Springtime for suppliers

Something is happening in supplier land. I don’t dare say it too loud. It’s like a ray of sunshine after a long winter. You don’t want it to get scared and fade away.

I first became aware of it speaking with a large chemical company in Europe two weeks ago. They supply resins to large automotive companies. “It’s not as bad as it used to be,” the supplier said. “The big automotive companies are beginning to work with us, you know, exchange some designs, underwrite the cost of some tooling and development. They no longer steal our designs and reverse-auction them to the lowest bidder.”  There was a pause in the conversation. “Even the American guys are getting better,” he added, for good measure.

For 25 years, I’ve been on the wrong side of the supplier discussion, arguing that original equipment manufacturers (OEMs) would be economically better served to co-create with their suppliers rather than beat them into price submission. A buyer at General Motors once told me, in the era when Purchasing Head Inaki Lopez was encouraging intimidation as a strategy, “Your theory of co-creation as it applies to suppliers does not even rise to the level of being wrong. You’ll never sell this here.” His prediction has proven so accurate that I’ve spent the last 25 years in my frozen supplier tundra, watching sourcing consultants help buyers slash costs and throats of defenseless suppliers too dependent on their order-givers to walk away.

Last week, though, I noticed some more ice melting from the trees. I was with a group that supplies parts to a large number of industries in the US and Japan. The most enthusiastic response to co-creation I got from this group was…from the automotive contingent. “Now that Ford has a Boeing person at the helm, things are downright good,” they said. “We’re sharing our best designs with them again. We’d stopped doing that many years ago.”

This weekend, a whole chunk of the ice cap melted under my incredulous eyes. The purchasing group at a large US healthcare company – yes you read it right, the purchasing group – is seeking help to build a new collaborative network capability. I read page after page of this RFP with trepidation, trembling at every page that this search for a new supplier co-creation capability might be a cover-up for the usual exercise of “We really are trying to lower cost.”  But no, it appears to be real.  This may be the end of the ice age for Western suppliers.

Oh yes, one more thing. Now that arrogance has been wiped off the face of the US automotive industry, there seems to be a new bully. Four companies in the last few weeks have voted for a new purchasing villain. You guessed it: Apple Computer appears to have risen to the top of the charts when it comes to treating suppliers badly. I wonder whether Steve Jobs is interested in automotive history.

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