Keynote with J.T. Battenberg, Chairman, CEO and President, Delphi Corporation
ISM's 89th Annual International Supply Management Conference
Roberta J. Duffy
Chairman, CEO and President
When you're the world's largest supplier to the automotive industry, you can't think of products in terms of being 95 or even 99 percent perfect. You must think in terms of 100 percent perfection. "After all," says J.T. Battenberg III, CEO and president of Delphi, "you don't expect the brakes on your car to only work 99 percent of the time, do you?" To reach these lofty standards, Battenberg says that Delphi recognizes the importance of optimizing the supply base, and during his keynote presentation at ISM's 89th Annual International Supply Management Conference, he talked about his firm's philosophy and the strategies they employ.
Battenberg stressed the importance of examining both ends of the supply chain - the customer side and the supplier side. From one end, you can learn lessons about the other. Here's how it works. Delphi's objective is "to be known as our customers' best supplier," according to Battenberg. As a supplier, Delphi has a wide variety of customers, creating a whole spectrum of relationships. Some of its customers believe in shared objectives, shared risks and shared visions. In those instances, Battenberg says that the customer will ask for collaboration, value creativity and stand by their agreements - and expect the same from Delphi. Other customer relationships look vastly different. These customers don't seek out design input from Delphi; they demand constant price cuts regardless of the optimum business model, existing agreements or long-term impact might be.
While Delphi's vision and commitment to be the supplier of choice stays the same, regardless of which type of customer it is dealing with, it's quite obvious that one of these types of relationships is preferred over the other. So, building on this experience, given that Delphi knows the different ways a firm can be treated as a supplier, it now understands how best to treat its own suppliers. Battenberg admits that his organization didn't always abide by this golden rule. In the automotive industry, there has been a culture of adversarial supplier relationships. But now, Delphi is committed to "emulating its best customers" - the ones that value the relationship - and not pass any other attitude up the chain.
Although each customer-supplier relationship is going to be unique, Battenberg says there are some fundamental concepts and philosophies that permeate throughout:
- Develop and manage cost standards, understanding all the drivers and best costs. Develop and achieve best-in-class cost management.
- Develop commodity strategies and strategic suppliers. Delphi identified 100 value streams, so they knew they didn't want to re-invent the strategy for each commodity.
- Lean supplier development builds new levels of trust in the supply base. Educating and enabling suppliers through your own knowledge brings value for both parties. For example, in one instance, a supplier said it needed a $3 million price increase. A Delphi cross-functional team did a workshop that taught the supplier how to create a lean environment and helped the supplier take costs out of its own processes. In the end 97 percent of that increase wasn't required.
By Roberta J. Duffy, editor of Inside Supply Management®