When the CPO Makes it Into the WSJ — For the Wrong Reasons

Perhaps the biggest horror story for any procurement executive is to make the business news headlines for the wrong reasons. But that's exactly what happened to Robert Schott, the former Vice President of Purchasing at Chrysler, earlier this week. According to any article in the Wall Street Journal, Chrysler was planning on reassigning "a senior purchasing executive as soon as today as part of an effort to improve relations with its suppliers, people familiar with the matter said .... [Schott] will give up that job and take a new post related to engineering and quality, one person briefed on the company's plans said."

Why did Chrysler make this move? "Under its new management, Chrysler is working to improve relations with both its dealers and its suppliers. Ties to both groups were badly strained over the past several years. Chrysler, like General Motors Corp. and Ford Motor Co., has been demanding price cuts from suppliers at time when steel and plastics prices were rising and wiping out parts makers' already thin margins."

In my opinion, it's unfortunate that supplier relations at Chrysler have deteriorated to such a serious point because relative to GM and Ford over the past two decades, they've been downright peachy (everything is relative, I suppose). Part of this came from Chrysler's need to survive in the eighties and nineties on shoestring design budgets. Through talking to some folks in the industry, I learned that Chrysler, unlike Ford and GM, often turned to their suppliers during this time for their assistance in product design and jointly engineering out costs (AMC, ironically considering how badly its products such as the Gremlin were, also used these tactics).

Even though this was not done in the spirit of collaboration or continuous improvement like a Honda or Toyota -- it was a tactic for Chrysler that was born out of a desperate situation -- it nonetheless helped put the venerable OEM ahead of its rivals from a reputation perspective with its supply base. In other words, Chrysler was Kinder and gentler to its suppliers relative to Ford and GM because they had no choice in the matter. They simply could not afford to have suppliers kept at a distance in the overall design and production process.

But what happened to Chrysler's procurement strategy and why did its relationships face such a precipitous drop in supplier satisfaction levels in recent years? For one, I'm guessing that Chrysler brought over procurement team members from some of their cross-town rivals -- as well as their strong-arming strategies and tactics. Second, their joint participation in Covisint and other related exchange activities probably exposed them to the types of piece-part driven, mallet-swinging sourcing results that their rivals were realizing. And third, Chrysler's sourcing teams must have had their performance measured around unit cost savings rather than looking at total landed cost, including design and final assembly.

Some of these hypotheses would have created a confrontational environment with suppliers rather than one born out of balancing competition and collaboration. But perhaps this most recent change will result in Chrysler's procurement organization being dealt more carrots to work with, balancing out the sticks we know they've learned to swing in recent years. What do you think? Will Chrysler's new procurement organization look more like Toyota or GM?

Jason Busch

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