Toyota and Honda rank 1-2 in Plante Moran’s 21st annual OEM-Supplier Working Relations Index, the same two places occupied by the Japanese automakers every year since 2011.
Toyota held the No.1 spot with 347 points and Honda had 316, gaining only two and six points, respectively. General Motors advanced 20 points to 289, good for third place, while fourth-place Ford fell 15 points to 249. Nissan scored 211, a 21-point increase, while FCA/Stellantis dropped 28 points to a distant last in the rankings at 170.
Automakers pay close attention to the study because positive supplier relations benefit OEMs with better pricing, more investment in innovation and technology, more sharing of technology and better supplier support. All these factors contribute to the OEM’s operating profit and competitive strength.
“Without a doubt, the industry went through a trial by fire this past year, but seeing the positive results for four of the six automakers was a surprise in many ways,” says Dave Andrea, principal in Plante Moran’s Strategy and Automotive & Mobility Consulting Practice, which conducted the study. “Typically, a crisis is not the time to improve established relations, but the OEMs’ efforts to enhance mutual trust, transparency and communications moved relationships forward through the worst of COVID-19 and the stop and restart of their operations.
“The automakers will have to continue building on these fundamentals to survive near-term parts shortages like the scarcity of microchips, and truly deepen relations to support the development of electric vehicles and related technologies in-house or out-sourced, or through acquisitions or partnerships,” Andrea (pictured below, left) says in a news release. “These industry challenges put more pressure on purchasing organizations to respond and resolve issues more effectively.”
The study shows trust and communication are the foundation of good working relations in a currently uncertain business environment with billions of dollars and thousands of jobs at stake. The three-year average of supplier trust of OEMs shows Toyota first with notable improvement; Honda and GM relatively steady at second and third; Ford down slightly at fourth; Nissan gaining and in fifth place and FCA/Stellantis dropping significantly this year to last place.
Plante Moran conducted the annual study this year from mid-February to mid-April. Respondents represented 841 salespersons from 503 Tier 1 suppliers, representing about 60% of the six OEMs’ annual buy. The supplier-respondents represented 45 of the top 50 North American suppliers and 81 of the region’s top 100 suppliers.
The study tracks supplier perceptions of working relations with their automaker customers in which they rate them across eight major purchasing areas broken down into 20 commodity areas.
Automakers’ scores on the Working Relations Index are tied to efforts to reduce costs, even though that may not be reflected in vehicle prices, Andrea tells Wards. The quality of supplier-OEM relationships affects levels of investment, warranty issues and the degree of cooperation needed to address problems such as the current microchip shortage, he says.
Since the Working Relations Index was launched in 2002, Toyota has taken first place every year except 2009 and 2010, when Honda was rated No.1.
“We’re often asked by automakers what’s the key factor – the ‘silver bullet’ – that will improve their Index ranking,” Andrea says. “The answer is: There isn’t one simple thing. It’s making many small, incremental improvements to the foundational elements over time – such as paying invoices, and training knowledgeable buyers – and aligning top leadership and all functions to support value-add by the supply chain.
“The automakers will have to continue building on these fundamentals to survive near-term parts shortages like the scarcity of microchips, and truly deepen relations to support the development of electric vehicles and related technologies in-house or outsourced, or through acquisitions or partnerships,” he says. “These industry challenges put more pressure on purchasing organizations to respond and resolve issues more effectively.”
