Effects of modular sourcing on manufacturing flexibility in the automotive industry. A study among German OEMs

Modular sourcing represents a departure from ‘traditional’ sourcing methods since it reduces the process and product related complexity. The importance of this concept to the automotive industry has been increasing tremendously the last few years and entails a re-structuring of automotive supply chains. In a modular sourcing relationship a supplier develops and produces a complex part of a vehicle (e.g. frontend including lights) on behalf of the vehicle manufacturer. This study focuses on the effects of modular sourcing on the flexibility of manufacturing systems in the automotive industry. Based on a solid theoretical analysis, a conceptual framework is developed in this study, which observes several actors and influential variables. In order to develop and validate this conceptual framework both exploratory case studies (at DaimlerChrysler, Porsche, Volkswagen, BMW) and quantitative analysis have been used. The results of this study demonstrate that the flexibility of the manufacturing system is positively affected by the application of modular sourcing. However, outsourcing too many activities can result in quality problems, higher costs, and can actually reduce the level of manufacturing flexibility.

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