SuRe
Supplier Relationship Index
Front-runners slowing down, the chasing pack
catching up
In this special feature for the Automotive News Europe 2010 Congress,
SupplierBusiness, an IHS Automotive company, introduces a new tool to monitor
OEM-supplier relationships which shows that relations between the historically most
confrontational OEMs, i.e. the “Detroit Three”, and their suppliers are on the mend,
while top ranked Toyota, Honda and BMW have partially lost their touch.
The last year has represented one of the most turbulent periods for the automotive industry, with the bankruptcies
among both global automakers and suppliers, high-profile vehicle recalls, new partnerships between OEMs and changes in
the country market rankings. Concurrent to these events, a shift towards more collaborative relations between the supply
base and the traditionally more adversarial OEMs has been recorded as measured by SupplierBusiness’ SuRe (Supplier
Relationship) index, which tracks the suppliers’ view of the business practices of their customers together with the
attractiveness of working with them.
On the other hand, some of those OEMs which had been in previous years been praised for their favourable conditions and
sensible approach in interfacing with suppliers have given ground to their rivals, outlining a reduction of the gap between
the front runners and the chasing pack in achieving a successful and fruitful collaboration with the supply base.
SupplierBusiness
An IHS Automotive Company
SuRe
Supplier Relationship Index
OEMs seem to have understood the value that supplier relationships play towards achieving their strategic goals and many
of them are actively investing resources in accommodating deep changes in their business practices in order to make them
fairer for suppliers. All but the three top rated carmakers of last year (Toyota, Honda and BMW) have posted a gain in the
SuRe index, although some deep rooted differences persist among some poorer performing OEMs, which will take years
and further substantial investment to completely remove the competitive disadvantage of poor supplier relations.
The “pedal storm” and the announcement of
substantial price reduction targets have not
compromised the position of Toyota, which tops the
SuRe index ranking. Toyota, with a SuRe index result
only partially down from last year, can still boast
supplier relations as one of its best practices, even if
its attractiveness as a customer has been somewhat
affected by one of the most discussed and
controversial vehicle recalls in memory.
Toyota and GM: two once opposite models of supplier
relationships getting closer?
GM, at the bottom of the league for many years
before being replaced by Chrysler, records dramatic
improvements in the SuRe index thanks to the
improved outlook and a specific corporate-wide
program launched by its CPO, whose intrinsic target
has been to improve relations in the way the
Purchasing and Engineering departments interface
with suppliers.
As a result GM is bridging the gap with other mass carmakers at a fast pace, coming as it does from a lowly position in the
index because of the many years of more adversarial and confrontational management of supplier relationships. GM seems
to be on the same path as Ford, which has completed a challenging turnaround and has met increasing favour among
suppliers. Between 2006 and 2010 Ford has passed from the second last position in the SuRe ranking to seventh spot.
About the SuRe Index
SuRe Index Quick facts
WHAT IS IT? Survey-based index, data collected from 2006
WHAT DOES IT DO? Gives a quantitative assessment of suppliers preference for OEMs
based on working situations in existing contracts and suppliers’ assessment of automakers’
long-term outlook
STRUCTURE: 28 questions pertaining to 5 concepts, defining the overall result on a 0 to
1,000 scale
RESPONDENTS: 192 in 2010
RESPONDENTS’ LOCATION: 50% in North America, 41% in Europe, 9% Other
RESPONDENTS’ BUSINESS FUNCTION: Senior to middle managers working in
Sales and Marketing (49%), Engineering (17%), Program Management (9%), R&D (6%),
Quality (5%), Manufacturing (5%), Purchasing(3%), Finance (3%) at suppliers
SupplierBusiness
An IHS Automotive Company
SuRe
Supplier Relationship Index
The SuRe index is based on SupplierBusiness’ well-established surveys of the supply industry, which started in 2005. From
its inception, the survey has seen the participation of more than a thousand senior to middle managers working at
automotive suppliers and interfacing with OEMs personnel.
A variety of suppliers’ organisational functions have been surveyed in order to include the different perspectives on the
business relations and practices of OEMs. The 28 questions have been organised in five patterns and encompass the entire
period of the supplier’s interface and involvement with the OEM - from RFQ to warranty liability management.
The concepts
SupplierBusiness
An IHS Automotive Company
SuRe
Supplier Relationship Index
The profit potential for the supplier is defined by the rating of commercial
aspects such as demand for annual productivity gains, requests of one-off
price reductions, payment of development expenses, payment terms for parts
and tooling, overall return on investment and the reward of cost-saving ideas
proposed by the supplier to the OEM.
INTERESTINGLY...
Honda loses top spot to Porsche this year. BMW (9th) slips further from 2009
and confirms the now five year long trend in reduction of profit for suppliers.
The effects of the €4bn purchasing savings target for 2012 are having an
impact on suppliers.
.
The organisation pattern encompasses the support received by the
supplier, the quality of communication given to the supplier, an assessment of
the quality and stability of volume planning, the preparation and support in
production ramp-up and towards model launch as well as the amount of
redesign and the management of design changes.
INTERESTINGLY…
Toyota and Honda have an extensive advantage in this concept over other
OEMs. The recent turbulence at Toyota has not damaged the suppliers’
acknowledgement of the organisation as one of the most admired companies
in the automotive industry.
The management of suppliers’ intellectual property, the dependability of the
carmaker in terms of commercial partnerships, in keeping agreements on price
and in preferring stable supply contracts are included in the trust concept.
INTERESTINGLY…
Ford North America has recorded four consecutive and substantial increases
in the results for this concept between 2006 and 2010. From being rated the
second least trusted automaker in 2006, in 2010 it has secured the second
position among mass carmakers. Are the Aligned Business Framework
principles finally seeing a wider implementation?
With “pursuit of excellence” we assess how much the carmaker yearns to
achieve a competitive advantage over competitors by sensibly leveraging the
supplier in getting the best-in-class quality and technology delivered to the final
customer. The topics of this concept include the management of quality, testing
and validation, product liability guarantees and logistics. Excellence is also
defined by the assessment of the technical competence of the OEM according
to the supplier.
INTERESTINGLY…
Toyota has been slipping further in this field, particularly due to a somewhat
more lax attitude in the management of quality delivered by suppliers, a trend
which began in 2006, well before the “pedal storm”…
The concept (Long-term outlook) assesses the sentiment of suppliers with
regards to the future potential success of certain OEMs as customers, the
desirability to work with them for the long term prosperity of the supplier itself
and the effective opportunities in getting business from such OEMs.
INTERESTINGLY…
The market leadership in high volume growth areas coupled with higher
turnover of suppliers and new operations in the US contribute to VW’s
positioning in this concept. Toyota lags behind because it does not represent a
realistic opportunity for new business according to most suppliers due to the
difficulties suppliers allegedly face in entering the supplier panel of the
Japanese OEM.
SupplierBusiness
An IHS Automotive Company
SuRe
Supplier Relationship Index
CONTACT INFORMATION
For more information on this research, please contact:
Matteo Fini
Lead Researcher
SupplierBusiness
Phone: +44 (0)20 3159 3478
Email: matteo.fini@supplierbusiness.com
SupplierBusiness
An IHS Automotive Company