The automotive industry is one of the most competitive in the world and, precisely for this reason, companies are constantly seeking ways to improve their management practices in order to ensure their prominent positions in the market. Among them, we can highlight the changes that the automakers are seeking in their relationship with suppliers, with the objective of improving the interaction between them and achieving mutual benefits.
In recent years, there has been a stimulus for industries to replace traditional relationships by long-term/ strategic collaborative alliances with their partners. The initiative aims to transform a simple buying and selling negotiation into a stable, collaborative association.
However, we know that changes like these do not occur overnight, since it takes a lot of work to adapt the demands of assemblers and suppliers to the reality of the market, without neglecting, of course, the improvement of the relationship between them.
That’s why, in this article, we present a survey on how to improve the relationship between automakers and suppliers, taking into account what it takes to maintain the partnership.
How to maintain a good relationship with suppliers
Given the need to improve the relationship with suppliers, assemblers were forced to seek new forms of association, which involve the following parameters:
- The search for suppliers with the lowest global cost, regardless of their geographic location or nationality;
- A greater responsibility of suppliers in the development of the design of the items they supply (the automaker provides the specifications and the supplier develops the design and the product using its own technology);
- The supply, by suppliers, of systems, subsystems or modules instead of individual components.
With these references in mind, it is possible to realize the relevance of suppliers as a strategic tool for integration, cost reduction and performance increase. Therefore, to be successful when it comes to hiring and maintaining a good relationship with suppliers on the rise, we have listed five crucial points. Check them out:
1 – Make input purchases from a company-wide perspective
One good way to improve the relationship between automakers and suppliers is by playing fair, which means that there is no sense in promising a long-term purchase contract with large deliveries if this is not the reality of the automaker. Or the market. Especially because in countries like Brazil, people deal with an unstable economy that often forces a change of plans from one month to another.
In addition, there is the technology issue, which allows the development of new products and processes constantly, making parts and equipment obsolete overnight. So, whenever a purchase contract is made, it must be broadly evaluated, especially the long-term ones, and take into account all sectors of the company, in order to know if something new is being made and whether it will influence the demands.
This way, you can have an honest conversation with the supplier and make him aware that the quantities and values of what he delivers to your automaker may change, avoiding any kind of unexpected surprises in the future.
2 – Demand from your suppliers the same level of responsibility from your company
A good business relationship is only possible when the parties involved face the situation with the same degree of responsibility. Therefore, before establishing a partnership with a supplier, try to know how he conducts his own business. By the way, this is a two-way road. There are many suppliers that also seek to associate themselves only with companies that are aligned with their moral and ethical precepts.
In order to avoid any unexpected problems after the contract has been signed, it is important that issues such as human rights, health standards, occupational safety, sustainability and environment, ethical behavior and cybersecurity are addressed beforehand. With everything aligned, it is way more difficult for problems to disrupt the relationship between automaker and supplier.
3 – Conduct audits of your suppliers
Usually, when we talk about auditing, it means that there is a problem in the air. However, for companies that do not violate the law, this check is just one more way to show their suitability and responsibility. Therefore, keeping an audit schedule with the suppliers is a way to make sure everything is going well.
4 – Monitor the performance and the risks throughout the contract
As much as the partnership is established and the automaker/ suppliers relationship is great, this is still a matter of business. Therefore, it is important to monitor the supplier’s performance throughout the contract period and the exposure to risks, such as overspending or delivery failures.
By periodically checking how deliveries are progressing, the quality of the product, price variations, among other points, it is possible to talk to the supplier and solve any problems much more easily, since the verification will occur in a short period of time.
This type of situation can also strengthen the relationship, since instead of changing the supplier, the automaker will rather solve the issue and keep the partnership, because it understands that it is advantageous, even if it needs some adjustments.
5 – Keep an eye on business continuity risks
Large vehicle manufacturers rarely rely on only one supplier. It is clear as crystal that managing only one partner is much more practical, brings more favorable commercial conditions and provides a closer relationship. However, it presents more risks, since in case of some unforeseen event, such as an employee downtime or an environmental catastrophe, supply deliveries are totally jeopardized.
Therefore, when signing a partnership, it is essential to establish with the supplier how the continuity plan will be for situations like these. It is also recommended that this planning takes place in an integrated manner, between the automaker and its suppliers. Thus, production can be relocated rather than completely halted, and the supplier finds time to solve the issue without losing its buyer partner.
Partner with your supplier!
As much as the relationship with suppliers is based on a commercial operation, it doesn’t necessarily mean that it has to be distant or “mechanical”. Especially in the automotive sector, maintaining a good partnership with the supplier can be determinant for success, as it will ensure the necessary inputs to carry out your company’s daily activities.
That said, when choosing the manufacturer of the inputs that will supply your automaker’s production, try not to focus exclusively on low cost or shorter delivery time. Look at the bigger picture and make sure that this supplier is willing to grow with you, both in productivity and profitability, and to always seek the best opportunities that the market has to offer, like Riosulense.
With over seven decades of operation, we supply original parts to the United States, Brazil, China and Europe. Our solutions serve SUVs, trucks, agricultural and railway machines, always with quality attested by years of experience and by the national and international certifications we have achieved throughout this period, such as ISO 9001:2015, IATF 16949:2016 and the Transportation and Power Generation Accreditation Program.
All of them are the result of a multidisciplinary team formed by chemical, materials, mechanical, and metallurgical engineers, which presents high levels of punctuality and quality in its products and has the market’s recognition due to the speed in delivering prototypes and developing new parts.
Another highlight is our continuous investment in technology and innovation. Proof of that is Riosulense Prototype Factory, a structure made for on-demand product development support services. With it, we provide complete engineering solutions to get concepts and ideas off the drawing board and turn them into dimensional models for field test applications. Contact our team and learn more about how Riosulense can be the perfect match for your automaker!
