Strategic Supply Chain Management - Supply Chain Online

46 Strategic Supply Chain Management
Markert explains. “We see many opportunities like that, and we’re already
capturing substantial savings.”
Internal changes, however, would not be sufficient to make Autoliv’s
new production system work effectively. To meet its objectives, the company
had to convince its suppliers to change the way they did business
with it. It invested significant resources in supplier development initiatives,
precisely as Toyota had done with it. “Because our supply base
accounts for 60 percent of the cost of our product, the way they engineer
their products, the way they launch their products, the way they assess
demand and execute to that demand represents 60 percent of our potential
for improvement,” says Brett Skinner, director of supplier integration and
process development for Autoliv inflators.
At a fundamental level, the suppliers had to agree to make smaller,
more frequent deliveries, typically through a cross-dock facility.
“Delivery is the key step for the suppliers,” Skinner says. “Once we get
them to understand why small, frequent deliveries are needed and why
it’s better for them, then we increase the likelihood for success. If we can
get quality and delivery, then we’ll work on the systems, and price will
follow. And we tell our suppliers straight upfront, we’re looking for savings,
we’re coming after money year in and year out, and we’ll help you
get there.”
As Autoliv executives often say, “Variability costs money.” Largebatch
production and large shipments are, by definition, subject to larger
costs and more waste when demand shifts. This is true for the Ogden
plant, as well as for the companies that supply that plant. So Skinner has
used the example of the major gains in performance of the Utah operation
to develop training programs that will help suppliers make similar
improvements. “Our whole approach is to eliminate waste. We focus on
quality and delivery, and we take it back upstream to our suppliers—and
to our suppliers’ suppliers—until we solve the problem that caused the
waste,” Skinner says. “And when we solve the problem, we have a formal
process in place to share the savings with our suppliers.”
FROM ONE TIER TO ANOTHER
The case of Greening Donald exemplifies Autoliv’s collaborative approach
with its suppliers. Based in Ontario, Canada, Greening Donald makes wiremesh
filters for airbag inflators, a key component for Autoliv’s products.
Autoliv is Greening Donald’s biggest customer, but Skinner’s team did not
use its market clout to dictate the terms of a new relationship with this