ASSIGNMENT

Assignment (Part C & D)



Assignment (Part C & D)

Assignment (Part B)

Supplier Development

One of the cornerstones of our national content strategy is creating economic opportunities for local businesses and investing in developing the capabilities of local contractors, suppliers, and vendors to help them meet global industry standards to qualify for contracts with ExxonMobil and others. We promote local capacity by helping suppliers meet our supplier prequalification requirements, providing training for entrepreneurs, and creating business opportunities for local small and medium enterprises.

By purchasing goods and services in-country and developing long-term supplier relationships, ExxonMobil supports the development of the local business community. Our presence has a multiplier effect, as our capital and operating expenses generate direct income for local suppliers and contractors as well as indirect payments to their vendors. As a result, local workers have higher disposable incomes, leading to increased consumer spending and greater national income. As the capacity of local suppliers continues to expand, we are increasing the amount and value of work executed locally.( Hahn, 1999, 209)

There has also been a trend toward an increased level of outsourcing. Industrial customers depend more on their suppliers for their products' end quality, performance, and cost than in the past. For example, 80 percent of the manufacturing cost of a Honda and 70 percent of the cost of a Chrysler automobile can be traced back to purchased components. So to ensure that end consumers receive the right product at the right price, industrial customers are actively intervening in their suppliers' operations. By initiating supplier development programs, customers become a catalyst for change in those organizations.

Although the firms we visited also have groups devoted to improving supplier quality, cost reduction is the primary focus of the supplier development efforts described here. The major U.S. auto assemblers generally require their suppliers to provide "cost give-backs" of 2 percent or more annually. Ford announced that, beginning in 1996, its suppliers are expected to reduce costs, on average, by 5 percent each year for the next four years. Through supplier development, the auto assemblers help suppliers attain tough cost reduction goals.( Hahn, 1999, 214)

Customers typically have two objectives for supplier development programs. The first is to reduce costs, improve quality, and improve delivery performance by completing projects jointly while the customer is on-site. The second objective is to teach suppliers a systematic process they can use to continue making improvements. All the auto assemblers we visited expected their suppliers to be self-sufficient in continuing a stream of cost reductions after they left. For suppliers, sustaining the change process on their own is a difficult task.( Paton, 2002, 20)

Customer Development

When we build products, we use a methodology. Many of us are not accustomed to thinking about markets or customers in a disciplined way. We know some products succeed and others fail, but the reasons are complex and the unpredictable. We're easily convinced by the argument that all we need to do is "build it and they will ...