German Automakers BMW and Mercedes Top Supplier Performance Survey

- May 25, 2011 7:05 AM
Categories: Spend Management |

Earlier this week, MetalMiner interviewed Dr. John Henke, President and CEO of Planning Perspectives, the world’s leading authority on buyer-supplier relations, according to their website. The firm conducts an annual in-depth analysis of North American automotive OEMs and their Tier 1 suppliers. This year’s results, released last Monday, are a must read for any metal supplier to the automotive industry. Dr. Henke is also a Professor of Marketing at Oakland University in Rochester Michigan.

About the study: conducted annually, the study tracks supplier perceptions of working relations with their automaker customers, in which suppliers rank the OEMs across the six major purchasing groups, broken down into 14 commodity areas. The results of the study are used to calculate the Working Relations Index (WRI) based on 17 working relations variables. This year, 451 suppliers participated, representing 63% of the six automakers’ annual buy.

Key findings from the study:

  • If all nine automakers are ranked, Mercedes would be in first place, followed by Toyota, BMW, Honda, Ford, VW, Nissan, GM and Chrysler
  • While the US automakers are showing big gains in several areas, the one area in which they are lagging is “OEM Trust”
  • Over the years, the study has shown that automakers with a higher WRI realize greater benefits from their suppliers such as higher quality, lower prices and more technology sharing than those automakers with a lower WRI
  • The benefits of “OEM Trust” show up in several important areas. For instance, one area where Toyota and Honda still have a meaningful lead over the US Big Three is in their respect for suppliers’ proprietary information and intellectual property such as patents and confidentiality of technical innovations. Another is in the supplier’s willingness to share new technology without assurance of a purchase order.

Overall study rankings appear as follows:


Source: Planning Perspectives Inc.

MetalMiner: What were the biggest findings from this year’s survey?

John Henke: There are two areas of interest. The first involves the supplier’s willingness to provide innovations to their customers – we first published a piece in Sloan Management Review last year on this topic. The second relates to the role of the individual buyer or purchasing agent and mutual trust with the salesman, both as an individual and for the firm a salesman represents. If you see what is going on, the really good thing from an industry standpoint is that the US automakers are continuing to improve. What was surprising was that Honda and Toyota are either in place or starting to slide. The two groups are beginning to converge and we didn’t expect to see that. Toyota may have bottomed out and we wouldn’t be surprised if they started to move upward. Domestics will continue to improve as well. If you notice one thing, both Ford and GM have increased at a slower rate this past year which tells us that from an improvement standpoint, they have reached all of the low hanging fruit and now they’ll have to develop more sophisticated approaches in working with suppliers.

MM: I was surprised to see the German transplants (at least BMW/Mercedes) come in so high compared to the Japanese transplants. Did this surprise you?

JH: Volkswagen is about where one would expect them to be, on par with Nissan and Ford. I would expect BMW to be high, but not as high as they are because they have been dropping in Europe. On the other hand, Mercedes was absolutely surprising – when Daimler got the Americans out of the organization and brought in their own people, they took a very adversarial approach to supplier relations and the survey results reflected that as they had the lowest rankings of all the OEMs. So seeing them this high made us question the data. What we have here for BMW and Mercedes are not unlike Toyota and Honda – they have had a fixed supply base for years (where people have been working together well and so they can get things done). Moreover, mutual trust exists. BMW and Mercedes have a stable German supply base (albeit parts from North American operations) characterized by a very tight knit customer/supplier relationship. It’s important to remember that this survey is but one point in time (it’s a window) and as we like to say around here, a swallow doesn’t make a spring.

Check in later today with MetalMiner to read what Dr. Henke had to say on some surprising metal-related findings.

- Lisa Reisman

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