Explain your answer. sarial Case 9-2 Managing the Supply Chain at Honeywell Honeywell www.honeywell.com If you own a home, work in an office building, or travel Rather than treating suppliers in an adver by air, the chances are excellent that a Honeywell prod. manner, Honeywell is treating its suppliers uct has affected your life. The Honeywell Corporation like business partners and is looking for opporta is the world's leading maker of control systems and nities to partner with suppliers in a wide variety related components for buildings, homes Industry of areas space, and aviation. The most recognizable Honeywell product is the automatic thermostat control for home The motivation for these criteria is not grounded heating that can be found in millions of U.S. homes that prudent sopply chain management saves money in better public relations or altruism, but in the belief Less recognizable Honeywell products are used in com mercial and military aircraft, Industrial applications und creates a competitive advantage. The company's home security systems, and the US, space program. willingness to focus on ises other than price is central to the success of this philosophy. Commenting on this Like many companies, Honeywell is in a compet itive environment that demands high quality products at issue, a supply chain manager at Honeywell remarked, affordable prices. To meet these challenges, Honeywell "We have to reengineer our mindset to focus on im has worked hard on its supply chain management. In an proving the benefits we can receive from the suppliers effort to maximize the value that suppliers make to its verses just concentrating on prices. Many business or business units, Honeywell has developed a distinctive ganizations hold price se sacred that they miss the free pproach to supplier management. The distinctive ap things that suppliers will do for you. Good suppliers proach contains the following key components want to be closely scrutinized by their buyers because the suppliers get a chance to showcase their on-time The company is shifting from a focus on price to a performance and other positive attributes focus on total cost. As a result, the company does The consistent theme that is reflected in all as not always buy from the lowest price suppliers. pects of Honeywell's approach to supply chain manage Instead, it buys from the supplier that it believe ment is an effort to maximize the value of its supplier will provide the lowest cost in the long term." relationships. The company anks a lot of its suppliers The company is shifting toward longer term from on-time deliveries to providing input on the design relationships with its suppliers and is creating its of Honeywell products. In exchange, Honeywell gives suppliers as if they are extensions of its own busi its preferred suppliers millions of dollars per year in nesses rather than vendors. business and conducts itself in a responsible manner by The company is asking its suppliers to pro making payments on time and treating its suppliers with vide business Solutions instead of simply drop respect. This overall approach to wpplier management ping products off at the loading dock creates what Honeywell believes is a wiwin partnership "How will Works Gainere from The Supliers Supplies Select Mopport. The Man Chapter 9. Managing Supplier Quality in the Supply Chain 227 hetween itself and its suppliers. The more Honeywell's Honeywell is firmly committed to prudent sup suppliers contribute to the profitability of its businesses.ply chain management. The company has quantified the e more bin Honeywell wit gives suppliers results of ses several areas for comples Although Honeywell is fully vested in its distinc in terms of treating suppliers like business partners tive approach to supply chain management, the company rather than arm's length vendors, the company has is also firmly committed to cost containment. Fortunately, learned that partners" rather than "vendors" produce supply chain Management and cost can we not more cost savings, have better on-time delivery, supply odds Honeywell. The firm is very careful about the better quality products, and provide more suggestions suppliers it chooses and works hard to find the right mix for supply chain improvements. These results, along of price and performance. Honeywell involves its up with positive results in other areas of the company's ap pliers in every aspect of improving the efficiency of the proach to supply chain management, have affirmed to supply chain. This creates a healthy working relationship the company the value of its approach to supply chain between Honeywell and its channel partners. management Discussion Questions 1. Why does Honeywell spend so much time dealing with supply chain management issues? Wouldn't the company be better off focusing on its own manufacturing operations? Explain your answer. 2. What aspect or aspects of Honeywell's ap proach to supply chain management appear to be particularly prudent? Can you suggest any additions to Honeywell supply chain management program? 3. Do you believe that Honeywell's approach to sup- ply chain management creates a win-win situ tion between the company and its suppliers? Why or why not