Supplier integration: an international comparison of supplier and automaker experiences

Selling off, closing down, or outsourcing, are common but risky strategies for automakers' component plants, as the experience at General Motors (GM) shows. A similar situation at Volkswagen (VW) was the trigger for the present analysis. A revisit of classical studies about lean production shows that supplier relations, not outsourcing, are decisive for superior performance. Toyota outsources little and Japanese automaker-supplier relations are strategically segmented between partner- and arm's length suppliers. In contrast, US automakers have outsourced much and relations got worse. This is one of the reasons of their ongoing crisis. Methods of strategic analysis such as the resource-based view are useful for balancing vertical integration and strategic outsourcing in different settings. Automakers in Germany such as BMW, Audi and VW are currently developing supplier segmentation strategies mostly from the procurement function perspective. Research and the turnaround for internal supplier management at VW indicate that a more general perspective should be applied. Organisational structures are relevant today, but also purpose, processes and people. The challenge is not to sacrifice sustainable supplier relations in favour of short term wins during the global downturn.