Everybody talks about the weather, goes the old joke. But nobody does anything about it.
In the auto industry, everyone talks about the inefficiencies of big supply chains, but nobody seems to be able to do anything about them.
A new supplier organization, formed last year in Chicago by companies of various industries, is looking for ways to help U.S.-based manufacturers better manage the various tiers of suppliers that serve them.
Two automakers, Chrysler Corp. and Honda of America Manufacturing Inc., are charter members of the new nonprofit group called the National Initiative for Supply Chain Integration Ltd., or NISCI.
Other charter members are Deere & Co., Harley Davidson Motor Co., AK Steel Corp., IBM, Procter & Gamble, National Association of Purchasing Management, Supply America Corp. (a U.S. Department of Commerce organization) and Trane Co.
Their products and industries differ vastly, but all of these organizations have long supply chains.
In the auto industry's case, it is known that opportunities to cut costs and boost productivity are being missed. But finding ways to make improvements at the supplier level has been difficult.
'Our approach is to develop experiments and run them across the supply chains of companies to learn how to make supply-chain integration work,' says Mike Doyle, chairman and CEO of NISCI. 'Experi-ences are shared so that member firms can benefit and solutions are found for all trading partners.'
One problem with managing automotive supply chains is determining who is in the chain and who isn't, Doyle says. 'Many manufacturers on the lower tiers are unaware that they are automotive suppliers and don't identify themselves as such. We need to reach all of those companies.'
A matter of trust
Research has shown that larger auto industry manufacturers have waste in their supply chains accounting for as much as 20 to 30 percent of costs. And the nation's 330,000 smaller manufacturers lack the staffs and sophistication to help their suppliers operate at top efficiency, Doyle says.
He reports that one important step in better management is creating trust. Trust is hardly a given among suppliers - even those working for the same OEM, he says.
'Far too frequently, there's a shortfall,' Doyle says. The auto industry has a history of supplier distrust generated by treating suppliers roughly and doing a lot of dictating.
Another crucial step is empowerment, or encouraging the involvement of suppliers at all levels.
'Supply-chain decisions should be made at the place where the competency resides,' Doyle reasons. 'But many suppliers are afraid to question orders from above. The supplier fails to mention any savings or improvements that could be realized, saying to himself, 'I'll just do the job, keep my mouth shut and get paid.''
Room to learn
There are numerous exceptions to the problems Doyle describes. One of the most notable is Chrysler; its supplier relations program has served as a blueprint for the auto industry. But Chrysler is participating in the new organization in hopes of finding additional benefits, says Jeffrey Trimmer, Chrysler's director of operations and strategy for procurement supply.
'We have a history of working with new ways to improve supplier relationships and the supply chain,' Trimmer says. 'NISCI provides a great opportunity to exchange information with other industries and learn. We in the Midwest tend to be shortsighted and forget that advances are being made in other industries.'
Honda, the other automotive charter member, sees educational benefits as a byproduct of joining NISCI.
'There's a strong need to develop purchasing professionals whose training reflects the changes being made in purchasing,' notes Jonathan Stegner, Honda of America's purchasing assistant manager. 'An organization such as NISCI can address these changes as well as influence and help set the direction of purchasing and supply-chain management education.'
Doyle says NISCI has already begun producing measurable benefits for its members. By 1999, he says, the benefits will range from tens of millions of dollars to hundreds of millions.
NISCI owes its creation to a federal government committee. The U.S. Commerce Department's National Institute of Standards and Technology first proposed creating a sort of industry think-tank to explore supply-chain issues. The new organization is funded by membership dues, plus a small share of the savings that members reap from learning and adopting new supply-chain practices.
It functions through a board of directors consisting of end-product users, raw material firms and small to medium-sized intermediate processors.
'Our main challenge for the future is that we're trying to create a new economic environment. We think supply-chain integration will be one of the most significant future shifts in the economy,' Doyle says.
John Bell is a free-lance reporter based in Chicago.