Recent surveys by a nationwide consulting firm indicate a great anxiety among component suppliers about what buyers currently want. According to the survey, OEM buyers have put suppliers on their "preferred" lists mainly for price or cost considerations, rather than for quality or delivery reliability, as had been the case in the past.
The survey was sent to managers of plants in Pennsylvania, Ohio, Michigan, Indiana, Illinois and Wisconsin that produce components for automotive, farm equipment, home appliances, fasteners and other metal products.
The number one priority this year was "cut costs in any way you can." The number one priority in last year's survey was quality. On a scale of 1-10, with 10 being the highest, quality ranked 9.2. This year it only ranked 5.2. To increase productivity (and cut costs), many OEMs are using incentive programs to motivate their workforces, and these OEMs, such as GM, are recommending these programs to their Tier I suppliers as a way to boost productivity and cut cost per unit.
Also, according to the survey, plant managers are asking suppliers to take over inventory management. But on-time delivery problems are growing. In this year's survey, the importance of on-time deliveries rated a 7.9, which was up from 6.2 in 2000. Complaints include missed and late deliveries and that suppliers do not bother to tell OEMs when a shipment will be late.
Many OEM buyers are also outsourcing value-added services to suppliers and report that the suppliers perform the services as well or better than their own companies.
Even though survey respondents mention delivery and quality as important factors, their major concerns are productivity and costs. OEMs are compelling their suppliers to boost plant performance as a way to cut costs. But, you know, many finishing shops responded, years ago.
In the finishing shops I have visited, they are striving diligently to meet OEM expectations and deliver more than expected. Missed and late deliveries are not on the agenda. Turnaround time is something they are proud of. Value-added services are something many finishers have offered for years: assembly, packaging, storage, etc. Maybe finishers set the precedent for the rest of industry. Maybe OEMs have seen what can be done and are now expecting more from other suppliers.
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