Supplier involvement in automotive component design: are there really large US Japan differences?

Abstract

Typical descriptions of Japanese supplier management portray first-tier suppliers as partners in product development from the early concept stages of design, whereas US first-tier suppliers are provided detailed specifications and blueprints and build to print. This paper examines US/Japan differences in supplier involvement in design based on a 1993 survey of 143 Japanese and 189 US automotive component suppliers. The focus is on the relationships between Japanese component suppliers and their largest Japanese customers and between US component suppliers and their largest US customers. The data indicate US companies have levels of supplier involvement in product development rivaling Japanese companies. In both countries there is a high level of supplier involvement in product development from the early stages of design, particularly among suppliers of major subsystems. This high level of involvement in the design of competitively significant subsystems poses a challenge to the predictions of traditional transaction cost economics. Nor do theories that explain Japanese supplier involvement based on high levels of ‘trust’ provide adequate explanation. Rather, Japanese customers seem to rely on other forms of control — target prices, performance monitoring, competition, and mutual dependence to control suppliers entrusted with the design of complex subsystems. There is evidence that despite the early involvement of suppliers by US companies, they are still weak on some of the underlying business infrastructure and technical processes that contribute to the Japanese automakers' success.