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Posted on August 20, 2019

From Intimidation to Collaboration in Supplier Relationships

Ally Pulskamp
Written by

Ally Pulskamp

Posted in
Supply Chain

Supply Chain Efficiencies With Trusted Qualified Vendors

Up until the 1970s and ‘80s General Motors had dozens of autonomous manufacturing plants that did their own thing. Each plant had their own vendors and largely operated on their own schedules. Then in 1984, GM purchased Electronic Data Systems (EDS) in an effort to tie together cross AdobeStock_184552486functional operations and eliminate redundancies through more real-time data communication. EDS founder Ross Perot joined the GM board of directors and became GM’s largest individual stockholder while retaining control of EDS as chairman. 

Two years later the GM board was having issues with Perot and paid him
$700 million to step down. Rumor had it that since EDS controlled all of GM’s data and communications Perot knew he had his hand on the proverbial “plug” and could pull it at any time. It was a power play and it wasn’t long before the GM board figured it out. The intentions were good, but the result was a temporary disaster.

Fast forward to 2019 with rumors of a GM and Ford merger. Perhaps the world’s largest industry consolidation. Today, OEMs can no longer compete as autonomous corporations. Beyond consolidation of operations, they also compete in integrated supply chains. It is no longer economically feasible for
individual OEM plants to have their own personal pool of vendors. Instead, they are consolidating pools of trusted qualified vendors that, for the most part, they need to share.

From Management by Intimidation to Collaborative Relationships

Not long ago the strategy to control costs was for OEMs to use aggressive negotiating and demanding terms and conditions that squeezed supplier profitability and often weakened the supplier’s business or drove them out of business. However, in recent years OEMs have embarked on more strategic partnerships to promote long-term relationships with their collective supply chains. These qualified and trusted supplier partnerships provide more sustainable benefits for all parties involved.

This transformation in industrial product supply is changing how many products are designed, manufactured and delivered. These changes are proving to be more dramatic than the GM and EDI merger 35 years ago. This time the results appear very promising with changes in supply chains and the optimization of their performance. The results are enhancing the supply chain landscape for large OEMs and the suppliers. They may be competing for the same parts, but now they can focus more on what their good at; designing and manufacturing high quality equipment.

 

This blog is an excerpt from our latest whitepaper, Supply Chain Efficiencies With Trusted Qualified Vendors. Click here or on the link below to download your free whitepaper! 

Download Your Free Whitepaper

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