DETROIT – Aisin World Corp. of America, part of the growing, multifaceted Tier 1 supplier Aisin AW, announces at the Society of Automotive Engineers World Congress here the company is adopting a new, standardized purchase agreement for North America it hopes will promote a healthy relationship with its suppliers.
Aisin is expanding rapidly in North America – sales in the region ballooned to $3.3 billion for the 2005 fiscal year that ended in March, a 32% jump over 2004 – and to support its growth, the company is anxious to encourage new local suppliers, as well as to fortify ties with its existing supply base, says AWA Executive Vice President Don Whitsitt.
To that end, Whitsitt says AWA is adopting a unified corporate purchasing policy that is based on a standardized purchase agreement model recently established by the Original Equipment Suppliers Assn. OESA is a 355-member supplier trade group based in Troy, MI.
AWA’s new unified North American purchasing document, officially called the Aisin North American Plan (NAP) Standard Purchase Agreement, will create an air of customer-supplier transparency and cooperation that often is missing in supplier relationships, says Michael Lipinski, AWA director-purchasing.
Lipinski says Aisin’s NAP purchase agreement eventually will be adopted by all 26 AWA manufacturing plants and facilities in North America, with the goal of alleviating the perception that purchase agreements, inevitably, are written to favor the company drafting the contract.
This creates a “sign at your own risk” mentality that does not nurture collaborative relationships, he says.
Whitsitt calls the NAP document “an important step in a collaborative arrangement” with current and future suppliers.
“Every parts maker in every tier could use this (the NAP purchasing contract) in a collaborative way,” says Lipinski, adding it “sets the tone” for relationship-based purchasing that has become a hallmark of successful Japanese OEM/supplier collaboration.
“It’s not perfect,” he adds, “but it’s set up to be much more collaborative.”
Lipinski says AWA also believes the standardized NAP purchase agreement will help the company expand its North American “local” supplier base. Equally important, price may not necessarily be as important as it has become in other North American supplier agreements.
Lipinski says price always will be a disproportionately large factor in any purchasing agreement, but he says Aisin’s new NAP document will stress attainment of quality goals that assure all parties “win.”
He says the new purchasing plan will get all parties on the same page with an upfront understanding of what’s expected, so that a mutually rewarding relationship is fostered. Signing agreements that force its suppliers onto shaky financial ground is not in AWA’s long-term interest, Lipinski insists.
“What I’m looking for is quality first – and companies that have a good understanding of lean-production systems,” he says. Companies that have these attributes generally also enjoy financial stability, Lipinski adds.
Once the parties understand one another and the expectations set forth in AWA’s standardized purchase agreement. “We’ll come to a good price (for all parties),” Lipinski insists.
He says implementation will be ongoing – and gradual. Because the company wants purchasing decisions to be centralized with each plant manager, it will take until perhaps 2010 for AWA to adopt the new NAP purchase agreement among all 26 of its North American facilities.
“The power of this is that you give the plant managers real control of their operations,” Lipinski says, which is key to AWA’s goal of increasing its ratio of local suppliers.