The encyclopedia · Strategy & Leadership · Operational decision · 1990–2002
Chrysler saved $2B by making suppliers propose their own cost cuts
Chrysler's SCORE program asked suppliers for cost-reduction ideas, saved over $2 billion, and turned adversarial sourcing collaborative.
Chrysler
The solution
Chrysler's supplier relations had long been adversarial, focused on beating prices down in negotiations. In 1990 it launched SCORE, the Supplier Cost Reduction Effort, asking suppliers to propose cost-saving ideas for Chrysler's products and processes.
A study of the program identified four success elements: a designated process champion, deep supplier engagement, motivated employees, and a fast evaluation-and-implementation pipeline; savings were shared with suppliers to keep ideas flowing.
The program saved Chrysler over $2 billion and built collaborative supplier relationships in an industry famous for distrust.
Why it worked
- Suppliers know the parts they build better than Chrysler's buyers do.
- Sharing savings gave suppliers a reason to keep proposing ideas.
- Fast evaluation kept ideas from dying in review queues.
- A dedicated champion gave the program organizational power.
- Engaging the whole supply chain multiplied the idea pool.
What can be applied
The people closest to a cost are the ones who can cut it: a structured channel that shares the savings with suppliers harvests ideas no bidding war would ever surface.
Aftermath
SCORE became a benchmark for collaborative supplier sourcing; the Interfaces (2002) study distilled its design principles so other firms could build similar supplier-suggestion processes.
Sources
- Chrysler Leverages Its Suppliers' Improvement Suggestions
- Chrysler Leverages Its Suppliers' Improvement Suggestions
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