I was watching the news last night and heard the stories about the Big Three automakers going back to Congress seeking an additional $25 billion in bailout funds to prevent them from going into bankruptcy.  There are certainly a host of issues they are dealing with, but the issue that immediately came to mind was their supply chains – and particularly their relationships with their suppliers.

There have been quite a few well documented stories over the last few years comparing/contrasting the way Toyota, for example, forges relationships with its suppliers compared to the Big Three.  Toyota takes a very strategic perspective on its suppliers whereas the Big Three generally take a tactical view.

The resulting approaches and outcomes are radically different.  Like many manufacturers, the automotive companies are increasingly becoming designers, marketers and assemblers since much of the content for their products is now made by suppliers and contract manufacturers.  Thus, their approach to building relationships with suppliers is a core part of their supply chain management strategy.  At the end of the day, and this really is evident in the automotive industry, the company with it’s name on the product is the one with its reputation on the line.  They are ultimately accountable for customer satisfaction, quality, etc.

Toyota’s strategic approach to supplier relationships means that they view them as integral components of the supply chain.  Toyota works hard to integrate them fully into their processes by training them on quality, process efficiency, etc.  Expectations are clearly defined and collaborative efforts are made to ensure mutual success.

The Big Three have taken a much more tactical approach to their supplier relationships.  They are viewed much more as outsiders compared to Toyota’s suppliers.  The emphasis is very frequently on beating them down to realize the lowest costs.

With such fierce global competition, increasing price pressures, and a globally outsourced supply chain, which approach works best?  Are you engaging your suppliers as strategic partners who’s success is completely tied to your success and vice versa?  Or, are you strictly treating your suppliers as tactical providers of a commodity that you need to meet your goals?

I would submit that in today’s world, the only way to lead is to follow Toyota’s lead.  Supply chains have become far too complex and globally distributed at a time when market pressures are ever more unrelenting that any other approach is an extremely high risk strategy to follow.

What’s your relationship with your suppliers?

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Tags: Supply chain, Supply chain management
Posted in Supply chain management, Supply chain risk management
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