With GM’s VP of Global Purchasing and Supply Chain Grace Lieblein reversing course on the company’s standard contract for suppliers – after a huge ‘misstep‘, as she called it – we thought this may be a good learning moment for Lieblein and other purchasing managers dealing with suppliers.
Perhaps Lieblein could have avoided this fiasco if she’d boned up on our research.
Here’s how the keen minds behind our sister site, Spend Matters, break down why supplier relations matter:
“The value derived from strong supplier relations reminds us of a case study from the classic negotiation book, ‘Getting to Yes’ by Roger Fisher, William Ury, and Bruce Patton. I recall that a case study involved dividing into teams with the objective of getting as much of an orange as possible (yes – we refer to the fruit!). Though the book covers the topic of negotiation, it serves as the foundation for positive supplier relations.
When different teams sit opposite one another to negotiate the terms of how the orange will be divided, most teams conclude the only option involves cutting the orange in two. But as Fisher and Ury describe, through a series of open and honest communications, both parties end up learning that they each actually want a different part of the orange – one the peel and the other the pulp.
And so the process of creating strong supplier relations (supplier management, supplier relationship management, or whatever term you prefer) rests on the ability of both parties to find ways to better understand how the other party sees the orange (so to speak).”
The Fruits of This Type of Labor
Apparently, GM’s purchasing department hadn’t taken the time to find out how their suppliers see the orange. Here’s more in-depth analysis on why auto supplier relations matter.
While Audi, Chrysler and even Ford were closely collaborating with their suppliers (American Axle even began working on an all-wheel-drive system for Chrysler before a production order was signed, according to this article), GM was apparently doing other things.
Case in point: last year, consultancy Planning Perspectives Inc. “asked North American suppliers whether they were willing to share new technology with automakers without a purchase order. Ford ranked third, behind Honda and Toyota. GM ranked fifth out of six automakers studied.”
However, John Henke, president of Planning Perspectives, thinks Lieblein’s revisions of GM’s terms and conditions are the first step in the right direction. Automotive News quotes Henke as saying, “This is one of the most profound things that GM has done in my experience.”
Time will certainly tell.