Courtesy of Spend Matters' sister-site, MetalMiner, I read this morning about Chrysler's new SUPER (Supplier Product Enhancement Reward) supplier management methodology. The approach "awards suppliers with 50% of the first year's cost savings of any cost cutting innovation generated by the supplier (all subsequent years savings go to Chrysler)." In many ways, SUPER appears to be Chrysler's attempt to get back to the Tom Stallkamp days. I had the chance to see Tom speak at a Corporate United event a couple of years back and his presentation was a throwback -- perhaps "ode" is a better word -- to the years where some in Detroit actually cared about building supplier relationships for competitive advantage.
Over on MetalMiner, Lisa Reisman notes, "In the 1990's Chrysler implemented an extremely successful program called SCORE that essentially rewarded suppliers who generated cost reduction ideas and strategies ... SCORE helped restore Chrysler's reputation in the eyes of its supply base." Yet, "The merger of Daimler set the company in motion for a more traditional confrontational/combative supplier relationship management approach."
However, things may be changing again with SUPER: "Chrysler has cut the number of days suppliers who have a dispute with Chrysler must wait for payment from 287 to 95. Another aspect of the SUPER program involves reducing warranty claims that have fallen 46% since 2007 according to the article. The program rewards suppliers who achieve a 12% reduction in PPM (defects, parts per million)."
That shared 50% benefit may not be all it's cracked up to be. MetalMiner notes "One CFO of a major supplier, according to Automotive News, didn't care for the 50% cost savings number, particularly when design changes could result in substantial new tooling charges (which are often amortized over the life of a program)." Still, SUPER remains a whole lot better that a buyer-driven stick in the eye such as extending payment terms while only offering to pay invoices at a discount to face value (a tactic employed by one infamous automotive OEM in the past).