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Criteria For Choosing Cases to Study Information Flow in Automotive Supply Chains

The task is to select three case studies to ..."be performed of integration projects in supply chain operations." Key to success is choosing only three cases that will cover as broad a range of integration in automotive supply chains as possible. To achieve this objective we propose to start at the OEM/tier 1 level, and choose supply chains based on a few criteria that will cover a wide variety of integration business processes. The OEM/tier 1 starting point is important because that is the single most critical locus of integration in the entire automotive life cycle. That is where most of the innovation is taking place when it comes to highly integrated business processes between trading partners. Starting at that point, candidates for integration case studies will be chosen based on two variables.

Closeness of interaction between trading partners. At one end of this scale, customer and supplier can be so interactive as to blur the distinction between the two companies. Vendor managed inventory (VMI) is an example of such an arrangement because with VMI, responsibility for making stock purchase decisions is actually transferred from the customer to the supplier. At the other end of the scale would be an arrangement such as spot-buy of commodity goods. With spot-buys, a customer can use any number of suppliers, and do so with only minimal pre-purchase business arrangements.

Complexity of the supply chain In the simplest case, an automotive OEM purchases material whose value-added processing is only a few steps removed from raw material. Steel, lubricants and plastic are good examples. Complex cases are those where an OEM purchases complex components which span several industrial sec tors and which have deep supply chains within each sector. Seats are a good example. They require fabricated steel, textiles, motors, and increasingly, control systems.

Without belaboring the difficulties of precise measurement, we can jointly classify case study candidates as shown in Table 1. Level of "customer supplier interaction" is determined by ability to use alternate suppliers, extent of coordination with production schedules, and amount of information exchange. "Supply chain complexity" refers to the number of tiers, and the pattern of relationships among the chain members. (Often supply chains look more like networks than chains. Multiple companies can supply the same company, equally tiered companies can supply each other, a supplier may have more than a single-tier relationship with a customer, and so on.)

We will exclude the "loose/low" case because it is uninformative and uninteresting. Then, we will choose one case from each of the other three quadrants. For each chosen case, analysis will include the entire supply chain, going down as far as possible toward raw material. As integration relationships are discovered at other points in the chain, they will also be categorized with the Table 1 typology. Thus we expect that together, the three case studies will provide several examples in each of the quadrants. This approach will allow comparisons of

• business implementation difficulties
• the value of different business models of integration
• the use of different underlying technologies.

Implementation The greatest difficulty should come in the "tight/high" condition because in this case: 1- trust is required, 2- contractual relationships must be negotiated, 3- there is a complex (and hence uncertain) flow of material, and 4- OEM functioning is likely to be sensitive to small perturbations in the system. The simplest case is "loose/high" because while the supply from each vendor may be uncertain, the customer will have alternate sources. (Placing "tight/low" in the middle betrays our bias that integration is more likely to falter because of negotiation over business matters than problems in parts supply.)

Value of different types of integration business models Different models reign along different parts of the "customer supplier interaction scale". For instance, JIT and VMI characterize the tightest interaction. "Spot buy" is at the lowest end of the scale. Customer configuration of a vehicle is about in the middle. We assume that these different models of integration have different business consequences.

Technology By drawing cases from the different quadrants, we will also have a chance to observe the workings of different integration technologies. For instance, tight relationships are likely to be characterized by high volume predictable information flow, a setting which can make good use of standards based EDI. When relationships are loose we would expect integration to rely on catalogue and electronic forms based technologies.