Toyota and Honda have the best relationships with suppliers, when compared to Ford Motor, General Motors, FCA US (Fiat Chrysler), and Nissan, according to a report conducted by Birmingham-based Planning Perspectives Inc., which specializes in company-supplier relations.
"This year, Toyota and Honda improved their working relations index ranking a combined average of 8.7 percent over last year's levels," says John Henke Jr., study author and president and CEO of Planning Perspectives. "Using our economic model, we know that if supplier relations at Ford, Nissan, FCA, and GM also improved by 8.7 percent, they each would have realized significantly higher operating income — an estimated $2.02 billion collectively."
The 15th annual North American Automotive Tier 1 Supplier Working Relations Index study says Toyota and Honda have ranked No. 1 and No. 2 in supplier relationships, respectively, for the fifth year in a row. Henke says Toyota and Honda "take supplier relations very seriously and actively work at it throughout their respective organizations, but particularly within their purchasing organizations."
"Over the years, we've seen that certain core or foundational practices have to be in place before an OEM can improve its 'relational activities,'" Henke says. "It's the relational activities that help the OEMs improve their WRI score and receive increased supplier benefits that contribute to the OEM's bottom line."
Best practices between OEMs and suppliers include fair financial practices, treating the supplier fairly, and honoring contractors.
Henke says Honda is the most preferred customer of suppliers, just above Toyota. Honda improved almost 12 percent this year. Dearborn-based Ford Motor Co. has regained a third place spot over a declining Nissan. While Ford has dropped to its lowest ranking in five years, it's still significantly ahead of FCA and GM.
Henke says suppliers with good working relationships with OEMs are more likely to invest in new technology to meet OEM needs, support the automaker beyond contractual terms, and give greater price concessions.
To view the full report, visit PPi1.com/services/annual-automotive-industry-study/.