM-supplier relationships slump in 2018
- Supplier relationships with five of the six major automakers declined in Planning Perspectives' Annual Supplier Working Relations study this year.
- Fiat Chrysler, Honda and Nissan continued a three- to four-year drop in relations. Toyota is the only automaker whose supplier relations improved, although slightly.
- Suppliers felt the greatest pressure from automakers such as Nissan and Fiat Chrysler to reduce prices and marked both automakers as making little effort to resolve payment issues in a timely manner.
Automaker-supplier relationships overall have continued a downward slide over the past three to four years, which could end up hurting automaker bottom lines without proactive steps.
Strong supplier relationships are integral to supply chain efficiency. If suppliers and automakers struggle to get along, haggling over pricing and terms can slow down the auto supply chain, especially when so many automakers source from only one supplier.
Ford, for example, suffered severe setbacks in production of the popular Ford F-150 when one of Ford's supplier's factories caught fire. The automaker temporarily laid off thousands of workers as the repercussions of just one supplier's mishap rippled throughout the supply chain.
Because one incident such as the fire can throw off an automaker's entire supply chain, supplier relationships shouldn't be taken for granted, but the study suggests many of the top automakers do. Graphs revealed Ford's supplier relations management to be inconsistent, suggesting supplier relations aren't much of a priority for the automaker.
Nissan boasts a high pre-tax profit margin, but that margin won't stay so high if Nissan continues to be the lowest ranked in terms of communication and overall trust.
Sure enough, the automakers with better supplier relations scored higher in terms of benefits received from suppliers. Besides supply chain integrity, there's another danger to treating suppliers poorly — suppliers are driving auto innovation right now, so automakers that don't treat suppliers like a priority could quickly fall behind as the competition heats up and insurgents like Tesla change how the industry operates.
- Planning Perspectives Five out of six NA Automakers’ Scores drop in Annual Supplier Working Relations Study
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