An analysis of Japanese versus American automakers' supplier relationships in Thailand.
In the context of the US automobile market, past comparisons of automakers' supplier management practices show Japanese assemblers besting American counterparts along a number of dimensions despite American automakers' efforts to emulate Japanese practices. But recent studies suggest emergent American practices differ from traditional Japanese vertical keiretsu practices. Such a departure could affect American-allied Japanese automakers in Thailand, a major global automotive export hub. This exploratory study of 383 automobile part and component suppliers in Thailand finds suppliers to Japanese assemblers distinguishable by higher priorities placed on delivery and flexibility, but on an equal basis with suppliers to American assemblers in terms of cost and quality priorities.
US automobile market, supplier management practices, Japanese assemblers, American practices, keiretsu practices, Thailand
It is known that Japanese automobile manufacturers' mastery of lean manufacturing practices affords them competitive advantages that spur success and enhance their reputation as they expand into global markets. Toyota's overtaking of General Motors as the world's largest automobile maker in 2008 (International Organization of Motor Vehicle Manufacturers 2011; Marr 2009) testified to such mastery. Certainly, subcontracting and supplier development strategies such as parallel sourcing (Richardson 1993) drive their manufacturing proficiency and superior supply chain performance in comparison to their American counterparts. For their part, American automakers have not stood still in the face of this competitive pressure. Since the 1980s, active study of Japanese supplier relationship models has led American car manufacturers to modify their subcontracting strategies and experiment with ones that resemble those of their Japanese challengers. As a result, reports of converging Japanese-American supplier management practices emerged in the mid to late 1990s (e.g., Helper and Sako 1995; Wasti and Liker 1999).
Despite this apparent convergence in supplier management practices of the two nations' automakers, studies found that even when Japanese automakers used American suppliers, their supply chains continued to outperform American automakers. For instance, Liker and Wu (2000) showed that American suppliers serving Japanese auto plants in the United States surpassed other domestic suppliers serving mainly US auto assemblers across a wide range of production and logistics metrics. This finding suggests that, at the time, differences still existed between the Japanese and American automakers in terms of supplier relationship management models and performance implications. Indeed, interviews with American suppliers conducted in 2000 by Ro, Liker, and Fixson (2008) suggested that the emulation of Japanese supplier relation practices by American automakers has created a "new emerging US model" that differs from the traditional Japanese keiretsu model. Taken together, these two studies raise questions about the relative value of the evolving American approach vis-a-vis the keiretsu practices of Japanese firms. Is this new approach delivering the supplier relationship gains American producers need to compete on an equal basis with Japanese auto manufacturers? How are Japanese manufacturers responding to this emerging model?
To date, studies pertinent to the foregoing questions largely center on the American market. That these extant studies consistently indicate a performance edge enjoyed by Japanese automakers in relationships with their domestic- (Japanese) and American-based suppliers raises the question of whether such a favorable position will sustain in a more "neutral" setting. A study by the Japan Bank for International Cooperation Institute (JBICI) provides evidence contrary to the extant studies and presents motivation for this study. In assessing the prospects of Japanese automakers in Thailand, Kasuga et al. (2005) describe how Japanese automakers have altered procurement practices and adopted "Western"-style policies in response to the entry of American and European manufacturers into the Thai auto industry. For instance, the study found that more Japanese automakers in Thailand are pursuing cost reductions by means similar to those practiced by Western procurement managers that go beyond traditional adjustment processes used in keiretsu practices. This intermixing of approaches suggests some Japanese firms see advantages in adopting emerging Western practices in the Thai industrial setting, which lends credence to American automakers' rationale for pursuing such practices.
Given the dynamics suggested by the JBICI report and the predominance of studies centered on the American market, we conducted an exploratory study that probed for similarities and differences in supplier relationships between Japanese and American automakers operating in a setting outside the American market. For this purpose we focused the study on Thailand, where its motor vehicle industry is evolving to be a major global automotive hub. The industry is actively promoted by the Thai government, even referring to Thai auto industrial hubs on its website as "The Detroit of Asia" (Thailand Board of Investment 2011). According to statistics published by the International Organization of Motor Vehicle Manufacturers (OICA), since 2004 Thailand's total production of cars and commercial vehicles has kept it among the top 15 automobile-producing countries in the world. In 2010 Thailand ranked twelfth among all countries, producing about 1.7 million passenger and commercial motor vehicles (OICA 2012), nearly half of which were exported (Thai Automotive Institute 2011). While severe flooding reduced the country's output in 2011 to 1.46 million vehicles (OICA 2012) and resulted in a drop in ranking to the fifteenth, the Federation of Thai Industries and the Thai Industry Ministry reported that production rebounded in 2012. In fact, the production surpassed the 2 million vehicle mark for the first time, and projected end-of-year totals at 2.3 million vehicles with roughly 1 million of those exported (Chaowachuen 2012). TO put this figure in perspective, France, the tenth-largest producer in 2011, produced 2.24 million vehicles (OICA 2012), suggesting that Thailand is in keeping with its goal to be among the top 10 auto manufacturing countries.
Our report of this study begins with a review of literature, followed by a description of research methodology, delineating the survey implementation and dataset. We then discuss data analysis and conclude by exploring managerial implications and topics for future research.
In the early 1980S, when the US automotive industry began acting on the threat posed to their domestic positions by their Japanese counterparts, attention turned to subcontracting practices conveniently summarized by the term "vertical keiretsu" that are common to several Japanese manufacturing sectors. Vertical or kigyo keiretsu (Tabeta 1998) refers to highly interdependent groups of final product assemblers and their suppliers organized by the assemblers or "core" firms. Such an organizational group allows the participating firms to derive benefits associated with classical forms of industrial governance, that is, vertical integration and market-based transactions, without having to resort to and absorb the downsides of those forms. Asanuma (1989) details Japanese automotive kigyo keiretsu as comprising buyer-supplier relationships involving "drawing supplied" (DS) parts and "drawing approved" (DA) parts. Also called "detail-controlled" parts in the literature, DS parts are produced by suppliers to specifications defined by the auto assembler. In contrast, DA parts, also known as "black box" parts, are built to specifications defined by the supplier with the assembler's approval. The gradient between these hybrid governance mechanisms (and, for that matter, along the spectrum from market-based to vertically integrated transactions) hinges on what Asanuma termed "the degree of technological initiative" a supplier brings to bear in its relationship with an automaker. As such, the more a Japanese auto assembler deems a DS supplier's capabilities to have evolved or may evolve, the more it may be willing to nurture the supplier to become a DA part provider by transferring development responsibilities (e.g., design and engineering) to the supplier. Distinguishing characteristics widely ascribed as spurring cost and quality advantages enjoyed by Japanese auto kigyo keiretsu in Japan and in the United States include long-term commitments to the group relationships, frequent sharing of vital and pertinent design and cost information, location of pivotal automaker engineer on supplier sites, asymmetric cross-firm equity holdings (manufacturers typically take larger positions in suppliers than vice versa), and dedicated investments (e.g., see Dyer 1996; Dyer and Ouchi 1993; and Tabeta 1998).
Indeed, studies comparing performance outcomes of Japanese and American automobile makers' supply chains during the 1980s indicated such keiretsu practices yielded clear advantages. A study by Clark, Chew, and Fujimoto (1987) approached the issue by researching differences in lead times and engineering hours expended on new car or major remodeling projects of 20 Japanese, American, and European carmakers during the period from 1980 to 1987. Results from their study showed that on average Japanese automakers relied five times more on DA or black-box parts (81% vs. 16%), required one-third as many engineering hours (1.155 vs. 3.478 million hours), yet brought new or significantly remodeled cars to market 19 months earlier (lead times of 42.6 vs. 61.9 months) than did American automakers. Japanese producers also bested their European counterparts in the latter two categories. This early evidence of dramatic performance differences among the different regions' supply chains raised questions about the transferability of keiretsu practices and advantages beyond Japanese shores.
Later studies took up such questions by accounting for kigyo keiretsu practices in transplant settings, that is, where Japanese firms managed or operated US plants. Using data from a survey of Japanese automaker plants based in Japan and the United States ("transplants") and US-based plants of American automakers, Cusumono and Takeishi (1991) examined differences in the nature of their supplier relationships and performance outcomes. The survey asked automakers about suppliers who provided four types of automobile parts and assemblies of moderate technical complexity during the late 1980s. The authors found that Japanese US-based plants' performance resembled that of their home country plants when compared to US automakers. Specifically, Japanese transplants relied on fewer suppliers per part (1.2 vs. 1.8), engaged in contracts of longer duration (average of 2.5 vs. 1.7 years), achieved lower part-defect rates (0.05% vs. 1.8% of parts received), and achieved dramatically greater reduction in defect rates after market introduction (-1,7% VS. -30.1%) than did American auto plants with their suppliers. Significantly, the transplants built these outcomes using suppliers mainly based in the United States (87.5%, of which 50% was Japanese-owned but US-based and 37.5% was US-owned). These findings lent credence to the transferability of advantages of successful keiretsu practices initiated by Japanese manufacturers for foreign supply bases.
About a decade later, Liker and Wu (2000) corroborated the transferability of keiretsu practices in a study of 91 US suppliers that served both countries' major automakers. Ina survey of first-tier US suppliers of parts, components, and subassemblies to US auto manufacturers and Japanese transplants, they found that suppliers to Japanese-owned plants generally outperformed suppliers to US automaker plants across 37 metric categories that reflected inventory, ordering, manufacturing, and transportation practices. For instance, the suppliers to Japanese-owned or Japanese-managed plants reached inventory turns 50 percent higher (38.30% vs. 25.4%), received fewer requests to change part orders, incurred less reworking or scrapping of parts, used fewer trucking companies (1.4 vs. 4.3), and made fewer early shipments (38% vs. 63%) than did suppliers serving US auto plants.
American auto assemblers certainly responded to their international rivals' ascendancy by altering supplier policies to emulate their Japanese counterparts' practices. A study by Helper (1991) suggested US automakers moved toward more "voice"-oriented relationships in which they were more willing to work with suppliers when problems arose as opposed to "exit"-oriented relationships where they were more willing to drop a supplier when problems arose. Ina survey of domestically owned, first-tier US automotive suppliers, Helper (1991) asked respondents the same ser of questions about practices they used in 1989 and five years earlier in 1984 to supply a typical product made by their firms to one of their main customers. She found that suppliers reported greater sharing of statistical process control and production scheduling information, more involvement in customer product design, and markedly longer average contract with customers in 1989 than in 1984. However, according to Helper, this seeming progress toward voice-oriented relationships stemmed more from suppliers responding to demands put on them by the automakers. Indeed, the findings also indicated that suppliers continued to perceive US automakers as untrustworthy and unwilling to assist them in cost or process improvements.
In a subsequent study, Helper and Sako (1995) expanded the survey to include US-based domestic and foreign-owned first-tier suppliers to US automakers and Japan-based first-tier suppliers (also domestic and foreign-owned) to Japanese automakers. Similar to the previous study, suppliers were asked to answer questions about practices used in 1993 and five years earlier in 1989 for a specific product-customer pairing. Findings from this survey confirmed the trend of greater information sharing and contract length between US automakers and their suppliers. Interestingly, though, they also found opposing trends in commitment by the two automaking countries toward their suppliers. Whereas considerably more US suppliers in 1993, compared to 1989, reported expectations of customers' help to meet competitor price challenges (51% vs. 32%) and slightly fewer thought their customers would switch suppliers (46% vs. 49%), fewer Japanese suppliers conveyed expectations of assembler help (40% vs. 45%) and more believed assemblers were apt to switch (49% vs. 40%). Helper and Sako (1995) argued that these reversals of Japanese suppliers' expectations may have reflected Japanese assemblers' efforts to use a credible threat of switching as a means of making "their voice relationship more effective." At the least it indicated that Japanese assemblers' supplier policies were also evolving and raised questions about the directions in which the two automaking countries were heading.
To gain insights about the direction being taken by American automakers, Ro, Liker, and Fixson (2008) investigated the evolving structure of their supplier relationships over a three-year period. Their study relied on responses from interviews with 66 key managerial and scientific personnel of 28 first-tier suppliers to three US and major Japanese automakers from 1998 to 200l. According to their findings, US automakers grew more reliant on module suppliers and systems integrators as means of more closely integrating product development and production capabilities with first-tier suppliers. Module suppliers are typically first-tier suppliers that receive system design layouts (e.g., chassis designs) from automaker engineers and coordinate the assembly and delivery of a system module made up of components produced by other first-tier or lower-tier suppliers. While module suppliers lessened automakers' information-processing and coordination tasks, Ro, Liker, and Fixson (2008) also found that US automakers were pushing more of their engineering tasks to independent systems integrators whose responsibility is to coordinate relationships between automakers and first-tier suppliers. In effect, they said US automakers created another tier of suppliers, sometimes referred to as "Tier 0.5," whose purpose is to build synergies between first-tier module component suppliers (including the module supplier) and ensure that modules with the most added-value entered their assembly lines.
While these structural responses bore similarities to vertical keiretsu arrangements, Ro, Liker, and Fixson (2008) identified striking contrasts between emerging American supplier arrangements and those of Japanese auto firms. They explained that the evolving American model relied more on coercive than enabling power relationships, and placed more emphasis on the horizontal coordination of first-tier suppliers through use of systems integrators than on the vertical synchronization of lower-tier suppliers emphasized by Japanese firms. In short, Ro, Liker, and Fixson (2008) characterized the new model as a "modern adversarial" approach that has led to a "leaner but meaner" supply chain for American automakers.
For their part, Japanese automakers showed a willingness to strategically drift from traditional vertical keiretsu practices toward more market and hierarchical forms of governance. Ahmadjian and Lincoln (2001) demonstrated this strategic shift in three in-depth case studies of changing supplier policies adopted by Toyota and other Japanese automakers. In one case they described how the emergence of electronics as a core element in automobile architecture during the 1990s motivated Toyota to chase more hierarchical control of electronics engineering. In doing so, Toyota built a core competency in automotive electronics so it could keep pace with its traditional supplier of electronics, Denso. Growing this capability allowed Toyota not only to preserve its role as a core integrator in the keiretsu, but also to assume a role of second supplier, a key feature in the traditional keiretsu designed to keep first suppliers flexible, innovative, and more competitive. In another case exemplifying a different approach toward greater vertical integration, Toyota acquired enough equity stakes in Daihatsu to make it a subsidiary. This approach allowed Toyota to better position itself in emerging automobile markets such as China, where Daihatsu enjoyed a thriving joint venture with the Chinese automaker Tianjin Motors (Ahmadjian and Lincoln 200l).
More recently, Aoki and Lenerfors (2012) compared the keiretsu systems of Toyota, Nissan, and Honda during the 1991-20ll period and demonstrated how these firms have to varying degrees adopted "more market-oriented styles" and caused a "de-institutionalization of vertical keiretsu." Examining longitudinal data about foreign ownership, supplier membership in the firm's keiretsu, and supplier sales dependence, they concluded that Toyota and Honda have deinstitutionalized to lesser degrees than did Nissan. At the time of the study, Nissan faced stronger sales challenges that prompted it to merge with Renault and adopt more Westernized practices. Aoki and Lenerfors (2012) found that the three firms' foreign ownership ratios increased dramatically (Nissan's from 2.7% to 70%; Toyota's and Honda's from 2.5% to 26% and 7.0% to 35%, respectively). They also discovered that the number of Toyota suppliers doing business with Nissan roughly doubled from 1991 to 2003 and the average ratio of sales dependence (percentage of sales from its keiretsu leader) for Nissan's suppliers from 1991 to 2009 decreased from 71 percent to 51 percent, while those for Toyota and Honda remained flat at about 79 percent. The latter findings reflected the greater use of global benchmarking by Nissan in its supplier selection process and the impact of globalization of automaker-supplier relationships and practices.
Finally, in a study aimed at recommending strategies to Japanese automakers for meeting global competition, Kasuga et al. (2005) argued that the dynamics of ongoing global expansion of the auto industry is driving greater intermixing of Western and Japanese automakers (via alliances, joint ventures, and equity positions) and auto suppliers (e.g., Western suppliers serving Japanese automakers). As a result, their procurement and supplier management practices have interwoven. Using the emergent auto-export industry based in Thailand as an example, they claim, for example, greater incidence of Western procurement policies, global sourcing, and nontraditional keiretsu transactions among Western--Japanese automaker alliances (e.g., Ford-Mazda and GM-Isuzu). They also argue that greater post-1999 merger and acquisition activity by North American and European auto-part makers afforded them scale and global scope advantages to gain inroads to relationships with Japanese automakers. Clearly, competitive positions that are at stake for Japanese and Western, including American automakers, outside their domestic markets (e.g., China and Southeast Asian markets) are bringing the merits of these two groups' evolving supplier management practices into question.
In sum, the emergence of reconfigured assembler-supplier relationships in the global auto industry creates the need to understand Japanese and Western automaker's supplier relationship models employed in markets outside their respective home countries. Extant literature provides evidence of relationships converging in some ways and diverging in others in markets where the suppliers and assemblers compete from domestic platforms (e.g., Japanese transplants served by US suppliers). Yet to be explored are comparisons of Japanese and American assembler-supplier relationships on a neutral ground. What commonalities seen in prior literature still exist? What new differences might be emerging? Such questions motivated us to probe these relationships as they play out in the Thai auto industry setting.
Excluding car dealers and distributors, the automobile supply chain in Thailand comprises three levels of manufacturers: passenger and commercial vehicle assemblers, part and component manufacturers (tier 1) suppliers, and supporting/equipment manufacturers (tier 2 suppliers). At the time of our study in the summer of 2010, the Thai auto industry comprised 640 tier 1 suppliers, 507 of which supplied American and Japanese automobile assemblers operating in Thailand. The remaining 133 tier 1 suppliers served European assemblers, including BMW and Volvo, and other Asian assemblers such as TATA Motor, and Thai Rung Union Car. For this study, we used a mail questionnaire to survey the population of tier 1 suppliers to four American automobile assemblers (Ford, General Motor, Daimler Chrysler, and Auto-Alliance Thailand (1)) and five Japanese automobile assemblers (Toyota, Honda, Isuzu, Mitsubishi, and Nissan). An updated list of the 507 suppliers to these assemblers as of June of 2010 served as the database for our mailing list. Solicited respondents included production, quality assurance, planning managers, and vice presidents/ directors knowledgeable and experienced in their firms' supply chains and operational relationships with automaker customers.
The questionnaire contained 18 items reflecting six dimensions of the responding firm's competitive priorities, business environment, and logistics integration. The 18 items were derived from established metrics used in previous studies. We adapted variables for measuring firm priorities along quality, delivery, flexibility, and cost dimensions from studies by Miller and Roth (1994), Boyer (1998), and Boyer and Lewis (2002) in which respondents rated the criticality of their firms' abilities in those areas along a seven-point Likert scale (1 = Not important, 4 = Very Important, 7 = Absolutely Critical). A scale adapted from Desarbo et al. (2005) served as the metric for gauging the hostility of firms' competitive environments. Finally, the scale adapted from Chen and Paulraj (2004) provided a mechanism for gathering insight about firms' logistics integration.
We pretested the questionnaire on 24 mid- or senior managers from a cross section of manufacturing companies, who were enrolled as postgraduate students in an industrial engineering program in Thailand. These managers had been studying supply chain management course in the postgraduate program, and had at least six years of experience in various manufacturing industries, including electrical parts/components, automobile parts/components, and motor/vehicle. They had also been a leader or member of a project team involved in at least one strategic initiative such as ISO9001, supply chain management, or lean manufacturing implementation project at their company. After pretesting, only minor corrections were made to the questionnaire used in the survey. Descriptions of items and labels from the questionnaire used in this study appear in the appendix.
Data were collected in two phases. Phase 1 occurred from June to August of 2010, during which the questionnaire was distributed to all suppliers attending the Supplier Monthly Meeting, a monthly gathering that American and Japanese automobile assemblers in Thailand ask their tier 1 suppliers to attend regularly. Four months after distributing the questionnaire, we received 312 responses. In phase 2 we telephoned nonrespondents seeking their participation and received 137 additional responses, bringing the total number of responses to 449. Fifty-two incomplete questionnaires and 14 responses from suppliers serving both Japanese and American automakers were excluded from further analysis. The latter were excluded to prevent muddling of differences due to supplier affiliation with both automaker groups, and to ensure that the observed relationship and other phenomena could be conclusively attributed to one or the other set of suppliers. A total of 383 usable responses from suppliers, of which 211 mainly serve Japanese auto assemblers and 172 mainly serve American auto assemblers, yield an effective response rate of 75.5 percent of the tier 1 supplier population in Thailand. Table 1 presents a profile of respondents' positions within their companies. An analysis of early and late responses across two organizational characteristics and five measurement scales yielded no statistical differences (at p < 0.05), suggesting that the data did not suffer from nonresponse bias.
Respondent Company Profiles
A comparison of organizational characteristics of the two respondent groups is summarized in table 2, showing near-equal percentages of suppliers engaging in engineer-to-order arrangements with Japanese and American customers. However, greater prevalence of make-to-order systems appeared among suppliers serving mainly Japanese, while make-to-stock systems are more prevalent among suppliers serving mainly American assemblers. We observed roughly equal distributions of suppliers in terms of firm size measured by number of employees and ISO certification levels. In terms of years spent supplying major customers, suppliers to Japanese automakers engage in longer-term relationships. Among firms that reported relationships of 6-10 years with their major customers, suppliers to Japanese assemblers outnumbered those to American assemblers almost four to one (69 vs. 18). Of the firms that reported relationships of less than a year, suppliers to American firms outnumber their counterparts (26 vs. 16). More suppliers to Japanese customers also appear to derive larger sales volume from their main customers; 58 suppliers to Japanese customers reported that 60 percent of their sales come from major customers compared to only 19 suppliers to American auto assemblers. In contrast, among suppliers that reported less than 30 percent of sales coming from major customers, twice as many supplied American automakers (84 vs. 41), which suggests that half of all the suppliers to American firms also derive significant sales from other non-Japanese automakers. Finally, responses summarized in table 3 indicate a wide representation in terms of main parts supplied by respondent firms.
Mean Comparison Analysis
Data analysis began with tests for differences in the observed means for each of the 18 variables used in the survey. Table 4 summarizes results of the mean comparison analysis. Results show that firms serving mainly Japanese automakers assigned significantly higher ratings (at p = 10% or lower) to 9 of the 18 items than did their counterparts serving American automakers. For the most part, the overall and group average means for the cost, quality, delivery, and flexibility items hovered between scale points corresponding to "important" and "critical," suggesting that the average respondent viewed the abilities described by these items as vital to their firms' businesses. The overall and group means for the agreement ratings of statements about the hostility of firms' business settings and logistics integration hovered just near or under neutral levels, suggesting some indifference to slight disagreement by respondents concerning those items' assertions.
The nine significant differences occurred on variables pertaining to firm delivery, flexibility, and logistics integration, with significant differences found for all delivery and logistics integration items and two of the three flexibility items. Regarding the latter, while rapid volume changes and large degree of product variety held greater importance among suppliers to Japanese original equipment manufacturers (OEMs), rapid design changes did not, suggesting that both groups place equal importance on their firms' ability to adapt to OEM model, part, or other alterations. Interestingly, but perhaps not surprisingly given the trends observed in the literature review, respondents of the two groups of suppliers assigned statistically equal ratings to quality- and cost-related items. These findings under a non-American market setting suggest a diminishing edge of Japanese automaker-supplier relationships in the quality and cost areas that were evidenced in prior studies in American market settings.
The nine significant differences found in the mean comparison analysis suggested that the two supplier groups can be distinguished by the importance placed on delivery and flexibility capabilities and perceptions of the degree to which their main customers influence their strategy and operations planning. Specifically, suppliers to Japanese automakers assigned greater importance to their abilities to provide quick and reliable deliveries, reduce lead times, respond to production volume changes, and offer large product variety than did suppliers that serve American automakers. Simultaneously, suppliers to Japanese automakers perceived their firms as working more closely with main customers when planning strategies and improving operations. If the greater emphasis on delivery and flexibility and apparently closer integration indicated by the statistical findings reflect performance outcomes, then it would seem that Japanese automaker-suppliers relationships still outperform their American automaker-supplier relationships in several areas.
However, while statistically significant differences of means were observed for these nine items, the magnitude of the differences suggest that the responses from the two automaker-supplier groups are not that far apart. The differences in magnitude ranged from 0.14 to 0.49, all were less than one-half of a point on a five-point rating scale. Arguably then, the findings suggest significant but small differences exist between the views held by the two supplier groups about delivery and flexibility capabilities and the closeness with which they integrate their strategy and operations with that of their main customers. Whether these differences lead to differences in performance between the two groups of automaker-supplier relationships in Thailand remains to be discovered; the variables in this survey did not permit evaluation of this inquiry.
The findings from the mean-comparison tests suggested that responses to the 18 survey variables could be used to predict membership in the two supplier groups. This conclusion provides the basis for the next stages of data analysis, which involved data reduction and logistic regression analysis. Before proceeding with logistic regression analysis, we conducted tests to assess whether the 18 variables could be reduced to a more manageable number of latent variables that preserved the covariance relationships in the data of the original variables. Here, we used estimates of Cronbach's alpha coefficient, exploratory and confirmatory factor analyses, and a test for discriminant validity to assess whether the 18 variables could be collapsed into six latent variables or factors that represent the dimensions of firm's competitive priorities (cost, quality, delivery, and flexibility), business environment, and logistics integration described earlier.
Tests for internal consistency detailed in table 5 yielded Cronbach's alpha coefficients for the six measurement scales that ranged from 0.68 to 0.86, which suggested acceptable levels of unidimensionality for the scales. An exploratory or unconstrained factor analysis of the 18 items turned up six underlying factors with eigenvalues exceeding 1.0 that together accounted for 67 percent of the observed variance in the item responses. Also, the rotated factor loadings revealed the expected grouping of items found in previously cited studies and ranged in magnitude from 0.62 to 0.94, which, given the large number of respondents (383), were deemed statistically significant. A confirmatory factor analysis that constrained the number of latent variables to six also yielded significant loadings of similar magnitude for all items and produced test indicators that suggested an acceptable fit of the data to the implied six-factor model (relative chi-square = 2.20, root mean square residual = 0.047, goodness-of-fit index = 0.92, comparative fit index = 0.94, and incremental fit index = 0.94). Last, a test developed by Fornell and Larcker (1981) was conducted to assess whether latent variables are measuring different phenomena. Results showed that the average variance extracted for each factor well exceeded all squared factor correlations, thus establishing discriminant validity of the six factors. Taken together, the results suggested a sound basis for collapsing observations for the 18 variables into the six latent variables.
Logistic Regression Analysis
The last step in the data analysis used logistic regression analysis to assess whether the six latent variables could be used to identify membership in the two supplier groups surveyed. The dependent variable in the regression equation was respondents' answer to the question of whether their main customers were Japanese-owned (value = 1) or American-owned (value = o). Factor scores for the six latent variables extracted from the factor analysis procedure served as independent variables. Results and test statistics for the logistic regression estimation, summarized in table 6, indicate that the data fit the model well and corroborate the mean comparison tests. Specifically, the odds of a responding supplier's main customers being Japanese-owned firms rise significantly with the priority the supplier puts on delivery and flexibility, and the extent to which its logistical operations are seen as integrated with those of its major customers. In contrast, respondent perceptions of the competitiveness of their business environment and importance placed on the company's cost- and quality-related abilities displayed no predictive effect on the odds of their firm supplying Japanese automakers.
The significant coefficient for the variable "delivery" suggests that the probability of a respondent firm catering mainly to Japanese-owned firms rises with the combined levels of importance that it places on being able to provide fast deliveries, meet delivery deadlines, and reduce production lead times. Specifically, the observed data suggest the odds of serving mainly Japanese-owned firms grows by 71 percent for each unit increase in the priority put on a firm's delivery abilities. Similarly, the odds of a respondent firm serving mainly Japanese assemblers increase with a firm's abilities to make rapid design and volume changes, and to offer a broad array of products. In this case, the odds in favor rise about 30 percent for each incremental increase in the importance placed on being flexible in its manufacturing and design abilities. Finally, the significant positive coefficient and estimated odds ratio for the variable "logistics integration" indicate that responding firms serving mainly Japanese assemblers viewed their firms as being more closely integrated strategically and operationally with major customers. The estimated coefficient of 0.432 implies a 54 percent improvement in the odds of this occurring.
Our findings point to several managerial implications for suppliers to Japanese and American automakers. First, the insignificant predictive effects of the underlying cost and quality factors suggest that all first-tier automotive suppliers in Thailand must demonstrate abilities to manage costs and produce quality parts and components if they wish to gain business from Japanese or American auto assemblers. Specifically, the equal emphasis that both supplier groups in this study placed on greater capacity utilization, lower production costs, high-performance products, and better conformance to design specifications imply that these aspects of cost and quality management have become order qualifiers for suppliers in the Thai and, quite likely, the global automotive industry. This is not surprising given the implementation of ISO technical specification (TS) 16949, which specifies quality control system standards for suppliers to the automotive industries. As a result of adopting ISO/TS 16949, most of the world's major automobile assemblers now require that their suppliers be certified in accordance with this standard. The requirement serves as an assurance of the supplier process and system stability and an indication of their potential to enhance operational capabilities.
A second implication is that Japanese-aligned automobile supply chains still differ from American-aligned ones in that Japanese automakers prize production and design flexibility, shorter lead times, faster and on-time delivery, and close working relationships with their Thai suppliers than do American automakers. That is, they not only expect the right quality and effective cost, but also delivery capabilities and operational flexibility that allow, if need be, their supply chains to quickly respond to market dynamics across the region and beyond. As an example, in 2011 a news article reported Toyota considering plans for exporting to Japan a version of a subcompact model it manufactures in Thailand due to increasing Japanese demand for smaller, more efficient cars and the Yen's rising exchange value (Dawson and Takahasi 2011). Although another news article reported that Toyota denied such plans (Mukai and Horie 2011), both stories underscored the worth of supply chain delivery and flexibility to the company. More recent reports of plans by Japan's three largest automakers to shift domestic production to European and other offshore sites in response to the Yen's persistent strength (Dawson and Takahashi 2012) reinforce this point.
A third implication is that suppliers to American automakers should not assume that their customers will continue to expect less from them in the areas of delivery, flexibility, and logistics integration. Our findings suggest that Japanese assemblers work more closely with and expect more flexibility and delivery performance from their suppliers, but not that much more. To be sure, the small differences between the average ratings assigned by the two supplier groups to delivery, flexibility, and integration factors, although significant, make clear that both supplier groups share similar views about the competitive implications of these capabilities. Arguably, this could be the result of the transference of supplier practices brought on by the comingling of Japanese and American automotive supply chains. In fact, nearly 70 percent of Thai auto production occurs under the domain and influence of Western automakers and their suppliers as can be gauged from equity positions in the market. Significant equity positions were held by Western parts suppliers in Thai subsidiaries; and by American assemblers General Motors, Ford, and Chrysler in Isuzu, Mazda, and Mitsubishi, respectively, to Renault's ownership stake in Nissan (Kasuga et al. 2005). Thus, the higher observed mean values for delivery, flexibility, and integration factors reflect not only assembler-supplier relationships of companies allied with automakers that have retained more traditional keiretsu practices (Toyota and Honda) but also Japanese suppliers and assemblers that have been more widely exposed to Western-influenced practices.
In all, this exploratory study contributes to the discussion in the literature on the comparative merits of American and Japanese automotive supplier relationships by examining them from a neutral market setting in Thailand. However, certain limitations of the study prevent the investigation of questions that warrant further investigation. Since respondents to our survey were not asked to name their main customers, suppliers serving Westernallied Japanese firms were lumped together with those serving Toyota and Honda. Thus, the data precluded a comparison of these subgroups' views of cost, quality, delivery, flexibility, and logistics integration factors. For instance, we could not discern whether suppliers to Toyota or Honda placed higher priorities on delivery, flexibility, and logistics integration than did suppliers to Nissan or Mazda. Nor could we conclude if the priorities of Nissan or Mazda suppliers differed significantly from those of General Motors' or Ford's suppliers. Future investigations that account for the horizontal alliances that have reshaped the supplier and assembler landscapes in the automotive industry would enrich our understanding of the global dynamics in this industry. Future studies might also survey automakers about their supplier relationship expectations and practices so that comparisons to suppliers' viewpoints presented in this study and earlier studies on this topic can be made. An understanding of automakers' expectations of cost, quality, delivery, and flexibility performance from their first-tier suppliers would provide a more rigorous basis for evaluating similarities and differences between Japanese and American automotive supply chain relationships.
1. Suppliers to American- or Japanese-owned firms (Dependent Variable)
Respondents were asked to indicate whether they supply to American- or Japanese-owned firms. American-owned firms are coded o and Japanese-owned firms are coded 1.
2. Predictors (Independent Variables)
Respondents were asked to rate item groups with the following
5-point Likert scales. Groups A and F: (1 = Strongly Disagree, 3 = Neutral, 5 = Strongly Agree)
Groups B, C, D, E: (1 = Not Important, 2 = Nearly Important, 3 = Important, 4 = Critical, 5 = Absolutely Critical)
A. Business Environment--Competitiveness
A1. Competition in this industry is cutthroat.
A2. Competition for your company product is cutthroat.
A3. There are many "promotion wars" in this industry.
A4. Anything that one competitor can offer, others can match readily.
Stem for Groups B-E: "For this company, how important is your company's ability to achieve the following: ..."
B1. Increase capacity utilization
B2. Reduce production costs
C1. High performance products
C2. Improve of conformance to design specification
D1. Provide fast deliveries
D2. Meet delivery promises
D3. Reduce production lead time
E1. Rapid design changes
E2. Rapid volume changes
E3. Large degree of product variety
F. Logistic Integration: (Stem: "Please indicate to what extent you agree or disagree with each of the following statements as they apply to your key customers.")
F1. Our business and/or functional policy (strategy) has been established in conjunction with the major customer's policy (strategy)
F2. Our logistics integration is characterized by excellent distribution channel, transportation systems and/or warehousing facilities location
F3. Our operation systems have been developed by the improvement team of major customers
F4. Our finished products flow smoothly to key customers
Ahmadjian, Christina L., and James R. Lincoln. 2001. "Keiretsu, Governance, and Learning: Case Studies in Change from the Japanese Automotive Industry." Organization Science 12 (6): 683-70l.
Aoki, Katsuki, and Thomas Taro Lennerfors. 2012. "Whither Japanese keiretsu? The Transformation of Vertical keiretsu in Toyota, Nissan and Honda 1991-2011." Asia Pacific Business Review. http://www.tandfonline.com/doi/abs/10.1080/136 02381.2011.652832#tabModule.
Asanuma, Banri. 1989. "Manufacturer-Supplier Relationships in Japan and the Concept of Relation-Specific Skill." Journal of the Japanese and International Economies 3 (1): 1-30.
Boyer, Kenneth K. 1998. "Longitudinal Linkages between Intended and Realized Operations Strategies." International Journal of Operations and Production Management 18 (4): 356-73.
Boyer, Kenneth K., and Marianne W. Lewis. 2002. "Competitive Priorities: Investigating the Need for Trade-Offs in Operations Strategy." Production and Operations Management 11 (1): 9-20.
Chaowachuen, Tinnakorn. 2012. "Ministry Targets 3m Annual Production by 2017. The Nation, November 24. http://www.nationmultimedia.com/business/ Industrial-Ministry-targets-3mn-annual-car-output--30194908.html.
Chen, Injazz J., and Antony Paulraj. 2004. "Towards a Theory of Supply Chain Management: the Constructs and Measurements." Journal of Operations Management 22 (2): 119-50.
Clark, Kim B., W. Bruce Chew, and Takahiro Fujimoto. 1987. "Product Development in the World Auto Industry." Brookings Papers on Economic Activity 3:729-81.
Cusumano, Michael A., and Akira Takeishi. 1991. "Supplier Relations and Management: A Survey of Japanese, Japanese-transplant, and U.S. Auto Plants." Strategic Management Journal 12 (8): 563-88.
Dawson, Chester, and Yoshio Takahashi. 2011. "Toyota Weighs Exporting to Japan--Auto Maker Considers Selling Thailand-Made Vehicles in Its Home Market and Elsewhere as It Tries to Offset Yen's Rise." Wall Street Journal, September 8, B.11.
--. 2012. "Strong Yen Dings Exports by Japan's Auto Makers." Wall Street Journal, June 26, B1-B2.
Desarbo, Wayne S., C. Anthony Di Benedetto, Michael Song, and Indrajit Sinha. 2005. "Revisiting the Miles and Snow Strategic Framework: Uncovering Interrelationships between Strategic Types, Capabilities, Environmental Uncertainty, and Firm Performance." Strategic Management Journal 26 (1): 47-74.
Dyer, Jeffrey H. 1996. "Does Governance Matter? Keiretsu Alliances and Asset Specificity as Sources of Japanese Competitive Advantage." Organization Science 7 (6): 649-66.
Dyer, Jeffrey H., and William G. Ouchi. 1993. "Japanese-Style Partnerships: Giving Companies a Competitive Edge." Sloan Management Review 35 (1): 51-63.
Fornell, Claes, and David F. Larcker. 1981. "Evaluating Structural Equation Models with Unobservable Variables and Measurement Error."Journal of Marketing Research 18 (1): 39-51.
Helper, Susan. 1991. "How Much Has Really Changed between U.S. Automakers and Their Suppliers?" Sloan Management Review 32 (4): 15-28.
Helper, Susan R., and Mari Sako. 1995. "Supplier Relations in Japan and the United States: Are They Converging?" Sloan Management Review 36 (3): 77-84.
International Organization of Motor Vehicles Manufacturers. 2011. "World Ranking 2008." http://oica.net/wp-content/uploads/world-ranking-2008.pdf.
--. 2012. "Production Statistics." http://oica.net/category/production-statistics/.
Kasuga, Takeshi, Toshiko Oka, Yohei Yamaguchi, Youichiro Higa, and Kaoru Hoshino. 2005. "The Expansion of Western Auto Parts Manufacturers into Thailand, and Responses by Japanese Auto Parts Manufacturers." Japan Bank for International Cooperation Institute (JBICI) Review 11:1-35.
Liker, Jeffrey K., and Yen-Chun Wu. 2000. "Japanese Automakers, U.S. Suppliers and Supply-Chain Superiority." Sloan Management Review 42 (1): 81-93.
Marr, Kendra. 2009. "Toyota Passes General Motors as World's Largest Carmaker." Washington Post, January 22, D1.
Miller, Jeffrey G., and Aleda V. Roth. 1994. "A Taxonomy of Manufacturing Strategies." Management Science 40 (3): 285-304.
Mukai, Anna, and Masatsugu Horie. 2011. "Toyota Has No Plans to Export from Thailand to Japan." Bloomberg News, September 8. http://www.bloomberg.com/ news/2011-09-08/toyota-says-it-has-no-plans-to-export-cars-from-thailand. html.
Richardson, James. 1993. "Parallel Sourcing and Supplier Performance in the Japanese Automobile Industry." Strategic Management Journal 14 (5): 339-50.
Ro, Young K., Jeffrey Liker, and Sebastian K. Fixson. 2008. "Evolving Models of Supplier Involvement in Design: The Deterioration of the Japanese Model in U.S. Auto." IEEE Transactions on Engineering Management 55 (2): 359-77.
Tabeta, Naoki. 1998. "The Kigyo Keiretsu Organization and Opportunism in the Japanese Automobile Manufacturing Industry." Asia Pacific Journal of Management 15 (1): 1-18.
Thai Automotive Institute. 2011. Automotive Production Records. Bangkok, Thailand.
Thailand Board of Investment. 2011. "Opportunities in Thailand's Automotive Industry." http://www.boi.go.th/index.php?page=opp_automotive
Wasti, S. Nazli, and Jeffrey K. Liker. 1999. "Collaborating with Suppliers in Product Development: A U.S. and Japan Comparative Study." IEEE Transactions on Engineering Management 46 (4): 444-61.
This work was supported by the Higher Education Research Promotion and National Research University Project of Thailand, Office of Higher Education Commission. The authors would like to thank all automotive suppliers and assemblers for participating in the survey, and sharing their insight and experiences in support of this study. Last, the authors would like to thank the article's reviewers for the insightful and constructive critique they provided during the review process.
(1.) Auto Alliance (Thailand) is a joint venture assembly company co-owned by Ford Motor Company and Mazda Motor Corporation.
Department of Marketing
College of Business
University of Nevada, Las Vegas, USA
Department of Industrial Engineering
Faculty of Engineering, Thammasat University
Klong Luang, Pathumtanee 12121,Thailand
Daniel I. Prajogo
Department of Management
Table 1/Profile of Respondent Positions Respondent Position Number Percent JP Production, Manufacturing 47 12.3 Department Quality Department 60 15.7 Vice Presidents/Directors 55 14.4 Production Planning 49 12.8 Total 211 55.2 US Production, Manufacturing 40 10.4 Department Quality Department 44 11.5 Vice Presidents/Directors 50 13.1 Planning 38 9.9 Total 172 44.8 Table 2/Respondent Company Profiles Japanese Supplier US Supplier Number Percent Number Percent Production system Make-to-stock 36 17.1 45 26.2 Make-to-order 103 48.8 64 37.2 Engineer-to-order 72 34.1 63 36.6 Total 211 100.0 172 100.0 Annual sales to major customers Less than 30% 41 19.4 84 48.8 30% to 60% 112 53.1 69 40.1 More than 60% 58 27.5 19 11.0 Total 211 100.0 172 100.0 Number of employees <200 73 34.6 49 28.5 >200 138 65.4 123 71.5 Total 211 100.0 172 100.0 ISO Certification ISO 9001 22 10.4 16 9.3 ISO 9001 & IS01 94 44.5 80 46.5 4001 ISO 9001, ISO 95 45.0 76 44.2 14001 & ISO/TS 16949 Total 211 100.0 172 100.0 Years supplying major customers <=1 16 7.6 26 15.1 1-5 126 59.7 128 74.4 6-10 69 32.7 18 10.5 Total 211 100.0 172 100.0 Table 3/Main Parts Supplied Main Part Japanese Supplier US Supplier Overall Number Percent Number Percent Percent Internal 26 12.3% 17 9.9% 11.2% facility (Air, Sound) Chemical, Oil, 39 18.5% 21 12.2% 15.7% Lubricant Auto part, 29 13.7% 17 9.9% 12.0% Metal sheet Machine 10 4.7% 6 3.5% 4.2% Fabric, PVC, 29 13.7% 24 14.0% 13.8% Rubber Sensor, Elec- 25 11.8% 21 12.2% 12.0% tronic part Jig, Fixture 25 11.8% 28 16.3% 13.8% Safety part 17 8.1% 26 15.1% 11.2% Interior com- 3 1.4% 5 2.9% 2.1% ponent Other 8 3.8% 7 4.1% 3.9% Total 211 100.0% 172 100.0% 100.0% Table 4/T-test (Equal Variances Not Assumed) for Suppliers to American and Japanese Automakers Item Means T-test for Equality of Means US Japanese Diff. Std. t- Sig. (n = 172) (n = 211) Error value A1: Com- 3.23 3.22 .01 .12 .09 .932 petition in industry is cut-throat A2: Com- 3.30 3.41 -.11 .11 -1.00 .318 petition for product is cut-throat A3: Many 3.04 2.97 .07 .11 .70 .484 "promotion wars" A4: Com- 3.85 3.84 .02 .09 .18 .856 petitor can match readily B1: Increase 2.97 2.95 .02 .10 .23 .821 capacity utilization B2: Reduce 3.01 2.97 .05 .09 .48 .633 production costs C1: 3.85 3.97 -.11 .08 -1.46 .146 High-per- formance products C2: Improve 3.96 4.02 -.06 .07 -.92 .359 confor- mance to design D1: Provide 3.90 4.12 -.22 .07 -3.05 .003 fast deliver- ies D2: Meet 3.47 3.89 -.42 .08 -5.13 .000 delivery promises D3: Reduce 3.46 3.81 -.35 .08 -4.18 .000 production lead time E1: Rapid 2.92 3.06 -.14 .10 -1.34 .181 design changes E2: Rapid 3.46 3.73 -.28 .09 -3.01 .003 volume changes E3: Large 3.16 3.33 -.17 .09 -1.83 .069 degree of product variety F1: Strat- 3.17 3.66 -.49 .10 -4.76 .000 egy aligned with cus- tomer's F2: Excel- 3.82 4.04 -.22 .08 -2.87 .004 lent supply chain system F3: Op- 3.83 4.13 -.30 .09 -3.39 .001 erations im- proved with customers' help F4: Finished 3.75 3.99 -.24 .08 -2.90 .004 products flow smoothly Table 5/Constructs, Measured Items, Factor Analysis, and Internal Consistency Constructs/Measured Variables Rotated Internal Factor Consistency Loadings (A) Business Environment .843 [alpha] = .731 Al. Competition in this industry is .743 cut-throat .704 A2. Competition for your company .658 product is cut-throat A3. There are many promotion wars' in this industry A4. Anything that one competitor can offer, others can match readily (B) Competitive Priority--Cost .890 [alpha] = .857 B1. Increase capacity utilization .898 B2. Reduce production costs (C) Competitive Priority-- .878 [alpha] = .776 Quality .865 C1. High-performance products C2. Improve conformance to design specification (D) Competitive Priority-- .589 [alpha] = .712 Delivery .874 D1. Provide fast deliveries .859 D2. Meet delivery promises D3. Reduce production lead time (E) Competitive Priority-- .585 [alpha] = .681 Flexibility .839 El. Rapid design changes .872 E2. Rapid volume changes E3. Large degree of product variety (F) Logistic integration .764 [alpha] = .789 F1. Our strategy has been .813 established in conjunction with .811 customer's policy .743 F2. Our logistics integration is characterized by excellent supply chain system F3. Our operation systems have been developed by major customers' improvement team F4. Our finished products flow smoothly to key customers Table 6/Logistics Regression: Classification Table and Variable Coefficients Observed Predicted US JP Percent Correct US 93 79 54.1 JP 44 167 79.1 Overall Percentage 67.9 Variable In (odds) Std. Wald df Sig. Odds Ratio [beta] Error Exp([beta]) A. Business -.110 .115 .912 1 .340 .896 Environ- ment B. Cost -.054 .116 .218 1 .640 .947 C. Quality -.103 .119 .751 1 .386 .902 D. Delivery (a) .536 .122 19.450 1 .000 1.710 E. Flexibil- .258 .114 5.096 1 .024 1.295 ity (a) F. Logistics .432 .115 14.166 1 .000 1.540 Integration (a) Constant (a) .225 .110 4.201 1 .040 1.252 [chi square] df Sig. Omnibus 48.348 6 .000 Test of Model Co- efficients Hosmer 7.997 8 .434 and Lem- eshow Test (a) Indicates statistically significant predictor variable at [alpha] = 5%.
|Printer friendly Cite/link Email Feedback|
|Author:||Mejza, Michael; Laosirihongthong, Tritos; Prajogo, Daniel I.|
|Date:||Mar 22, 2013|
|Previous Article:||Social support for European rail liberalization policy.|
|Next Article:||Dry port development in China: motivations, challenges, and opportunities.|