In recent decades, major original equipment manufacturers have pared their ranks of suppliers and delegated the management of lower-tier suppliers to their trusted top-tier providers. The benefits are great, measured in cost savings and efficiencies. But has the delegation has gone too far?
It definitely has, argue Thomas Choi and Tom Linton in Harvard Business Review's December 2011 issue. They say that many OEMs now rely too heavily on first-tier suppliers and that doing so is dangerous, weakening OEMs' control over costs, their visibility regarding technology developments and market shifts, and their ability to innovate and manage risks. Listen here.