Reducing Materials Costs By

By Larry Barrett  |  Posted 2002-12-01 Print this article Print

Chrysler is going to measure supplier against supplier every day of the week. Are you ready for your company to get graded, constantly?


Reducing Materials Costs By 15%

This new scorecard system is the linchpin of the company's Material Cost Management program, designed to reduce Chrysler Group's materials costs by 15% in the next two years. The online scorecards will be available to suppliers within the next six months. Chrysler Group's in-house IT staff is currently building the system on the company's intranet.

"All of the big OEMs (original equipment manufacturers)—Chrysler, GM and Ford—will have online scoring or ways to get suppliers' performance to them so that performance can be viewed," says Kevin Prouty, research director at AMR Research in Boston. "When these OEMs go out to source components on a new vehicle, they're trying to get away from the piece-part process. They're trying to look at the total cost of sourcing not just the actual cost of the component but the cost of quality and delivery."

Barnas says Chrysler Group in the past three years has taken more than $5 billion worth of contracts away from suppliers who scored poorly on the scorecards and given those contracts to other suppliers who made the grade. And that was before the information was available all the time, online.

"Sure, pricing is part of the criteria," he says. "But of that $5 billion, roughly $3.2 billion were re-sourced because of quality issues. Either the percentage of defective parts was too high or we found another supplier that delivered a better quality product on a more consistent basis."

Since Chrysler only began to push around-the-clock rating in October, Chrysler suppliers are still waiting to see—or hear—how this will change their relationships with the automaker.

"Well, I assume it will make the information much easier to access and [be] convenient," says Jim Gill, a spokesman for Continental Teves, an Auburn Hills, Mich.-based supplier of hydraulic and electronic brake systems. "But to be honest with you, this is the first we've heard of this."

Senior Writer
Larry, of San Carlos, Calif., was a senior writer and editor at CNet, writing analysis, breaking news and opinion stories. He was technology reporter at the San Jose Business Journal from 1996-1997. He graduated with a B.A. from San Jose State University where he was also executive editor of the daily student newspaper.

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