"At the beginning, everyone was paper-driven," according to Gubbey, who deals with 276 local suppliers. "But with the volume expansion and the complexity expansion, they can't survive that without systems in place for managing it."

As a result -- and despite a vicious price war and ongoing cost-cutting -- Shanghai GM demands good management systems from its suppliers.

"You don't get to talk about price until you've met quality, service and technology requirements," Gubbey says. "When they have transparency, they react to things more quickly. If something goes wrong, you see it right away."

Persuading suppliers

Not all companies have that kind of leverage with suppliers, though. Wilfredo Tan is the managing director of the Asian supply chain at Reston, Va.-based World Kitchen Inc. He works with hundreds of factories in China as he looks for companies to produce ceramics, cookware and kitchenware -- goods that are then sold through leading retailers and the company's own stores.