DCX stokes procurement fire

The lovefest with suppliers is over at DaimlerChrysler.

2001 Management Briefing Seminars index
Instead of relying on pre-selected suppliers for new programs, as it has in the past, the automaker will bring competing suppliers into the vehicle development process as soon as the clay models are complete, DaimlerChrysler COO Wolfgang Bernhard said Wednesday at the Management Briefing Seminars.

DaimlerChrysler will require suppliers to suggest component ideas early in the product development phase and then award the business based on the best ideas.

The move is a marked change from the 1990s, when DaimlerChrysler fostered long-term supplier relationships and strived to award programs to incumbents, Bernhard noted.

Instead, DaimlerChrysler has attempted to "right-size" its supply chain since last year, Bernhard said. The automaker has re-sourced about $2 billion worth of components in the past nine months.

DaimlerChrysler's changes have been drawing increasing scrutiny from the supplier community in recent months, as the automaker attempts to reduce its component costs.

"They intend to accomplish the same functional objectives but with more discipline," said John Groustra, a partner in the Birmingham, Mich., consulting firm Conway MacKenzie & Dunleavy. "There's more potential for reward to the performing supplier."

Tom Stallkamp, the former head of Chrysler Corp. procurement and now CEO of MSX International in Auburn Hills, Mich., said that straining supplier relations is a risk for an automaker. "If you have an extremely adversarial relationship, they're going to go where it's smoother," Stallkamp said.

General Motors is moving fast toward creating smooth supplier relationships, Stallkamp added.

But Bernhard said DaimlerChrysler is moving to a new era of supplier relations.

"We do re-source, and we will re-source in the future," Bernhard said. "If you don't re-source, they drag you in their grave. You've got to cut yourself loose."

To improve its communication with suppliers, DaimlerChrysler's new component teams cut the number of contacts working with each supplier to two. This decision was driven by suppliers telling the automaker it was difficult to approach.

Said Bernhard: "If there ever was a disconnect with suppliers, this is now over. They are committed to us. We are committed to them."

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