Magna Seeks to Strengthen Supplier Relations
Byron Pope Ward's AutoWorld, Jun 1, 2008 12:00 PM

Supplier Bankruptcies, Commodity costs, logistics and managing relationships all are key concerns of Ed Enns, director-purchasing for Magna International Inc.'s North American operations.

Speaking at the Global Automotive Conference, Enns outlines the strategy Tier 1 Magna is using to navigate the gloomy economic conditions facing the automotive industry.

Maintaining healthy relationships with numerous suppliers is critical to Magna's long-term success, he says.

In today's economic climate, it's unwise to squeeze suppliers for unrealistic cost concessions, he adds, noting that doing so is detrimental to both purchaser and supplier.

“We always talk about sharing risks and rewards with our suppliers, and I happen to believe that,” Enns says. “We need to do that even though things are as difficult as they are today.”

Trust is the key to forging strong relationships with suppliers, the Magna executive says, noting that fluctuating commodity costs sometimes can lead to suppliers trying to finagle their way out of a contract.

“I'm from the old school, where your word is your word,” he says. “When you sign a contract, you should spend more time trying to figure out how to manage the contract than how to get out of it.”

Keeping costs under control is a delicate balance, and one misstep can push a supplier into bankruptcy, impacting parts delivery, Enns says.

“Supplier financial risk is a huge issue for us,” he says. “We have on average, unfortunately, about six to seven supplier bankruptcies a month that we have to try and manage through and keep our business on track.”

Tracking the financial health of a supplier is no easy task, Enns says, noting a supplier that seems stable today could enter bankruptcy in a matter of months.