In an economy where it is essential to minimize costs in every possible aspect of business to remain competitive, many traditional methods of conducting business operations have to be reevaluated and redesigned to obtain maximum efficiency. The introduction of supply chain management in the 1980's revolutionized the way suppliers, manufacturers and retailers dealt with each other in managing material flow. DiamlerChrysler, formerly Chrysler Corporation, pioneered this concept by mastering the relationship with their suppliers.
In the 1960's, American automakers held a reputation of having adversarial relationships with their suppliers. There was also a growing concern about the high degree of vertical integration achieved by the industry that resulted in inefficiency and waste in their supply chains. As the increase in productivity accredited to the concept of mass production was now coming to an end, they forced price reductions on suppliers. This created distrust between the automakers and suppliers and also reduced the quality and product design.
The industry was also faced with external competition, especially from Japanese automakers who were introducing cheaper, more fuel-efficient cars to the US market. Since the Japanese excellence in the concepts of Just In Time inventory and quality control were not possible to replicate domestically, American automakers began to look at other areas to improve and cut costs.
In a time of such financial crisis, Chrysler's largest buyer, Thomas Stallkamp, proposed to established links with the suppliers and even the raw materials supplier further down the line. They wanted suppliers to become long-term partners and integral parts of design and product development. Also, the buyers were to play a role in operations, especially designing.
The company realized that most delays and cost overruns were ultimately attributable to the traditional sequential design approach that they followed, with different functional groups responsible for different steps in...