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Conflict of interests

May 3, 2005
Many corporate executives talk a good game when it comes to partnering with their suppliers and customers, but in practice their motivations are entirely
Many corporate executives talk a good game when it comes to partnering with their suppliers and customers, but in practice their motivations are entirely selfcentered. Rather than pursuing collaborative relationships with their supply chain partners, these managers embody the adversarial philosophy that "it's good to be the king," and treat their suppliers as subservient serfs.

Of course, some companies have operated on this type of model for a long time, but as the role of manufacturing continues to evolve (some would say devolve) in the U.S, there's a mounting body of evidence that adversarial management tactics are driving our industrial base offshore, and are hurting our chances of enjoying sustained economic revival and growth.

Supply chain collaboration, on the other hand, while frequently dismissed as just a feel-good management fad, offers a proven strategy for success and in fact is the key to corporate survival.

That's the view of Thomas Stallkamp, who was president of Chrysler Corp. during the 1990s, when the Big Three automaker was spearheading the supply management concept of the extended enterprise throughout the automotive industry. Chrysler's legendary SCORE ( Supplier Cost Reduction Effort) program offered one of the first working models of strategic collaboration with supply chain partners. By seeking cost reduction solutions from its suppliers rather than demanding across-the-board price cuts (a tactic then in vogue at rivals General Motors and Ford), Chrysler rebounded from an economic crisis in the early '90s while achieving cumulative savings of $5.5 billion over the decade thanks to SCORE.

That kind of success opened up a lot of eyes to the tangible results that are possible from collaborative commerce. Just as Wal-Mart was the supply chain bellwether for retail and Dell represented high-tech's supply chain watermark, so too did Chrysler become synonymous with the extended enterprise.

However, while Wal-Mart and Dell held firm to their charted supply chain courses, Chrysler became a victim of its own success when it was acquired by Daimler Benz, a German company whose managers were famously adverse to the style of information sharing and responsibility sharing Stallkamp had championed. Chrysler soon adopted Daimler's adversarial ways, and Stallkamp moved on to other ventures.

These days he's spreading the good word on collaboration as a consultant as well as author of the new book, SCORE! A Better Way To Do Business (2005, Wharton School Publishing).

Stallkamp was motivated to write the book largely out of his concern that U.S. manufacturers are trading short-term gains via outsourcing for a potential long-term economic crisis. In our rush to go offshore for cheaper labor, he says, we're not creating enough jobs to maintain growth in employment in our own country.

"Our manufacturing base is going away," he told me, "and as a result the U.S. economy can't handle the dislocation of manufacturing jobs."

Outsourcing in and of itself isn't necessarily bad, he stresses. "But giving up on your domestic supply base because it's easier to source overseas rather than continuing to work with a local supplier is not a good idea."

While Stallkamp is hardly the first pundit to opine that American manufacturing is in trouble, he's one of the very few who actually has a proven game plan to reverse the exodus of jobs and expertise from our shores. The natural tendency of companies when they get in trouble is to become more adversarial, when it's just the opposite — partnering with your suppliers to develop collaborative relationships — that is the best course of action, Stallkamp believes.

Many people mistakenly thought that SCORE was just a cost reduction program, he notes. "It was actually an idea generation program." For instance, Chrysler's R&D costs were the lowest percentage of sales of any automotive OEM, and yet it was able to introduce more new vehicles than its competitors. How? By using the R&D capability of its suppliers. Since Chrysler was awarding long-term contracts to suppliers who could meet defined targets, those companies came to view Chrysler as the best company in which to invest their limited R&D resources. It became a win/win situation for all those involved.

So how does a company get into a position where collaboration can produce the desired results? "You start off by making sure your senior management buys into this concept," Stallkamp emphasizes. "If you back off a little bit, or you're perceived as being insincere, it'll fail. The only way it can work is if the person at the top of your company buys into collaboration."

After that, you need to proactively build trust among your suppliers and customers through small examples. "You have to work at this daily, winning small victories, and publicizing the success stories that showcase examples of where you listened to suppliers."

Stallkamp admits there are plenty of skeptics, and his own exodus from Chrysler illustrates that continuity often is a casualty when new management assumes power. Nevertheless, he's convinced that collaborative commerce is the best strategy for American companies.

Stallkamp remains cautiously optimistic that American manufacturers will change their model, moving from conflict to collaboration with their supply chain partners. "The model of the old adversarial way is broken," he states, "so I don't think we have any other alternative."

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