Concept of «Extended enterprise». Part 1.

«Extended enterprise» concept has been first developed and applied to the purchase office practice in Chrysler Corporation. It has been done by its purchasing vice-president Thomas Stallkamp as an extended version of SCORE program which has been launched since 1991.

 In 1990, consumer demand of automobile industry in the USA decreased and the profitability downfall tendencies were beginning to outline. American automobile producers were not able to compete with Japanese car manufacturers neither in cost parameters, nor the quality and speed of market entry. The situation required some comprehensive solution.

Chrysler acted in the following way:

1)  separated 100 main vendors into 5 groups;

2) 1 of 5 company top-managers joined each group, met the group members in person and consulted with them;

3) personal meetings of top-managers and general managers of vendors were conducted.

The results of meetings with the top suppliers confirmed that the existing purchase strategy somehow similar to the one of Ford and GM needed serious changes to be done.

The plan of cost reduction has been made with the SCORE (Supplier Cost Reduction Effort), program as a main point.

Basic principle of this program is suppliers’ creativity encouragement aimed at cost reduction in the process of co-operation with Chrysler. The difference from competitors was: suppliers have been suggested investing some part of profit in increasing their own commercial viability and developing further partnership with Chrysler.

SCORE was based on in-process monitoring of both saved costs and amount of improvement proposals regarded by company. Any upcoming suggestion was registered in a program and passed for review to designers department within 24 hours. The suggestions were forwarded to the company office which was in direct relation to its implementation. It was constructors department when the point was to improve production, and it was related to the purchase office when the idea was the price reduction.

Active participation of Bob Lutz was the recipe of success of the program. Diverse ideas were coming up, and it was important to evaluate their potential as well as provide quick feedback with the suppliers responsible for the efficiency of suggested ideas.

The result of SCORE program embodiment was the following discovery: synergism of efforts of suppliers and the company results in manufacturing the production of higher quality creating the background for receiving profit by both parts.