How will buyers know where suppliers buy from?

As Fortune points out, between Thai flooding and Japanese earthquakes, it’s been a tough year to run supply chains (The global supply chain: So very fragile, Dec 12). What became clear from these events is that many big firms were surprised to learn what they didn’t know. Sure major manufacturers knew who they bought from but they didn’t necessarily know whom their suppliers depended on (see, for example, this post). There seems a simple answer to that: Compile a database of who supplies whom. Automotive News reports that an auto industry group is trying to do just that (After disasters, group wants database of subsuppliers to fix bottleneck, Dec 13).

The Automotive Industry Action Group hopes to win the support of automakers and suppliers for the database, which would help its members track the activities of Tier 2, 3 and 4 suppliers. …

AIAG, of suburban Detroit, wants to fix that problem. The organization, which represents 870 automakers and suppliers worldwide, would create a database of component factories. …

Each supplier would volunteer a list of its factories, perhaps with GPS location coordinates. The database also could include each factory’s quality certification, products and other basic data.

The supplier would retain control over who is granted access to the list. In the event of a disaster, the supplier could let its customers see the list to find out whether any key factories were damaged.

In theory, the database would be attractive for suppliers because it could simplify communication with customers, eliminating the need to update each customer separately through the customer’s purchasing portal. That can be time-consuming for a supplier that might have 20 or 30 customers, Sharland says.

While at first glance this would seem eminently reasonable, it is running into resistance from suppliers. The article gives several reasons for this. One is that many suppliers view their supplier list as proprietary. They benefit from their customers not knowing exactly from whom they are buying. Some suppliers worry that their customers would just go around them and buy directly from lower tier suppliers. Alternatively, downstream buyers might take their improved knowledge of the supplier’s cost structure and demand lower prices.

It will be interesting to see how this plays out. Given recent experience, the informational demands on suppliers have to go up. That may not result in a centralized database, but it is hard to imagine an auto maker doing business with a supplier unwilling (or unable) to give a clear picture of their exposure to various kinds of supply chain disruptions.