American auto makers are beginning to recognize the advantages of the partnership in Japan between big business and suppliers. James Hitchcock, director of supply policy and planning for Ford Motor Co., says U.S. companies have been unable to achieve "the degree of openness and trust and partnership in forward planning" with suppliers that the Japanese have. With those qualities, subcontractor relations "work very well," he adds.
Traditionally, U.S. auto makers have purchased parts through competitive bidding, giving winners a purchase order that indicated only that the auto maker planned to use their products on a particular model for a year. But Hitchcock now acknowledges that a short-term promise may create "excessive risk that causes the supplier to be excessively cautious in investment."
Ford and General Motors Corp. are changing their style of subcontracting: GM, for example, is trying to make suppliers part of its team by reducing the number supplying each division and by involving them in car design. However, that is only a small step toward a Japanese-style partnership. Japan's system works not only because subcontractors know they will have customers, but also because the subcontractors themselves differ from those in the United States. In Japan, subcontractors are specialists, and the partnership enables them to concentrate on their specialties. Many American subcontractors, by contrast, are diversified companies that may generate little enthusiasm for improving an unglamorous product, such as a horn, even if there is an assured market.
Alan Webber of Harvard Business School notes that learning from Japan will inevitably force U.S. businesses to try radically new approaches. But he argues that to do otherwise would consign the country to disastrous economic decline. He cites the enormous gap in auto production costs and quality between the two countries.
"Maybe we need a variety of experiments where a U.S. auto company tries arranging a part ership with a small, committed, sole-source American supplier and then also t es it with a bigger and more diversified supplier," he suggests. "There's no guarantee you'll get it right the first time. You're going to have to plant a crop of eds and see what grows best."