I recently wrote a piece about the GM total supply chain, pointing out their business philosophy of shoving costs back on suppliers, and out onto a bloated dealer network. The problem is a lack of consideration for the customer. I wrote, "From the eyes – and wallet – of the customer, the corporate borderlines between supplier and manufacturer, and manufacturer and dealer, and dealer to customer, are distinctions without differences. The price the customer pays is largely a function of the total cost, regardless of which entity in the chain incurred the cost." I was surprised at the number of comments and emails I received questioning the logic.
The use of the word 'partnership' is bandied about liberally in the business world – a buzzword that has endured much longer than most. I looked it up to be sure I wasn't the one who is missing the point. Sure enough, the definition is pretty much as I expected:
(pärt'nər-shĭp') A relationship between individuals or groups that is characterized by mutual cooperation and responsibility for the achievement of a specified goal.
The part about"mutual cooperation and responsibility"seems to have been missed by many managers. Even more so, the part about a "specified goal".
In most companies I suspect the bulk of the responsibility in the 'partnership' with suppliers is on the shoulders of the supplier. Even more so, the "specified goal" is the increased profits of the buying company without regard to the supplier … and I doubt that many suppliers in such partnerships really signed up for that "mutual" goal.
That Toyota has a financial interest in many key suppliers is widely known – and widely misunderstood. We tend to look at that through our 'every man for himself – survival of the fittest' business lens and assume that Toyota uses their position to dominate the supplier for the sole benefit of Toyota. The reality never occurs to us. That is, by having a financial interest in the suppliers, Toyota can better know the intimate details of their business and processes and thereby optimize the overall process – which pays off handsomely for everyone in the supply chain.
The original kanban team Taiichi Ohno deployed at Toyota was actually comprised of industrial engineers from supplier companies. He brought them in, had them assist in developing the kanban concept, then had them implement it at Toyota, and then sent them back home to implement kanban in their own companies in a manner that improved the supplier's flow, reduced their costs, and better linked all of them together.
Eli Golratt's Theory of Constraints principle that local optimization does not lead to global optimization applies to supply chains as well as to factories. A collection of companies, each selling at arms length to the next guy, each one looking out only for himself, is not a supply chain with prospects of providing superior value to end customers, and as a result succeeding and growing market share. It is a collection of mercenaries only as good, and only as secure, as their next purchase order.