The newly independent Del-phi Automotive Systems Corp. wants to encourage its suppliers to cut costs by sharing some of the savings with them.
Delphi's purchasing chief, Ray Campbell, is edging away from the fixation on low prices that once characterized Delphi's former corporate parent, General Motors.
To aficionados of DaimlerChrysler's SCORE program, Campbell's gambit should sound familiar.
In fact, Campbell says he may create a supplier incentive system that combines aspects of SCORE with a vendor rating system devised by one of Delphi's board members, racing and aftermarket impresario Roger Penske.
Under DaimlerChrysler's SCORE program - SCORE stands for Supplier Cost Reduction Effort - suppliers volunteer cost-cutting ideas worth up to 5 percent of their annual DaimlerChrysler sales.
Campbell has other changes in store. Delphi wants to reduce the number of its suppliers by 50 to 90 percent. Currently, Delphi is supplied by 4,500 vendors.
However, Campbell is not sure exactly how Delphi's planned reduction will take place or what the final target will be. 'I'm going to let it evolve,' he said.
Campbell also wants to rekindle vendors' efforts to improve the quality of parts supplied to Delphi. Last year, suppliers improved quality by 20 to 25 percent, compared with previous annual improvements of 40 percent to 50 percent.
To achieve bigger quality gains, Campbell will empower Delphi employees to take direct action to improve quality.
At Packard Electric, for example, only 37 of the division's 6,400 suppliers are causing the bulk of the quality problems.
If Delphi quality engineers can work directly with those suppliers - instead of indirectly through the purchasing bureaucracy - Delphi may gain quicker improvements in quality.
Campbell's methods are not revolutionary. Other companies have adapted Chrysler's SCORE system, and a number of suppliers are pushing vendors to improve quality. The key is to implement these strategies effectively, Campbell said.
'It's usually a matter of refinements in the tools that we use. The devil is in the details. Sometimes it's how things are organized differently or articulated differently,' he said.
Campbell's spring cleaning is cleverly timed. After Delphi's May 28 spinoff from GM, the $26 billion company's executives were blessed with a once-in-a-generation opportunity to reexamine its entire purchasing strategy.
However, Delphi will avoid the temptation to shake up all its purchasing policies. The company plans to retain the reforms it enacted in recent years. For example, Delphi will not drop its policy of choosing vendors that can supply the company worldwide. That's a policy it inherited from its corporate parent, GM.
Delphi will not settle for national or regional purchasing arrangements, even though, for example, the company faces a dire paucity of quality suppliers in Latin America.
Likewise, Delphi will continue to rely on 'competitive tension' among suppliers to hold down prices. 'At some point, you have to test the marketplace,' Campbell said, 'to make sure you're getting globally competitive prices for what you're buying.'
Campbell outlined other aspects of his strategy:
Select suppliers early, allowing them to help design components.
Strengthen internal working relationships.
Last month, Campbell set up an e-mail chat box so that any purchasing employee anywhere in the world can send him a question. Everyone can see the question, along with Campbell's response.
Campbell wants to develop an objective rating system to determine which suppliers retain business and win new contracts. It could be similar to DaimlerChrysler's SCORE system or to Penske's approach that grades suppliers on price, quality, delivery, technical problem-solving and cost-cutting. Or it could combine aspects of both approaches.
Dale D. Buss is a free-lance writer in Rochester Hills, Mich.