Stallkamp: Make supplier alliances

Suppliers should form alliances and outsource select functions to service providers to meet increasing demands that automakers are pushing on the supply chain, said Tom Stallkamp, CEO of MSX International.

2001 Management Briefing Seminars index
Suppliers need not rush to acquire companies and march their way into becoming integrated mega-suppliers, he said Wednesday at the Management Briefing Seminars.

"Buying up companies seems increasingly risky and costly," Stallkamp said. "We must resist the trend to integrate at the first tier level, or we will only be replicating the sins and costs of vertical integration the OEMs committed."

A supplier alliance is a flexible, nimble and temporary alternative to acquisitions, he said.

"It's best to start small than large, some trivial little project, then work up from there," Stallkamp said.

Automakers are pressing Tier 1 suppliers to assume more internal product development; increased warranty responsibility; increased financing costs, including carrying the costs of development into production; and greatly increased sales, general and administrative costs, he said.

Stallkamp said forming alliances offers advantages over integration, including preserving the independence of the supply base and tailoring the supply chain for the specific product and automaker needs. 

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