What makes an automotive supplier "strategic"?

Automotive Design & Production, March, 2004 by John Cleveland

They understand that strategic flexibility depends on operational excellence. There is a myth in the manufacturing world that companies that are really good at innovation, creativity, new product development, intellectual property creation, etc. are usually not obsessive about "operational excellence" and vice-versa--that obsessive operational discipline brings with it avoidance of risk and a lack of innovation and creativity. (You're either going to be the mad scientist or the boring accountant, but never both!) We fundamentally disagree with this "either/or" mentality. While these may represent really different skill sets within the company, successful suppliers have to embrace both at the same time. Operational excellence creates the foundation for flexibility, agility and adaptability that are the hallmarks of good strategy. Becoming a "strategic" automotive supplier requires hard work and scarce talent. Which means the strategic leaders will always be in the minority.

* Some companies think their manufacturing capacity is strategic, when in fact it is not. We believe that the current woes of the Steelcase Corp, in Grand Rapids are a good example of this. The office furniture business is basically a design-and-distribution model of competition. The manufacturing process has very low engineering content. Steelcase management has gotten trapped into thinking that manufacturing is critical when, in fact, the vast majority of their manufacturing could be done better, faster and cheaper by outside suppliers instead of their captive capacity. As a result, their cost structure is radically out of whack, and their profits show it.

By John Cleveland, Vice President, IRN, Inc., johnc@irn-auto.com