Chrysler is piloting a no-bid purchasing system with suppliers for its new minivan

Article by Anita Panait, on August 9, 2013

Chrysler Group is conducting a pilot of a collaborative, no-bid purchasing system that guarantees favored suppliers a profit. Suppliers, however, have to open their books to the carmaker.  At the center of the pilot is Chrysler’s next minivan. Chrysler purchasing boss Scott Kunselman remarked that "a couple dozen" suppliers are exploring the idea, but none have signed a contract.

The system relies on huge trust on financial matters between the carmaker and its suppliers -- something that Kunselman acknowledges is a work in progress. Chrysler will replace its Dodge Grand Caravan and Chrysler Town & Country minivans with a single minivan in 2015. The Detroit News suggested in a report in July that the current Grand Caravan could be continued for another two years. 

The pre-sourcing arrangements between a carmaker and supplier are typically designed to enable them to trim engineering costs, build trust and improve long-term planning.

Although pre-sourcing is common among suppliers at Honda Motor Co. and Toyota Motor Corp., it has yet to be adopted by domestic suppliers. Kunselman remarked that the pilot would be success as a number of suppliers confirmed willing to take part in the program.

Long-term, no-bid deals provide suppliers with more predictable revenue, enabling them to invest on a lowered risk. Suppliers are more inclined to provide their best technology to loyal carmakers who also offer the best profit opportunities.

On the other hand, no-bid agreements assure carmakers of having an uninterrupted supply of parts as well as access to a supplier's best technology. Kunselman remarked last fall that he wanted to do shift many of the carmaker’s supplier relationships into pre-sourcing, it would allow the company improve its relations with around 3,000 suppliers. Doing so would also provide Chrysler access to suppliers' best technologies and production capacity. [source: automotive news - sub. required]

Topics: chrysler, minivan

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