Network performance impact on supply reliability in the automobile industry

The automobile industry relies heavily on its global supply networks. Nevertheless, there is some reason to assume that some OEMs which suffered from frequent supply shortages in 2010 and 2011 could have performed better if they had reassessed the assumptions upon which they managed their suppliers. One of the outdated assumptions the car industry relies on (and one that is continuously enforced by supply chain management text book claims) is that OEMs deal with supply chains - as opposed to complex networks with both vertical and lateral performance impacts. Based upon on-site research, interviews with OEMs and suppliers, and theoretical research in organizational theories, this paper concludes that considering the network characteristics of the automobile industry OEMs should reconsider their practice of standard production capacity flexibility in their supply management. It will be discussed how network effects and the resulting performance dynamics can make a difference in the supply performance of suppliers and thus should be taken into account.