Are Your Suppliers in Trouble? Warning Signs and What to Do

Tariffs, trade disputes and changes in consumer tastes can hurt your suppliers–and, in turn, you.

While the U.S. economy overall is strong, there are risks that will likely affect the automotive supply chain in the coming year. These include tariffs on products such as steel and aluminum, and continuing trade disputes with China.

In addition to the upheaval in global markets, the shift in the automotive industry away from passenger cars and toward trucks and sport utility vehicles has caused automakers to realign their product offerings, lay off workers, and end the production of a number of car models.

For suppliers who have been dependent on contracts to provide parts for these vehicles, this realignment could be very problematic—and if those suppliers are in your supply chain, their trouble could cause ripple effects for your business.

While the U.S. economy overall is strong, there are risks that will likely affect the automotive supply chain in the coming year. These include tariffs on products such as steel and aluminum, and continuing trade disputes with China.

In addition to the upheaval in global markets, the shift in the automotive industry away from passenger cars and toward trucks and sport utility vehicles has caused automakers to realign their product offerings, lay off workers, and end the production of a number of car models.

For suppliers who have been dependent on contracts to provide parts for these vehicles, this realignment could be very problematic—and if those suppliers are in your supply chain, their trouble could cause ripple effects for your business.

Global Trade Uncertainties

The Trump administration’s trade policies are having a significant impact on the automotive industry, as well as other manufacturing industries. Commodity costs are rising due to the increased tariffs and the retaliatory tariffs other countries have imposed. Ford and General Motors have each reported that they expect steel and aluminum costs are likely to be $1 billion higher in 2019 than they were in 2018. Suppliers’ profitability will likely suffer from these increasing commodity costs. Smaller suppliers using fixed price-contracts are already dealing with pressure from higher raw materials costs and an inability to pass those costs onto consumers.

There is little doubt that these higher tariffs are already causing stress in the industry. Some manufacturers were able to obtain relief from the tariffs on certain items; however, the deadline to apply for such exemptions has now passed, and the government has only approved about 10% of the requests that were submitted.

But perhaps even more alarming is the uncertainty of what the future holds. For example, the United States and China recently agreed to a 90-day “cease fire” in the escalating trade war, which will (at the time of this writing) end on March 1. At this time, no one can know whether the negotiations will be successful, or what would be deemed a success by both countries. Suppliers are in a difficult position because they may be subject to new tariffs or other restrictions on their products with little notice, and almost no ability to anticipate and prepare for these changes before they occur.

Reduced Volumes and Changes in Consumer Taste

In addition to trade uncertainty, there has been a significant shift in customer demand for vehicles in the United States. In the past few years, the demand for passenger cars has decreased and the demand for SUVs and light trucks has increased. However, the increase in demand for SUV and truck products is unlikely to offset the reduced car demand, leading to lower volumes overall.

Manufacturers are already responding by changing their product lines and eliminating some car models altogether. Recently, GM announced that it would stop production of several passenger cars, idling five plants in North America and implementing layoffs of more than 10% of its workforce. In early February, GM laid off  1,300 salaried workers at its Warren Technical Center in Michigan. Ford has also announced that the only passenger car it will make in the future will be the Mustang.

The dramatic reduction in passenger cars and softening volume may push some suppliers into distress. According to Laura Marcero, the industrial practice leader at Huron Consulting Group, suppliers are likely to see lower volumes in the next 18 months due to these changes. These changes in demand will affect suppliers who focus on products for passenger cars. They will also impact those who have already been experiencing some financial difficulty. This is likely to exacerbate the effect of increasing commodity costs and trade woes facing suppliers and the industry as a whole.

Identifying and Protecting Against Troubled Suppliers

These market conditions are likely to cause some suppliers to have difficulty fulfilling orders, and they may seek price increases from their customers, including other, higher-tier suppliers in the supply chain. In addition, the shift from passenger cars may cause individual suppliers who are dependent on those products or who are operating on thin margins to falter.

A troubled supplier can cause significant harm to the upstream suppliers and ultimate customers.  Customers should routinely evaluate the companies in their supply chain for warning signs of distress:

  • Requested price increases, accelerated payment terms, or customer financing support, or use of factoring (a company selling its accounts receivable at a discount to raise cash)
  • Late deliveries or changes in product quality
  • Requests for technical or other support from customers
  • Delayed collection of accounts receivable and delayed payments of accounts payable
  • Employment of consultants, including restructuring consultants, and financial advisors
  • Deteriorating market position, including lawsuits or warranty demands
  • Delayed or restated audited financial statements
  • Removal and replacement of key management roles
  • Changes in debt structure, such as new loans, extensions, and modifications of existing loans.

Action Plans for Customers of Troubled Suppliers

Understanding your options is key to resolving these issues in the most advantageous manner. Customers should routinely analyze their contracts to maximize their position in dealing with potentially troubled suppliers. A customer’s existing contracts with a given supplier have a substantial effect on the customer’s rights and remedies, both pre-bankruptcy and post-bankruptcy. For example, terms of the contracts govern critical issues such as:

  • Ability to terminate the contracts
  • Supplier’s stop shipment rights
  • Customer’s re-sourcing rights

Ability to demand adequate assurance of future performance pursuant to section 2-609 of the Uniform Commercial Code or consider the contracts repudiated by the supplier

  • Bankruptcy considerations, including assumption and rejection rights
  • Recovery of tooling
  • Lien and setoff rights

To preserve supply, manufacturers also may participate in pre-bankruptcy workouts. These transactions often include multi-party agreements among the troubled supplier, its most significant customers, and its secured lenders to solidify the commitments of each party to keep the supplier operating while the workout progresses. These agreements commonly include access and accommodation agreements, and subordinated participation agreements.

An access agreement permits the customer, under certain circumstances threatening production and only as a last resort, to access the supplier’s plant to produce parts using the supplier’s own equipment and employees, pending transfer of the contract or facility to a healthier supplier.

Through an accommodation agreement, the customers may provide accommodations that protect the lenders’ collateral base through protections on inventory and receivables, commitments to continue sourcing parts to the troubled supplier and limitations on setoffs, (or demands in bankruptcy settlements). In return, the lender agrees to provide working capital financing and not to foreclose or otherwise impact the supplier’s business.

Faced with unknown foreign trade risks, increasing commodity costs, and the realignment of vehicle lines to account for shifting consumer demand, all suppliers and customers need to be aware of any potential disruption in the supply chain. By actively monitoring vendors and taking the proactive steps outlined above, automotive suppliers can protect the supply of critical parts and continue to fulfill their contracts with their own customers.

27 February 2019 | Ann Marie Uetz, John A. Simon, Tamar N. Dolcourt | Industry Week

Supplier cyber risk concerns auto industry

Dive Brief:

  • In a new study by Synopsys and SAE International, 73% of respondents expressed concern about the cybersecurity of third-party providers, yet only 44% said their organization imposes cybersecurity requirements for products from upstream providers.
  • Securing the Modern Vehicle: A Study of Automotive Industry Cybersecurity Practices also found 30% of organizations don’t have an established cybersecurity program or team, and 63% test less than half of the automotive technology they develop for security vulnerabilities.
  • “This study underscores the need for a fundamental shift — one that addresses cybersecurity holistically across the systems development lifecycle and throughout the automotive supply chain,” Andreas Kuehlmann, co-general manager of the Synopsys Software Integrity Group, said in the release.

Dive Insight:

The automotive supply chain is long and complex. A break in the chain at a small, tier 3, single-part producer can be disastrous.

There are plenty of portals and opportunities for “bad guys” to breach security. According to the EY Global Information Security Survey 2018-19, 1.95 billion records containing personal information and other sensitive data were compromised between January 2017 and March 2018, and 550 million phishing emails were sent out by a single campaign during the first quarter of 2018. The average cost of a data breach last year, EY reported, was $3.62 million.

Opportunities do exist for automotive supply chains to protect themselves. One organization, the 3,000-member Automotive Industry Action Group (AIAG), last year released the Cyber Security 3rd Party Information Securitypublication to support industry efforts to protect sensitive data by outlining a unified set of cybersecurity guidelines for automotive trading partners.

Its strategies are based on industry best practices and standards. The National Institute of Standards and Technology (NIST) helped create the document. Also participating were security leaders from General Motors, Ford, Honda and Fiat-Chrysler, with additional input from Toyota, Nissan, Caterpillar, Bosch, Continental and Magna International.

The guide covers such areas as access controls, data encryption, vulnerability management, security audits of suppliers/third parties, data retention and disposal and security investigations. Along with this framework, each original equipment manufacturer (OEM) can take additional measures to increase security of its suppliers and their supply chains.

“Over the course of the past 25 years, we have seen a remarkable shift in enterprise value from tangible to intangible assets. Data is the new currency,” J. Scot Sharland, executive director of AIAG, said when the publication was announced. “As such, more effective command and control of data has become an enterprise risk management priority.”

07 February 2019 | Barry Hochfelder | Supply Chain Dive

In latest bid to counter China, US blocks sales

Dive Brief:

  • The U.S. on Monday placed Fujian Jinhua Integrated Circuit Company on its “Entity List,” which prohibits the company from purchasing American parts due to national security concerns.
  • In this case, the national security concerns relate to intellectual property theft. The New York Times reports the listing is the latest U.S. move to more strictly regulate business with China.
  • Earlier this month, the U.S. Treasury Department outlined new ways to limit foreign investment in China. China reportedly asks U.S. companies to hand over technology rights in exchange for market access, a practice the U.S. objects to and is trying to counter.

Dive Insight:

The conflagration around China tariffs is overshadowing the issue of the theft or misuse of intellectual property (IP). Technology companies selling into China might tacitly ignore the ramifications of IP issues in exchange for sales revenue, but this long-term problem is becoming a battlefront on the U.S. trade war with China.

While most feel that the tariff issues with China will ultimately be successfully negotiated, the theft of IP by China or other countries will remain a critical issue. As it should.

We read about high profile intellectual property theft issues and are aghast, but at the same time ignore the day to day devaluation of our company’s IP through its casual handling and lack of understanding of its importance.

Sure, our prints and other documentation might have a clause in the title block claiming confidentiality but I’ll bet that most buyers, or suppliers, have never read it. The boilerplate on our purchase orders and contracts also have an IP clause that one needs a magnifying glass to read. I’ve heard too many buyers and sellers refer to those clauses as ‘food for the lawyers’.

We tacitly trust our tier-one suppliers to protect our IP, and by extension, their critical suppliers as well. But what about the other players in the extended supply chain? In our search for lower costs and faster deliveries, there might be members of the extended global supply chain with less regard for IP protection.

In the speed of light, our prints and specifications rocket around the world for essentially everyone to see, bad actors included.

Supply chain managers can at least offer a first level of protection by making sure that all suppliers sign a confidentiality agreement. Extend that protocol to critical tier-two suppliers as well. I am not naïve enough to think that a signed CDA will stop the spread of IP theft, but it will offer some legal protection for your company and set the tone with your suppliers that you treat IP carefully. And that you expect the same from them.

31 October 2018 | Rich Weissman | Supply Chain Dive

Trade wars create ‘another breeding ground’ for poor supply chain ethics

Dive Brief:

  • AsiaInspection, which performs supplier audits, production inspections and lab testing, found ethical progress in factories has stagnated since the second quarter of 2018, indicating “brands and manufacturers are gradually growing complacent.”
  • The timing of the drop-off in ethical progress aligns with “tariff and protectionism concerns [taking] center stage,” according to the report.
  • Working hours and wages continue to be the most pressing ethical concerns. Scores in waste management have also deteriorated, but as a result of tightened standards rather than deteriorating progress, AsiaInspection said.

Dive Insight:

Are supply chain ethics becoming a casualty of the trade wars? No. There have been ethical issues in the global supply chain before the trade wars, and there will be ethical issues after trade peace is declared.

While there are islands of ethics throughout the supply chain, the rising tide of ethical shenanigans are beginning to swamp those shores. Trade wars are just the latest excuse for poor behavior.

Ethics in the global supply chain are looked upon through a different lens. What may pass for strong ethics in one country or region may be considered criminal in another, making standardized audits all the more difficult. Cultural norms certainly impact ethics, as do politics and economics. Will trade wars, or other economic pressures, create yet another breeding ground for poor ethical behavior? Human behavior says most likely.

I am confident ethics for traditional buyer and seller relationships are baked into many organizations, especially ones that are larger and more sophisticated. As a lifetime member of the Institute for Supply Management, I have generally followed their Principles and Standards of Supply Management Conduct throughout my career. Yet, I have seen blatant ethical breaches with supply chain colleagues over the years that made my skin crawl. In one job, my boss was the biggest culprit, bragging about supplier-paid family vacations.

I have seen reasonable ethics on the sell side, with suppliers typically reflecting my own ethical standards. Sure, there were soft areas with suppliers out of my control throwing around gifts to engineers and facilities managers who specify product or services. Internal ethics training in many organizations educate those in positions of influence to recognize ethical challenges, but it does not eliminate them.

Sadly, ethical issues in the extended supply chain are outside of the influence of most supply chain managers. Perhaps the best way to fight an ethical decline is to keep their own house in order and lead by example. At least they will be able to sleep at night.

15 October 2018 | Rich Weissman | Supply Chain Dive

Does Tesla’s ‘big ask’ for cash from suppliers risk disrupting the supply chain?

Dive Brief:

  • Tesla sent a memo to some of its suppliers, asking to return cash to the automaker, The Wall Street Journal reported. Tesla did not respond to Supply Chain Dive’s request to confirm the memo.
  • The automaker told the Journal it is looking for price reductions from some of its suppliers to improve competitive advantage.
  • Since the beginning of the year, “we’ve seen a huge run up” in the amount of money due to suppliers, Bill Danner, president of CreditRiskMonitor, a financial risk analysis and news service, told Supply Chain Dive. The figure, however, isn’t unexpected as Tesla ramps up production of the Model 3.

Dive Insight:

At the end of the first quarter of 2018, Elon Musk assured Tesla shareholders he’s feeling “quite confident” the auto company will have positive cash flow in the third and fourth quarters of the year. If Musk is able to deliver, the result will be a sharp turnaround from the past several quarters of millions in negative cash flow.


Credit: Shefali Kapadia / Supply Chain Dive, data from CreditRiskMonitor

On its path to turn the numbers around, Tesla has boosted production, restructured its workforce and now it is going to its suppliers to negotiate prices and payment terms. “If they can get better payment terms, that won’t make it more profitable, but it will at least cause them to have better cash flow, because they don’t have to pay the suppliers quite as quickly,” Danner said.

But Danner doesn’t think most suppliers have the financial capacity to move the needle far enough to bring Tesla’s cash flow into the black.

“The suppliers are probably feeling a little stressed out at the moment,” he said. As the automaker boosted production of its vehicles, it likely requested more parts produced quickly by its suppliers, along with engineering and design changes. “And now he wants money back? Those are big, big asks.”

As Tesla demands more of its suppliers, it needs to consider the long-term impact, Marcell Vollmer, chief digital officer at SAP Ariba, told Supply Chain Dive in an email. “It’s easy to ruin trust but takes ages to rebuild.”

While Tesla has reportedly asked for cash back, Volkswagen went to its supplier Prevent years ago with the same goal to boost profits. It asked Prevent to lower prices, but the move backfired. “Prevent was a single supplier and stopped delivering seat covers. Volkswagen had to stop production. The supply chain got disrupted and … Volkswagen had to delay delivering thousands of cars to consumers,” Vollmer said.

Delayed car deliveries would mean delays in funds coming in — and could translate to late supplier payments.

Since the beginning of the year, Danner said Tesla’s delinquency rate of supplier payments has stayed about the same. “They’re not paying everybody on time, but they’re paying a lot of their vendors on time,” he said.

If the delinquency rate increases, it could sound alarm bells for vendors. Tesla is “some distance from bankruptcy,” Danner said, but given its high debt and financial structure “if the economy stumbles, this company is pretty vulnerable to economic shock.”

23 July 2018 | Shefai Kapadia | Supply Chain Dive

Inbound supply chains subject to growing disruption

Interruptions to the smooth flow of parts to assembly plants are becoming more commonplace, according to research from global insurance broker JLT Specialty.

Recorded incidents last year – typically factory fires, hurricanes and labour strikes – increased by more than 30% compared with 2016 to reach 1,699 , affecting 5,585 suppliers across 10,809 sites, according to the analysis.

Factory fires and explosions were the greatest cause of interruptions at 318 cases, up from 180. Merger and acquisition activity was next at 247 incidents, followed by hurricanes or typhoons at 116.

Regionally, North America suffered the most, with 777 disruptions – more than Asia and Europe combined.

One of the most dramatic examples last year was Hurricane Harvey, which hit the southern US in August.

More recently, a fire at the Meridian Lightweight Technologies’ plant in Michigan caused a parts shortage last month. The incident led to Ford stopping production of the F-150 at its Kansas City plant, Missouri, for a week, while BMW and FCA adjusted their production schedules.

Elsewhere, a truckers’ strike in Brazil interrupted vehicle production there in late May and early June.

London-based JLT says the research findings provide a clear picture of the risks suppliers are exposed to and should help vehicle manufacturers pinpoint weak links in their supply chains.

Though tier two and tier three suppliers are just as likely to suffer interruptions as those in the tier one category, there is usually least visibility in the lower tiers, according to the report.

Matthew Grimwade, JLT Specialty’s head of automotive, said: “Our research shows that automotive manufacturers face some serious challenges – not just in terms of the growing number of disruptive incidents to the supply chain industry, but in the diversity of these events, too.

“Being able to gain an insight into the key areas of exposure and supplier vulnerabilities is essential if automotive manufacturers are to effectively prioritise risk, prepare a plan and protect their business.”

The research was conducted in partnership with US supply chain resilience solution provider, Resilinc.

12 June 2018 | Steve Garnsey | Automotive Logistics

ELD suppliers prepare for a second wave of adoption

Federal authorities will start enforcement on April 1 of a mandate that requires all commercial cargo trucks to be equipped with an electronic logging device (ELD). Transportation companies ramped up adoption last year, but estimates indicate up to a few hundred thousand trucks have yet to install the device.

With more than a hundred suppliers in the market, there’s bound to be enough ELDs to meet the demand. But many in the transportation industry say quality issues and a shortage of replacement parts could hamper adoption.

ELD demand remains high in early 2018

Since the mandate was first announced in 2014, manufacturers have flooded the market with more than 100 ELD products. These vendors run the gamut from truck manufacturers and telematics companies that have been in business for years, to startups whose only business is ELDs.

Last year saw a surge in demand as many carriers waited until the third and fourth quarters of 2017 to deploy ELDs, according to a report by Driscoll and Associates.

Velociti, a company that specializes in the deployment and maintenance of aftermarket technology products for transportation companies, spent much of last year installing ELDs Velociti president and COO Deryk Powell expects a continuation of strong demand in 2018. “Although the official mandate date has passed, many factors have contributed to the demand remaining strong into early 2018, which is a trend we expect to continue,” Powell says.

The cost of an ELD isn’t especially expensive (about $500 per year), but many owner-operators say such rigid tracking will reduce their autonomy, and most importantly, profit, says Clem Driscoll, founder and president of marketing consulting and research firm C.J. Driscoll & Associates. He estimates there are “a few hundred thousand” trucks that have yet to install an ELD.

“They’re afraid of losing money … They are concerned that time is going to be taken away from their drive time, or some portion of it, under the rules and that it’s going to kill them,” Driscoll says.

Quality a concern for lower-cost units

The wait-and-see approach and last-minute deployment of ELDs has thrown a kink in the ELD supplier market, making it a challenge to predict demand. The Owner-Operator Independent Drivers Association has fought the mandate and sent a letter to the House Transportation and Infrastructure Committee in March, noting “mounting issues” including malfunctioning devices, system failures, faulty GPS tracking and inaccurate recoding of duty statuses.

Many suppliers haven’t been able to meet customer expectations, Powell says. Core ELD functionality and reliability are top needs, along with a reasonable expectation for ELD providers to offer a proven process for the adoption, integration, training and support for the platforms. “Support — in particular the ability to troubleshoot problems and replace hardware efficiently when necessary — has been an area where many have struggled,” Powell says.

Current buyers in the market are now largely owner-operators seeking a low-cost solution. ELDs range from stand-alone tethered devices to tablet-based solutions and even BYOD (bring your own device) models that enable the driver to use their own phone or tablet. The FMCSA provides a checklist for choosing an ELD and maintains a list of registered self-certified devices

While the market includes products by big names such as Garmin, Verizon and Omnitracks, there are dozens of new suppliers in the space. EROAD went to market last year with an end-to-end ELD solution that offers full compliance and third-party certification to ensure owners are meeting compliance requirements.

The company has focused on meeting the needs of customers who are increasingly dissatisfied with other ELDs, says EROAD President Norm Ellis. “The regulation is over 640 pages long, to tell you how in-depth it is. There are many facets to it, and if you miss one, you won’t be in compliance,” Ellis says.

Meeting demand with added value

EROAD brought its product to market in March of last year, and like any new product, the device had a few “blips on the road,” says Ellis. Issues were resolved, and demand was so strong there were a couple of months where EROAD was up to a few hundred units short.

While that surge started to taper after the deadline, Ellis forecasts another wave of purchases as enforcement begins to ramp up. “Many small fleets and owner operators were still waiting on the sidelines to see if the mandate was really going to go through,” Ellis says.

Beyond simply meeting compliance, some ELD suppliers are bringing additional value to the market with devices that offer other features like IFTA state tax reporting, electronic pre-trip inspections and complete fleet management systems. EROAD promotes itself as one platform with a “continuous ROI” to meet business needs.

What could be challenging in 2018 is meeting the supply of replacement hardware and repair technicians to resolve issues, Powell says. While a driver could have simply switched to paper logs in the past, the mandate now requires that systems be repaired within eight days of a known failure.

“I don’t see supply being ‘big enough’ as a concern in of itself. I think the more relevant question is the ability of providers and fleets to have a plan in place for the supply of replacement and repair hardware,” Powell says.

29 March 2018 | Craig Guillot | Supply Chain Dive

VW pushes its suppliers to raise supply chain sustainability

Volkswagen Group has said it is engaging in “intensive” discussions with its suppliers to determine how the sustainability of its supply chain can be improved, especially for the raw materials used in electric vehicles.

“We are engaging in intensive dialogue with companies from the mine through to our direct suppliers. It is important to ensure that we share the same corporate goals and especially the same corporate values,” said Michael Bäcker, executive director corporate purchasing electric/electronic at the Volkswagen Group.

The company said it had made its corporate guidelines more stringent, requiring greater transparency in raw materials procurement from its suppliers.

In addition to the previous requirements such as compliance with clearly defined working conditions, environmental and safety standards as well as human rights, the guidelines now explicitly forbid any form of child labour or forced labour in the extraction of raw materials such as cobalt and mica.

“Specifically, the objective is to bring environmentally compatible vehicles onto the road that have been produced with respect for human rights and in accordance with environmental and social standards throughout the supply chain,” said the carmaker in a statement. “This starts with raw material extraction and ends with the finished product.”

VW Group company Audi announced earlier this year that it would only place orders in future with suppliers who achieved a positive score under a newly introduced sustainability ratings system – and that it intended to carry out spot-checks to audit them.

Other activities within the initiative include joint efforts with partners from a number of industries within the Responsible Minerals Initiative (RMI) to develop approaches for the certification of cobalt smelting plants in order to make transparent the extraction conditions and origin of this raw material for batteries.

Francisco Javier Garcia Sanz (pictured), member of the board of management of the Volkswagen Group responsible for procurement, said: “We expect our suppliers to ensure maximum transparency and provide information on compliance with the agreed sustainability standards. We will consistently pursue any infringements or irregularities.

“To put it quite clearly, if any supplier or any subcontractor of any supplier does not adhere to these rules and initiate the necessary action, we will be forced to stop dealing with the supplier in case of doubt,” he added.

In September, Volkswagen was named amongst a group of corporations and NGOs aiming to end child labour, hazardous working conditions, pollution and environmental damage in the global battery supply chain.

The Global Battery Alliance was launched at the World Economic Forum (WEF) Sustainable Development Impact Summit in an effort to create a responsible value chain for the battery market.

Meanwhile, in November, BMW Group said it had taken further steps to improve transparency in its battery cell supply chain by promising to release information on smelters and countries of origin for raw materials by the end of this year.

13 December 2017 | Gareth Tredway | Automotive Logistics


The top 10 supply chain stories of 2017

If 2016 was a year chalk-full of disruptions, 2017 was the year of resilience.

By and large, companies sought to reinvent their supply chains this year, tapping their logistics providers, suppliers and internal operations for help. It was also President Donald Trump’s first year in office, which brought about a high degree of business uncertainty despite strong economic growth.

Over the course of the year, Supply Chain Dive sought to provide a balanced coverage of each aspect of the supply chain – from procurement to fulfillment, the first-mile to the last – and pin point emerging trends in each topic.

Looking back, we put together a short list of our top 10 stories of 2017:

Emerging trends

    1. 9 trends in last-mile delivery

      E-commerce is forcing changes in how retailers and carriers do business. Read More >>

    2. What is Big Data, and why does it matter to supply chain?

      Recent advances in technology have enabled supply chains to unlock the last layer of Big Data application: delivering insights through automated analysis. Read More >>

    3. Is freight forwarding at a crossroads due to new technology?

      Technology companies promise to disrupt the freight forwarder, but will they succeed? Read More >>

Highly relevant news items

    1. Inside Nike’s plan to cut lead times from 60 days to 10

      The company is radically transforming it’s supply chain, so it can design and deliver new products within days of any sport championship. Read More >>

    2. Kobe Steel’s quality scandal is an age-old supply chain tale

      The pressure to reduce costs has sparked a race to the bottom, and we have no one to blame but ourselves. Read More >>

    3. Supreme Court refuses to hear ELD mandate case

      The battle over the Department of Transportation’s final rule is over. Now, the war extends to the devices’ implementation. Read More >>

    4. Kellogg’s new supply chain model comes at a high cost

      Former Kellogg distributors accuse the company of ‘unjust enrichment,’ demanding compensation. Read More >>

Our favorite stories

  1. How changes in the ocean cargo industry affect shippers

    Supply Chain Dive explores the various links that connect shippers to their carriers, and why they should care. Read More >>

  2. How to become the next big logistics hub

    An in-depth look at Lehigh Valley’s success shows there are four steps to attracting e-commerce companies, 3PLs and freight forwarders. Read More >>

  3. What is ‘supply chain’?

    Three definitions highlight the dynamic way supply chain managers must think to remain competitive. Read More >>

30 November 2017 | Edwin Lopez | Supply Chain Dive

Auto suppliers rank major buyers, show cost-cutting initiatives do not always hinder relations

Dive Brief:

  • The 2017 North American Automotive OEM – Supplier Working Relations Index revealed cost-cutting priorities do not always lead to poor supplier relations, if good treatment persists, Industry Week reported last week.
  • The index ranks six major automotive buyers on various categories. Toyota and Honda continue to top the list while Nissan’s supplier working relations hit an all-time low. General Motors, meanwhile, has dramatically improved its position rising from the bottom of the list to a top-three buyer in two years.
  • Comparing Nissan’s downturn with GM’s surge reveals the importance of attitude and culture to supplier working relations. Supply Management reports Nissan’s “adversarial approach” and dropping suppliers for profit concerns deteriorated its ranking, meanwhile GM pushes its suppliers hard but works closely with them.
 Dive Insight:

A closer look at the indicators used to rank suppliers’ perspectives of buyers reveals the importance of close partnerships to establish a successful supply chain.

The index ranks the automotive buyers based on five tiers: original equipment manufacturer (OEM) supplier relationship, OEM communication, OEM help, OEM hindrance and supplier profit opportunity. However, it also takes into account a rating of buyers’ as well as vice presidents’ initiative to build better relations, and improvement in relations within specific purchasing areas.

The report’s detailed scope and results reveal two main lessons: purchasing professionals at every level drive relations and supplier relations improvement initiatives pay off. Just as Nissan’s relations have deteriorated due to an “adversarial culture,” Supply Management adds, GM’s vice president of purchasing very publicly speaks to the importance of good relations, which ripples down to how the company’s buyers interact with suppliers.

Recent reports support the idea behind this report, that the degree to which a buyer and supplier collaborate marks the difference between a successful or inefficient supply chain. Planning Perspectives, which releases the index, notes good relations yield “more supplier sharing of innovation; greater price concessions; more supplier investment in OEM-related innovation; and greater supplier support; among others.”

Communication, both in quality and frequency, cannot be underestimated as a tool to improve buyer-supplier relations. Cost-cutting priorities are part of the industry, but sharing goals, establishing joint growth strategies and establishing clear terms of collaboration and profit-sharing may help priorities buy into long-term plans.

If Toyota, long the standard for lean production, continues to top the list of preferred customers and GM could rise as quickly in the rankings, good relations are not necessarily correlated to profit strategies but rather company culture.