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August 2011 | Adam Leach
much focus on reducing costs throughout the supply chain means US automotive
companies are unable to collaborate, claiming their “hands are tied”.
The US AutoSupply Chain at a Crossroads,
published by Case Western ReserveUniversity (CWRU), reported a mixture of market forces and
too much stress on cutting the price of parts has created a ripple effect in
the supply chain where companies do not have the opportunity or resources to
look at alternatives to simply negotiating lower costs.
study reported the mantra from every tier of suppliers was “our hands are
tied”. At the top level, companies such as the “big three” – General Motors,
Chrysler and Ford – need lower costs from vendors in order to stay competitive
with rival European and Japanese manufacturers. This in turn leaves tier one
suppliers with little choice but to demand reductions from their suppliers, and
this continues down to the individual component manufacturers.
report suggested this attitude towards supply chain relations is so “firmly
entrenched” in the industry that there is a strong possibility that this “self-defeating
cycle” will continue. Susan Helper, Carlton professor of economics at the
Weatherhead School of Management at CWRU, who worked on the report, said:
"In this future, instead of developing better products and thinking
critically about how to remove inefficiencies from processes that span multiple
firms, firms at each level of the supply chain generate profits by squeezing
margins of firms in the tier under them. This path is a recipe for
Helper also envisages an alternative where collaboration can flourish. This
approach is "characterised by collaborative relationships between firms at
all tiers of the supply chain, wherein firms share cost savings from
identifying and eradicating inefficiencies that they might not have been able
to address on their own".
study was based on a series of interviews and surveys with industry
professionals, tier one suppliers and business experts.