Re:How we got grifted by a multi-billion dollar grocery dist...
by monocasa on Friday December 30, 2022 @01:53PM
(#34188468)
It's the other way around I've found for a lot of the automotive industry. Most of the big automotive companies try to keep their suppliers a hop and a skip away from not being able to keep the lights on in borderline debt bondage to the auto manufacturer. Puts them in a much better negotiating position and makes sure that the profits go to the auto manufacturer rather than their suppliers.
That was half the reason for the chip shortage. Auto manufacturers collectively (and incorrectly) forecast a decline in demand in cars during the pandemic, cancelled a bunch of orders for chips and a bunch of the suppliers went under. Then started offering 10x-20x for replacement chips from their few remaining suppliers (that pretty much all went to buying out wafer slots that would have been non-automotive chips) to keep a $35k car not being able to be shipped for the lack of a $0.30 part.
This is a feature, not a bug.
If you are in an inventory-rich industry, you do not want to deal with a supplier that has no working capital.
Goods first - money later sucks if you are a small startup. But it's much easier to work with inventory and figure out the money later than vice-versa. Toyota does not want to stop the production line because their order of ball-bearings showed up late and now they have to start a new purchase cycle.