ABSTRACT
This chapter establishes a firewall between manufacturer and their suppliers. It develops long-term supplier relationships and establishes metrics to measure how they work with suppliers. In establishing the rules of engagement with a new supplier up front, it is good to document this in a service level agreement. A service level agreement outlines the rules and procedures by which manufacturer's plan to work with their new supplier. It is not necessarily a formal legal document and does not replace any formal contract you may have with a supplier. It acts essentially as "standard work" for the day-to-day operation of your relationship with their supplier. One of the good things about a service level agreement is that it assumes that their relationship with the supplier will be ongoing. Some of the large automotive original equipment manufacturers (OEMs) have engaged in this kind of aggressive price arbitrage over many years with the result that many suppliers have diversified away from automotive business.
