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Outsourcing vs. Insourcing in the Automotive Industry. The Role and Concepts of Suppliers von Nitschke, Christian (eBook)

  • Erscheinungsdatum: 03.07.2005
  • Verlag: GRIN Verlag
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Outsourcing vs. Insourcing in the Automotive Industry. The Role and Concepts of Suppliers

Master's Thesis from the year 2005 in the subject Engineering - Industrial Engineering and Management, grade: 2,0, Stellenbosch Universitiy, course: Operations Management, 78 entries in the bibliography, language: English, abstract: The research report takes an in-depth look at the automotive industry and their major participants in the upstream value chain. The different parties involved are the automotive manufacturers (OEMs) and their suppliers. The overall goal of the following report is to identify suitable business models for small to medium sized (SME) automotive suppliers. As the automotive value chain currently undergoes an evolutionary change towards a diminishing vertical integration of the OEMs, it becomes a challenging issue to reconfigure the responsibilities of the suppliers. Thereby OEMs and their suppliers have to cope with a shift from a functional to a process orientated value chain. During this reorganization of the OEM-supplier interface, enterprises realign their strategic intent towards their core competencies as well. Besides the shifting value chain, both suppliers and OEMs have to cope with a consolidation in their industries. This consolidation is impacted by stagnating traditional markets, an ongoing globalization of the value chain, and an increasing productivity pressure in the automotive industry. Looking at the automotive supplier, it becomes obvious that the suppliers are on the one hand challenged by productivity pressures and on the other hand have the opportunity to take over more business of the automotive value chain. The growth potential requires changes in the area of supply chain management and new types of collaboration in the supply network. This prospective development is mainly influenced by a trend towards the outsourcing of entire processes by the OEMs and the increasing need for future innovations in the automotive industry. After discussing the above mentioned issues, the report analyses the role of suppliers with respect to their main customers, the automotive OEMs. Based on the findings business models for suppliers are assessed and key success factors for small to medium sized suppliers are proposed and evaluated. The findings of the evaluation are translated into suggestions for most suitable business models of SMEs. The report concludes with recommendations for the strategy building process indicates problems concerning the shifting value chain, and points out the importance of further research in the field of the small to medium sized automotive supplier industry. [...]


    Format: ePUB
    Kopierschutz: AdobeDRM
    Seitenzahl: 124
    Erscheinungsdatum: 03.07.2005
    Sprache: Englisch
    ISBN: 9783638392730
    Verlag: GRIN Verlag
    Serie: Akademische Schriftenreihe Bd.V40860
    Größe: 1791kBytes
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Outsourcing vs. Insourcing in the Automotive Industry. The Role and Concepts of Suppliers

Chapter 1: introduction and statement of problem

1.1. Introduction

The automotive industry has gone through a big transformation in the 90's and in the beginning of the new century. The car manufacturers and their suppliers still count to the old industry but they are setting new standards regarding production concepts and the way to do business.

These partially transformed or optimized business models are not only new inventions. They are originated in the minds of the former leaders of Toyota like Taiichi Ohno (1988) as well. Toyota started to implement its so called Toyota Production System (TPS) which could stand as a synonym for Lean Manufacturing in 1945. The different parts of this philosophy are concepts like Just-in-Time Production (JIT), Mass Customization and the total elimination of waste in the process of car manufacturing. The automotive world is still trying to adapt concepts of this benchmark to reach the quality and productivity standards set by Toyota. All large car manufacturers, e.g. DaimlerChrysler, Audi and Porsche set up their own Production Systems recently with the aim of copying the elements of the TPS or to implement features of a Total Quality Management Program.

In addition to the statement above the topics reengineering and automation have arisen in the last decade. Nearly all manufacturers and their suppliers had reengineering programs in their factories and are developing concepts to automate their production and service functions to become more efficient. At the same time they are developing new products like the Sports Utility Vehicle (SUV) or City Cars (like the Smart) to meet the customer's needs. These tasks lead the car manufacturers in a position where they have to improve the overall value for the stakeholders on the one hand and deal with the underlying internal processes on the other hand.

Another trend in the industry is to globalize through mergers, acquisitions or joint ventures. This phenomenon is not only seen at the manufacturers (OEM's) but on the supplier side as well. Mergers like the fusion between the Daimler-Benz AG and the Chrysler Corp. in the 90's or Joint Ventures with enterprises from the Asian area were seen several times recently. What are the implications of this development or what is the intent of companies to build alliances? Certainly an underlying issue is ongoing growth and technology & knowledge transfer; but is that all? And what is about alliances between manufacturers and suppliers?

The end of the 90's hype in the automotive industry was to outsource non core competencies to service providers. This involved mainly functions like IT (Information Technology) or Human Resources. But not only are the supportive functions of the automotive value chain being outsourced by the OEM's. There is a drift to become a pure assembler. The MCC (Micro Car Corporation/Smart which is integrated in the DaimlerChrysler AG today) has practiced the idea of modular sourcing in an extensive way. Nearly 90 percent of the cost of a car is produced by suppliers which are settled directly on the factory area ( Plunkett's Automobile Industry Almanac , 2003).

In addition to the outsourcing of non-core competencies the newest tendency by car manufacturers is to outsource entire processes and/or business units to system suppliers. These system suppliers either have all the competencies to perform and/or provide the demanded service/product themselves or they subcontract second or third tier suppliers to satisfy the customer. Another kind of cooperation of these system suppliers is to work with strategic alliances or joint ventures between first, second and third tier suppliers.

Definition of Terms

To get a deeper insight into the automotive industry it

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