From supplier bankruptcies and soaring raw-material costs to global logistics and the eternal hunt for the best price, purchasing departments have become pivotal to the success - and survival - of North American auto makers. Ward's 6-part series stems from interviews with the purchasing chiefs of GM,, , Toyota and . Today is Part 5.
MARYSVILLE, OH – It takes a lot to rattle Larry Jutte, a soft-spoken Midwesterner who grew up in Ohio farm country and rarely finds reason to raise his voice.
But the senior vice president-procurement forof America Mfg. Inc. shows slight agitation – and amusement – upon hearing that Motor Co. purchasing chief Tony Brown suggests Ward's interview Honda's Japanese honchos to fully understand the scope of its global purchasing organization.
Brown says Honda's North American procurement team, led by Jutte, “may be competent, but the real decisions get made in Japan.”
Honda's Jutte praises ADAC Plastics, which supplies Ridgeline's inner door handle.
Jutte begs to differ. His organization includes 1,400 purchasing agents in North America, including 900 in Ohio. Here in Marysville, Jutte has 200 buyers handling quality, cost, delivery and logistics, tied in with Honda research and development – “everything it takes to get that product sourced, qualified and quality-ready for mass production.”
A smile comes to Jutte's face as he responds to Brown's comment, speaking softly at first, but finishing with an uncharacteristic flurry of emotion.
“You can tell Tony Brown that I've been there, I've seen it,” he says, his voice rising. “There's a whole bunch of people there doing that kind of work, and they're working with the R&D guys with exclusive models that are only made in North America and Japan's not involved with it!”
Jutte refers to a global vehicle program Honda will launch “in a few years” that will be led by the Marysville staff, with collaboration from Japan and other regions. As for details of the program, don't bother asking.
“Everyone in the company understands because the (sales) volume is in North America, that whatever is good for North America is probably good for Honda globally,” Jutte says. “This team will communicate globally to be able to make the right decisions. And it's not just their decisions – it'll be a team decision.”
Jutte insists Japan does not dictate orders to his North American procurement organization.
“But at the same time we have a responsibility to listen to Japan – they have ideas,” he says. “Thailand has ideas. China has ideas. The U.K. has ideas. And it's all of those ideas that come together that make Honda collectively better than any individual country or any individual in the company.”
Famous for its belief in collective intelligence, Honda views suppliers as a valued part of the team. Although Big Three auto makers are eager to source parts for the U.S. market from low-cost regions of the world, Jutte says Honda remains wedded to the philosophy that parts should be sourced locally.
The challenge is to find U.S. suppliers that are price-competitive with the rest of the world. Jutte refers to ADAC Plastics Inc. of Grand Rapids, MI, a supplier of the distinctive inner door handles on the new Ridgeline sport/utility truck. ADAC has since won other Honda business.
“They are a good company,” Jutte says. ADAC's original quote for the Ridgeline was the best, even on a global basis. That wasn't quite good enough for Honda.
“We went in and by working with them on tooling, on cycle times, on parts procurement, on all aspects of doing business, we were able to reduce that original quote by almost 15%,” Jutte says. “That made them that much more competitive. Not just for Honda, but for anyone they're doing business with.”
Even Ford and Tony Brown.
Honda purchasing – by the numbers
- $13.6 billion North American purchasing budget (autos and motorcycles)
- 600 suppliers in North America
- 1,400 buyers in North America, including 900 in Ohio