“I fear the Greeks even when they bring gifts” : the customer-supplier “partnership”

Introduction

Years ago, the so-called customer-supplier “partnership” started to become fashionable in the automotive industry.

This definition has always reminded me of the loving “come here and I won’t do anything to you…” that we have all heard at least once in our lives from our parents or addressed to our children.

But what is it?

The “partnership” in the automotive industry

Simply, the attempt to make the entire supply chain benefit from important savings, through the sharing of their know-how by manufacturers.

How ?

Exactly through the paternalistic approach of all of us who are beginning to give good advice when we can no longer set a bad example.

In other words, in times of dire straits, finding themselves in the situation of having to reduce their costs, manufacturers have started to outsource the lowest value-added processing phases in order to obtain better results at reduced prices.

The next step was to encourage the relocation of these stages to low cost countries.

And the final step was to propose a “partnership” to those who could not follow that migration flow, often for logistical reasons dictated by the need to ensure proximity to the customer.

The partnership works like this: I find savings among YOUR costs and you give me back half of the gain in the form of a price reduction.

  • Doctor: “Where does it hurt?” (i.e. “why can’t you guarantee me lower prices?”)
  • Patient with trembling voice: “Here…” (generally in fixed costs, primarily personnel cost)
  • Doctor: “Well, if that’s all it is, I have the solution: cut.”
  • Patient: “What you mean “cut” ? I’ve been cutting for years: there’s nothing left.”
  • The medical report will then state: “The patient is seriously ill but does not understand the diagnosis. Free the place for healthier patients”.

I remember in the midst of the automotive crisis in 2010, at a time when he was given great praise, pompous hagiographies and even a comic book superhero role, Carlos Ghosn, head of Renault – Nissan, complaining that the French car industry (despite the fact “partnerships” had been in place for years) maintained a level of inefficiency of 25%.
Claiming substantial state aid as a corollary.

Conclusion

In reality, customer-supplier relations are dictated exclusively by the power of negotiation, and having or not the upper hand makes all the difference.

There are very few weapons to face this.

Growing up in a small tourist resort I noticed how those who come from big cities with the prosopope of those who pretend to teach others how to live are the first to be regularly fooled. That’s how the life goes.

So the lie and circumvention remain the first barriers of the small against the infamous “partnership” generously offered by the big.

Low capital-intensive activities can eventually focus on “breakthrough” activities, making “agility” a strong point.

Being able, often with the help of new technologies or Artificial Intelligence, to find innovative ways of doing things.

The same exercise is much more difficult for those that need huge investments in machinery and properties, called “capital intensive”.

The search for agility for them often results in endless and ineffective weight loss treatments, such as those that pull off those of my age, always with poor results.