Lessons from Automotive Suppliers for Wood Products Manufacturer

5. May 2016 12:42

Lessons from Automotive Suppliers for Wood Products Manufacturers

By: Urs Buehlmann, VT; Mathias Schmitt, White Rock LLC; and Omar Espinoza, University of Minnesota

Ever wondered how you make a living when selling components to car manufacturers?  If you are dealing with car manufacturers, you are dealing with billion dollars companies that can choose and pick the supplier that offers the best value.  Even once you have established the connection to a manufacturer, you will face constant pressure to lower your price and face the constant danger that your customer will choose another company as the supplier of what you are selling.

Considering these situations, you may feel a little more comfortable dealing with the typical woodworking industry customer, local builders, architects, or even private customer who buy from you, but none of them big enough to create a crisis in your company if they drop out.

However, maybe there are lessons that can be learned from the tough competition reigning in the car manufacturing supplier business?  This workshop will focus on describing managements tools used by automotive suppliers to survive in their cutthroat business environment.  Serving a market that encompasses numerous suppliers but only very few, large buyers force suppliers to be highly competitive on a global scale.  What tools are such supplier`s using to achieve this level of performance?

We will show examples ranging from Lean, to Six Sigma, to Kepner Tregoe to describe how automotive suppliers continuously improve their performance to sustain their business.  The application of these tools to woodworking companies will then be discussed.

 No corporation needs to be convinced that in today’s scale-driven, technology-intensive global economy, partnerships are the supply chain’s lifeblood. Companies, especially in developed economies, buy more components and services from suppliers than they used to. The 100 biggest U.S. manufacturers spent 48 cents out of every dollar of sales in 2002 to buy materials, compared with 43 cents in 1996, according to Purchasing magazine’s estimates. Businesses are increasingly relying on their suppliers to reduce costs, improve quality, and develop new processes and products faster than their rivals’ vendors can. In fact, some organizations have started to evaluate whether they must continue to assemble products themselves or whether they can outsource production entirely. The issue isn’t whether companies should turn their arms-length relationships with suppliers into close partnerships, but how. Happily, the advice on that score is quite consistent: Experts agree that American corporations, like their Japanese rivals, should build supplier keiretsu: close-knit networks of vendors that continuously learn, improve, and prosper along with their parent companies. (Incidentally, we don’t mean that companies should create complex cross holdings of shares between themselves and their suppliers, the way Japanese firms do.) [FROM HBR 2004]

See more on this topic at the "Lessons from Automotive Supplier for Wood Products Manufacturer" session at the IWF 2016 Education Conference.


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