How they did it: Supplier Trust at General Motors

This is an excerpt of the original article. It was written for the May-June 2017 edition of Supply Chain Management Review. The full article is available to current subscribers.

May-June 2017

Trust hasn’t always been an element in supplier relationships; all too often buyers have been encouraged to carry a big stick and get tough with suppliers to get the best price—no matter the cost. That approach to procurement is beginning to change.

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In 2016,General Motors achieved two major milestones: The Bolt—Chevrolet’s entrant into the market for all electric vehicles—was named Motor Trend’s Car Of The Year after it was rated at 238 miles on a charge, the most for any electric vehicle currently on the market. At the same time, GM improved 11% and moved up to fourth place on the Supplier Working Relations Index, a highly respected annual survey that measures supplier trust in the automotive industry. It was one of the largest single year gains in the history of the index. John Henke, publisher of the survey since its inception more than 20 years ago, noted at the time that “only General Motors—a historical laggard—showed significant improvement in this year’s study” and that “only GM’s purchasing VP and buyers appear to be working together to build trusting relations.”

GM believes that both achievements are the fruits of Strategic Supplier Engagement—or SSE—an initiative the automaker launched in 2014 to improve its financial performance and the performance of its vehicles: The Bolt’s mileage rating, for instance, is the result of a strategic relationship with LG Electronics, the supplier of the propulsion technology behind the Bolt EV. That type of innovation— and strategic relationship—were both lacking at GM for years before it began to see improvement in the index. This is the story of how they did it.

From cost cutting to cost sharing

With Strategic Supplier Engagement, GM’s goal was to build a foundation of trust and transparency. Yet, when it comes to its suppliers, adversarial rather than strategic was likely the first word that came to mind in the automotive industry prior to its introduction. Despite its storied past, GM perennially came up short on Henke’s Supplier Working Relations Index, often battling for last place and typically finishing behind its U.S. and Japanese competitors.

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