It's great to try to cut costs in design. But sometimes, the ax that chops the cost out of a component can inflict a wound on the one who wields it. Few industries are as notorious for squeezing vendors on price as the auto industry. Virtually everyone who supplies parts to the industry has horror stories about the cost cutting they have to accept. Some suppliers, who prefer to be anonymous for obvious reasons, fear that eventually they may have to stop supplying automakers because they can't make enough profit doing it.
And similar fears ride the ether.
Some fear that the reverse-auction format of some e-commerce sites could drive prices down so far that many worthy suppliers would not be able to compete.
Worse, the price pressure could lead to a point where some suppliers would not be able to provide engineering assistance to customers, or invest in the development of new technology. They just wouldn't have the funds to do either.
Efforts like those of Pacific Bearing to develop a portal for engineers who need help with power transmission components could offset the danger.
Still, the auto industry seems bent on using e-commerce to bludgeon suppliers on prices. In fact, many suppliers are concerned that a possible joint e-commerce initiative by automakers could force prices to new lows. That could ultimately wipe out the hard-earned improvements in quality Detroit has achieved in recent years.
I don't mean to pick on car companies here. The auto industry is not alone in trying to wring savings from suppliers. But, its efforts seem more visible if only because so many companies supply parts to the industry.
Ironically, many companies—automotive and others—that are forcing suppliers to make draconian cuts in the price of their components or materials are offended when their own customers demand the same of them. "Why don't they understand the value we bring, and that value is worth something?" they ask.
Indeed. Quality, innovation, application support—they are all measures of value, and they don't necessarily come cheap. Nor should they.
It's value companies should be looking for, not just low prices.
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