Outsourcing in the automotive industry: From JIT to Modular Consortia

Abstract

The Modular Consortia approach to production being implemented by such leading-edge automotive manufacturers as Skoda and Volkswagen, is one of the latest experiments in manufacturer-supplier relationships. Competitive pressures and the on-going search for increased efficiencies and greater profits are driving automotive manufacturers and suppliers to reevaluate their respective supply chain activities and relationships. Automotive manufacturers are rationalizing the supply base, defining new supply requirements and increasing their use of outsourcing as a strategic alternative. In response, the automotive supply industry is experiencing consolidation and restructuring (with the creation of ‘tiers of suppliers’) and a move towards modular supply. This article explores the manufacturer-supplier relationship at two of Skoda's facilities in the Czech Republic, and Volkswagen's new truck and bus plant in Resende, Brazil. Two conceptual models are developed, the Supplier Profile Matrix and the Stairs of Transformation, to illustrate the challenges and opportunities faced by both manufacturer and supplier as they move beyond JIT to integrated supply and to modular consortia.