Companies in high-volume industries are making dramatic changes in supply chain management.1 Many factors, including the growing recognition of supply chain management’s importance and relevance, have prompted those changes. Firms in the automotive industry have reported startling results from seamlessly integrating suppliers into their operations, distribution, and new product development. These successes have established targets for other companies attempting to achieve world-class status by emulating best practice in the auto industry.
Two notable best practices are the development of tiered supplier partnerships and kyoryoku kai or supplier associations.2 Tiered supplier partnerships link automotive firms to their key subsystem suppliers, while supplier associations diffuse technological development back through the supply chain. The results from these approaches — including major cost reductions, improved product development speed and quality, and enhanced flexibility — have been well documented.3
However, while these supply chain management approaches have been successful in the industries where they were developed, they may not be applicable to all firms. The auto industry’s structural characteristics (highly concentrated, with high volumes, considerable component engineering input, and limited product life) are far from universal. These structural characteristics have shaped the assumptions behind these particular supplier partnership approaches but may limit the models’ applicability in other industries. Firms implementing the approaches may risk... To read the complete article, login or sign-up using the form below.
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