Delphi plans to cut its global supply base by 75 percent even as it seeks more collaboration with suppliers.
"Globally, we buy around $14 billion in direct material and have a little more than 4,000 suppliers," says Delphi purchasing chief Dave Nelson. "That's a lot of relationships to manage."
Delphi had 9,000 suppliers three years ago. It aims to cut the number to 1,000, Nelson says. No target date has been set.
Of those 1,000, 100 will be so-called strategic suppliers -- companies that supply Delphi with critical systems and modules.
Nelson says about 200 will be classified as "near-core" suppliers, or those that sell unique systems and modules.
The remainder will consist of 500 commodity suppliers and as many as 200 small, niche suppliers that sell "high-value, low-risk" commodities.
Delphi, the world's largest auto parts supplier, has been on a mission to reduce costs. Nelson says as much as 60 percent of Delphi's costs come from its supply base.
But reducing the number of suppliers is only part of the change.
Delphi also will teach Tier 2 and Tier 3 suppliers lean manufacturing principles.
"They will be the partners who share in our success," says Nelson, who joined Delphi in 2002. He examined the Japanese auto partsmakers while working for Honda of America Manufacturing Inc. for a decade as a senior purchasing executive.
Global purchasing should be based on collaboration and cooperation, not the "old contentious, price-focused approach to procurement," Nelson says.
Partnering with suppliers is crucial to removing waste to reduce costs, he says.
Automakers often push costs down the supply chain rather than remove waste.
Delphi, with the assistance of its suppliers, plans to establish cost standards in everything it designs and buys, and then work with suppliers to eliminate waste.