The resilience of a supply chain is dependent on the reliable performance of the suppliers who make it up, but the fiscal health of many of lower-tier firms is often not visible to executives at companies several tiers up. This is especially true for original equipment manufacturers (OEMs) like automakers or industrial equipment producers who often have many lower-tier suppliers.
In Uncertain Times, Big Companies Need to Take Care of Their Suppliers
Move beyond transactional relationships toward strategic partnerships.
April 06, 2022
Summary.
Many large original equipment manufacturers (OEMs) have long been ruthless with their suppliers, demanding extremely low prices and loading them up with risks. Given that the current turmoil buffeting global supply chains is unlikely to end anytime soon, OEMs should reconsider their supplier policies. They include moving beyond their transactional behavior and treating suppliers more like partners, implementing greater price flexibility in contracts, and rethinking inventory levels and where in the supply chain stock is carried.