US automakers tighten teamwork with suppliers to improve quality
Auto suppliers call it ''weeding out.'' Auto manufacturers prefer the word ''concentrating.'' Either way, analysts and industry executives say Detroit will cut the number of its suppliers by 20 to 25 percent over the next few years.
For the automakers, the purpose of the cutbacks is to improve the cost and quality of the car parts they buy. For the suppliers, cutbacks mean a far more competitive marketplace. From this development, a new supplier-manufacturer relationship is also emerging - one that is more cooperative and less ''adversarial,'' according to an auto-supplier executive.
Because of an effort that began 18 months ago to improve the quality of its supply program, Ford now gets parts from about 1,000 fewer shipping places, says Lionel Chicoine, vice-president of purchasing and supply. One supplier may have five or six shipping points, so the figure does not reflect the number of suppliers actually eliminated by Ford.
Ford began reducing its supplier base because ''we had a great number of suppliers who had only one or two parts sourced to them,'' Mr. Chicoine recalls. ''It was an inefficient administrative burden.'' At the same time, ''You get higher quality and greater uniformity of product by concentrating with a single supplier,'' he says.
That concentration has turned the automakers into teachers, passing down to suppliers the lessons they are learning about quality improvement and giving them classes in statistical process control. This is the method used on the assembly line to track the amount of variability in a part.
At the Budd Company, a major supplier of auto body parts, ''we have been going through a massive reeducation,'' says James McNeal Jr., president. He adds that ''suppliers get double or triple doses (in quality education), because each manufacturer conducts their own program with us.''
Mr. McNeal comments that communication between suppliers and the automakers now is ''different.'' For one thing, there is more of it. Cross-company plant visits are being stepped up, and Detroit is letting its suppliers get involved earlier in the design stage. ''Communication . . . is perhaps more trusting,'' McNeal says. Budd has access to the automakers' information and facilities ''that heretofore would have been very difficult to (get).''
William McCollough, vice-president of plant operations for Holley Carburetor, a division of Colt Industries, adds that ''conversations regarding problems and processes are dealt with in a more objective way,'' because the two sides are now talking statistics - and not making decisions ''that were largely effected by subjective'' intuitions in the past.
While Detroit tries to work on the zero-defect principle with its suppliers, there's another issue it's not ignoring: cost.
''The (automakers) put an awful lot of pressure on suppliers to reduce costs each year,'' says Harry Mathews, senior consultant at Arthur D. Little in Cambridge, Mass. ''(Detroit) doesn't have the large amount of capital it had before,'' and to compete in the world market, it has to narrow the cost gap with Japan.
This situation is forcing automakers into a new way of doing business: establishing longer-term commitments and contracts with their suppliers.
Detroit's practice has been year-long contracts, while suppliers ''would like to see contracts for five, six years,'' says John Hammond, an auto analyst at Data Resources Inc. ''Manufacturers have been resistant to grant long-term contracts. They've wanted to be able to exercise choice,'' he explains.
But for some suppliers to meet the new quality standards, it would require a major investment in new machinery and training. Mr. Hammond says suppliers aren't willing to make that investment until they have a guarantee that Detroit is committed for more than a year.
Hammond says Detroit is ''gradually bending'' in this direction. Ford and General Motors executives say they're serious about making those commitments. Ford has worked out 125 new long-term agreements and is considering 300 more, Chicoine says.
Robert Stone, vice-president of materials for GM, says the evolving needs of the automakers are already resulting in longer commitments. ''In order to manage costs, you need much closer ties with suppliers,'' he says. ''We give them long-term contracts now, and I'm talking multiyear, if we can get quality and economics in line up front.'' The move to work with suppliers in the design stage and to help them adjust to new delivery schedules and inventory practices implies the need for longer commitments, too, he adds.
The supplier-manufacturer relationship has come a long way, industry executives say. And says Albert Booth, president of Holley, ''It's going to continue to intensify.''
Suppliers still have to deal with the industry trend toward just-in-time inventory scheduling. The emphasis on quality needs to permeate the rank and file. Cooperation between the ''big four'' and their suppliers still needs solidifying. Those suppliers that can't make these switches are likely to find themselves in the ''dropped'' category in a few years.