General Motors used the cover of bankruptcy to whack at huge overhead and legacy costs within its own organization. The payoff was big profits on a reduced sales volume. That in turn gave GM the ability to sell its stock at a price that will go a long way toward making its majority stockholder, the U.S. Government whole again.
That’s all great — unless automotive companies from the OEM’s through Tiers One and Two fall right back into the habit of focusing only on price in their procurement strategies.
Yes, many companies throughout the industry accomplished some restructuring to lower their overheads, too, but the fact is that the purchasing practices over the last decade had already pushed lower tier suppliers to razor thin margins. Simply going back to hammering on price is a strategy that is blind to the long term. Buyers should never stop searching for value from suppliers — but price is only one component of value. The global market is demanding innovation, better safety, reliability and environmental sustainability as well as affordability. These are values, along with production planning efficiencies and risk management that trusted suppliers can bring to the companies that are smart enough to recognize them.
Long term success will go to the companies — in every industry — that develop the skills to tap into those other values from their suppliers.