Delphi to Shed 3,000 Suppliers

TRAVERSE CITY, MI – Delphi Corp. will reduce the number of suppliers it deals with directly by 3,000 over the next few years, David Nelson, vice president-global supply management, says at Friday’s Management Briefing Seminars here.

Delphi currently has 4,000 suppliers, down from 9,000 three years ago, Nelson says. However, 95% of “the spin,” or purchasing outlays, now are dealt out to only 1,007 suppliers, he says.

“When you’re dealing with 4,000 suppliers, that’s a lot of relationships to maximize,” Nelson observes. Delphi purchases $14 billion from suppliers annually, representing between 50% and 60% of its revenues.

Shrinking its supplier base is a major part of Delphi’s strategy to adopt purchasing practices of Toyota Motor Corp. and Honda Motor Co. Ltd. In fact, Nelson was hired by the huge components and systems producer two years ago specifically for that purpose.

David Nelson is Delphi’s vice president-global supply management.

A former purchasing executive at TRW Inc. who spent 10 years as Honda’s purchasing chief in Marysville, OH, Nelson says Delphi’s mission is to develop a collaborative relationship with suppliers so both parties become leaner and more efficient.

“We’ll have far fewer suppliers, but we’ll have stronger relationships with those that remain,” he says.

Delphi is rolling out nine new strategies as it moves to change the way in which it does business with suppliers, Nelson says. Its expectations are demanding: Flawless launches, zero parts per million defects, zero disruptions, first-time quality, meeting cost targets, maintaining the right attitude and a devotion to “lean thinking,” he says.

Nelson estimates it will take Delphi another three or four years to fully implement the changes it is making in the purchasing-supplier relationship.

And it won’t be easy. “Changing the way people have been taught to think in terms of supplier relations all their lives is a tough challenge,” he says. “We’ve had to change perceptions and values after years of contentious relations.”

Nelson cites some early results. By the end of this year cost standards will have been charted on 80% of the things the company buys, providing a roadmap for both sides to work out, he says.

Delphi recently dispatched 57 engineers to supplier plants to help them identify and reduce waste and run leaner. “This is not about eroding profits,” he says. “It’s about reducing costs.”