Late engineering changes causing problems for OEMs and suppliers, study reveals

  • 07-Jun-2011 08:37 EDT
Supplier Involvement graph.jpg

Diagram showing the cause and effect of working relations. As supplier-OEM cooperation increases (green arrow), supplier sharing of innovation increases. But as price reduction pressure and excessive engineering changes increase, (red arrow up), innovation sharing decreases (red arrow down).

The results of a recently released study on supplier-OEM working relations show the Great Recession of 2008-2010 has left imprints on the product development process.

As automakers reduced their workforces to become leaner organizations, excessive engineering changes became commonplace late in the product development cycle.

"With more new vehicle programs coming on stream, engineering personnel have been and are being stretched to maintain schedules, and this has become a real challenge," Dr. John Henke, President and CEO of Planning Perspectives in Birmingham, MI, and a marketing professor at Oakland University in Rochester, MI, told AEI.

Henke's comments were based on Planning Perspective's 2011 North American Automotive OEM-Tier 1 Supplier Working Relations Study.

In the 11th annual survey, 415 Tier 1 suppliers ranked the purchasing groups of Chrysler, Ford, General Motors, Honda, Nissan, and Toyota, and those results were used to calculate the report's Working Relations Index (WRI) based on 17 key variables.

Volkswagen, Mercedes-Benz, and BMW, for the first time, were included in the study. However, the three automakers were not included in the WRI because, according to Henke, one year's worth of data did not provide the depth of information necessary to explain trends and relationships relative to other OEMs.

The effect of late and excessive engineering changes is causing problems in the North American industry.

"Suppliers have told us it has made it more difficult for them to meet delivery, cost, and quality targets," said Henke. He noted that Toyota is the least prone among the OEMs surveyed to making last minute engineering changes.

While engineering changes continue to beset suppliers, so does automakers' quest for new technologies.

Even though suppliers are protective of their inventions when sharing with OEMs, intellectual property ownership has become an increasingly contentious issue.

Said Henke, "This is unfortunate for both the OEM and supplier. The increasing competition—meaning more manufacturers producing and selling vehicles in North America—are what will increasingly help differentiate automakers competitively both in terms of product uniqueness and cost."

Planning Perspectives' study shows that OEMs with the best working relations get to see new innovations from suppliers sooner than those OEMs with poor working relations.

According to Henke, "Honda and Toyota have the best supplier working relations, hence suppliers are more likely willing to share innovation—oftentimes without any assurance of a purchase order—with them vs. the other OEMs," he noted. 

In the 2011 study, Honda and Toyota scored significantly higher than Chrysler, GM, and Ford with respect to suppliers' proprietary information and intellectual property—namely patents and confidentiality of technical innovations.

"Chrysler, GM, and Ford need to move toward mutually beneficial contracts that protect suppliers' intellectual property at least equivalent to the contracts of Honda and Toyota," Henke said.

Good working relationships encompass several factors, but communication is a requisite.

"If the communication between the OEM and supplier is anywhere near where it should be, the supplier should know which programs have questionable futures and plan accordingly. We know that when programs are canceled, some OEMs—most notably Ford, Honda, and Toyota—have in the past rewarded their suppliers with future business to offset a canceled program," Henke said.

Technological leadership can be a game-changer for a supplier.

"It is in the supplier's best interest to be working on new and improved products to win new business when the opportunity arises," said Henke. "So if a program is canceled at one automaker that technology can always be used with another OEM."

HTML for Linking to Page
Page URL
Rate It
5.00 Avg. Rating

Read More Articles On

In Washington, DC, at the 2018 SAE Government/Industry meeting this week, cellular-communications giant AT&T affirmed in a session on connected-vehicle technology that it will launch ultra-fast mobile 5G service in limited areas sometime late this year.

Related Items

Technical Paper / Journal Article
Training / Education
Technical Paper / Journal Article
Technical Paper / Journal Article
Training / Education
Technical Paper / Journal Article
Training / Education
Training / Education