Supplier Management in Service Industry: What can be Learned from Automotive Manufacturing?

The objective of this chapter is to describe how many of the supplier management practices of the U.S. automotive industry can provide learning points for those who manage service organizations. After a review of the four service sectors (distributive, producer, social, and personal services), we define supplier management. The three main functions within supplier management--control, improvement, and planning--are illustrated and discussed. The suppliers for a specific service are even more diverse than those cited for an automotive OEM; many services use suppliers from each of the other service sectors. Consistent with automotive OEMs, service companies outsource all three categories of supplies--goods, services, and software--though the proportions and contribution of each supply category to operational excellence may differ. Service operations experience waste, and we review the accepted list of eight wastes for service operations, noting that each of these wastes could be caused by a supplier. Essential practices of supplier management for a service industry are organized around the concept of customer-supplier partnership, a six-step hierarchy first identified for automotive OEMs. With the addition of two more imperatives, assure service dependability and manage the service supply chain, we explain how these eight practices may be adapted to services.