The big three select suppliers on the basis of lowestprice

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Reference no: EM13614886

The following is an excerpt from a recent article discussingsupplier relationships with the Big Three North Americanautomakers.

"The Big Three select suppliers on the basis of lowestprice and annual price reductions," said Neil De Koker,president of the Original Equipment SuppliersAssociation. "They look globally for the lowest partsprices from the lowest cost countries," De Koker said,"There is little trust and respect. Collaboration ismissing." Japanese auto makers want long-term supplierrelationships. They select suppliers as a person would amate. The Big Three are quick to beat down prices with methodssuch as electronic auctions or rebidding work to acompetitor. The Japanese are equally tough on price but arecommitted to maintaining supplier continuity. "They workwith you to arrive at a competitive price, and they are willing topay because they want long-term partnering," said Carl Code,a vice president at Ernie Green Industries. "They [Hondaand Toyota] want suppliers to make enough money to stay inbusiness, grow and bring them innovation." The BigThree's supply chain model is not much different from the oneset by Henry Ford. In 1913, he set up the system ofindependent supplier firms operating at arm's length onshort-term contracts. One consequence of the Big Three'slow-price-at-all-costs mentality is that suppliers are reluctant tooffer them their cutting-edge technology out of fear the contractwill be resourced before the research and development costs arerecouped."

Contrast the Japanese supply chain model with that ofthe Big Three.
Why might a supplier prefer the Japanesemodel?
What benefits might accrue to the Big Three by adopting the Japanese supply chain practices?

Reference no: EM13614886

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