At a meeting with some key suppliers last month, a Delphi Corp. purchasing manager came in with a baseball bat.
``He said, `This is how we used to work with vendors,' '' said a supplier at the meeting. ``Then he threw the bat aside and said, `We're going to do something different.' ''
Troy, Mich.-based Delphi is rolling out a program with key suppliers to share cost savings they find. For example, if Delphi and the supplier find a way to reduce the cost of a component Delphi buys, that savings will be shared. In some cases, Delphi will share half the savings. If a supplier is struggling and Delphi wants to keep it afloat, it might let the supplier keep all of the savings, said R. David Nelson, Delphi's vice president of global supply management.
In cases where the supplier is exceeding expectations and using Delphi's techniques to save costs with other customers, Delphi might keep all the savings.
One Delphi supplier and an industry watcher said the program is a departure from the usual practice of simply passing annual price-cut demands from automakers down the supply chain.
Delphi has about 100 ``strategic'' suppliers it wants on the cost savings program and so far it has done so with about 75, Nelson said.
``That's the way you get great cooperation,'' said Nelson, a former purchasing executive at Honda of America Manufacturing Inc. and Deere & Co. ``They say, `we'll help you get parts at a lower cost' and we say, `we will give you the business.' ''
The traditional push-down method doesn't encourage suppliers to take cost-savings ideas to customers, said Greg Stanalajczo, chief operating officer of Royal Oak, Mich.-based Trillium Teamologies Inc., a technology and creative firm.
``In the past you had to hold on to those savings because you knew you were going to get a mandatory 5 percent cut next year,'' said Stanalajczo, who attended the supplier meeting last month. ``This is a little fresh air. They're telling us to help show them how to save money and they'll share it with us. That creates merit in an environment where most of the time you hear, `Take 5 percent out and we don't care how you get it and we don't care about your livelihood.' ''
Despite the more collaborative approach, Delphi still is tough on price, Stanalajczo said. The company wants suppliers to match the lowest price they can find. What's different is the approach they take, he said.
``It's a different environment,'' he said. ``It's not just me, me, me.''
Neil De Koker, president of the Original Equipment Suppliers Association, said Delphi's program is similar to the former Chrysler Corp.'s SCORE program in the early 1990s and to practices at Toyota. The SCORE program was popular with suppliers.
``Suppliers, to come up with innovations that cut costs, have to spend time and money to do that,'' he said. ``They have to do studies and tests before they can even approach their customers. If all you're getting is some credit toward a target or if it all goes to the customer, where's the incentive? You're not working together to get at issues nobody can get to individually.''
It's no accident that Delphi's approach is similar to Toyota's. The company has hired two former Toyota executives - Hiromichi Kamimura and Kazumi Nakada - and works with a consultant formerly employed by Toyota to work with suppliers and within Delphi on cost management.
De Koker said because of Delphi's size - the company reported sales of $28.1 billion last year - it can influence the industry.
``I think it'll start to grow and get momentum,'' he said. ``We're all starting to see that annual price-cut demands can only get you so much. We need some strong leaders with suppliers and [automakers] to do this.''
The program dovetails with Delphi's effort to teach lean to its suppliers. For the past two years, the company has sent lean teams to suppliers to teach Delphi's lean system. Delphi has about 4,000 suppliers and an annual purchasing budget of around $14 billion.
Delphi has trimmed the number of suppliers it uses by about 1,000 over the past two years and will trim more. Overall, Delphi has seen a 34 percent improvement in supplier quality. Delphi wouldn't quantify the cost savings.