Jose Ignacio Lopez De Arriortua Case

1. A buyer should be ultimately striving to maintain a dominant power leverage position over their supply base.   It is never wise to allow a supplier to have more power or the dominance position.   It is possible to maintain a buyer dominant power position and simultaneously build a collaborative alliance with a supplier.   This is shown in the end of the case when VW builds the factory in Brazil.   VW is still in the dominant power position and they are working side-by-side with suppliers in the factory building alliances and stronger relationships.   By working together, on the same factory floor, VW is able to learn a great deal about how the suppliers do their work and give VW a chance to meet and know the actual employees of the supplier.   The suppliers and their employees are able to meet the VW employees and work together to achieve a cost savings.   Since other suppliers are also on the shop floor, the suppliers are able to see first-hand how VW treats other suppliers.   With this much more open environment, collaborative alliances can form with VW still being in the dominant power position.

2. The Big Three failed where Toyota and Honda succeeded in terms of effective supplier relationship management because when copying they missed some of the underlying key issues.   From the supplier's perspective, Toyota and Honda were better communicators, more trustworthy, and cared more about their profitability.   Toyota and Honda also use the six step process of understanding how the suppliers work, sharing information, and work together to supervise and develop the suppliers while gaining joint improvements.   Focusing on price reduction only does not help supplier/manufacturer relationships.   Toyota does not believe in bullying its suppliers but instead acts like the supplier's parent.   The biggest difference, I believe, is understanding how their suppliers work which leads to joint improvement activities.   This shows the suppliers you understand how they do business...