Deepesh Rathore

Jun 21 20:41 2007 Vinay Choubey Print This Article

I have always wondered how typical Indian OEM-supplier relationships work. On a micro-level that is.

I wonder how the Managing Director of a multi-million dollar supplier group greets the General Manager – Sourcing of a leading OEM. The MD of the supplier probably smokes Havana cigars,Guest Posting goes around in a chauffeur driven S-Class and has the Ritz-Carlton as a second home. On the other hand, the GM – Sourcing earns a modest salary like any senior executive in an Indian automaker does.

And yet it is the OEM executive whose stamp of authority ensures 85% of the turnover of the supplier group.  Yes, the Havana cigars are dependent on someone's signatures.

Does the high flying Managing Director (HFMD) greet the modest earnings OEM purchasing executive (MEPE) with reverence?

Up to the point of worship? 

Do they meet like friends? Or is there some stiffness?

If they happen to meet somewhere outside India, would the HFMD ensure that the MEPE had an “enjoyable” stay?

If they happen to meet over drinks, who picks up the tab?

This thought process brings me to the second string.

Is OEM sourcing a completely transparent issue? Is there no underhand dealing involved in OEM sourcing? How easy, or how difficult, is it for a purchasing executive to favour a particular supplier.

I know that to a large extent purchasing is based on ratings, scores and systems. But there is always scope for an ambiguity where a supplier meets 85-95% of requirements. In such cases, the supplier is just about good enough on most counts but falls short on certain counts.    

Does the supplier do a nudge-nudge wink-wink with the OEMs purchase personnel and get the contract?

Is people skills a factor in OEM-supplier relations? Should they be? Is playing golf with the Japanese OEM's MD part of business or just for pleasure?

I know that there was a controversy last year about Faurecia and some other suppliers bribing officials at VW, Skoda and SEAT to get lucrative supply contracts.

Does it happen in India?

I cannot help but wonder about how transparent things are in Indian OEM-Supplier relations. After all we Indians don't have an enviable track record in the area of ethics and corruption.

Assuming that the relationship has a certain degree of corruption involved is it more in case of companies like Maruti where even small components mean multi-million dollar businesses or in the case of a company like Ford where volumes are much lower.  Are employees of a company which has conservative salaries more susceptible to corruption as compared to other companies where middle level managers are better paid? Think of it, automotive industry in India is one of the lowest rated in terms of take home salaries.

My personal experience is that OEMs, especially Indian ones, try to keep their supplier relations under wrap. A two wheeler OEM had blocked my entry into their offices once I became too nosey about their suppliers. The reason was clear – most of the suppliers were close relatives of the OEMs managing family and their were a number of cross-relationships involved which they did not want to talk about.

So how are Indian OEMs designing their supplier relations to ensure that they are completely transparent?

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Vinay Choubey
Vinay Choubey

Deepesh RathoreResearch

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