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Logistics supplier integration in the automotive industry

Article in International Journal of Operations & Production Management · October 2012

DOI: 10.1108/01443571211274558

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Logistics
Logistics supplier integration supplier
in the automotive industry integration
David Bennett
Newcastle Business School, Northumbria University, 1281
Newcastle upon Tyne, UK, and
Florian Klug Received 4 April 2011
Revised 7 July 2011,
Department of Business Administration, 30 September 2011
Munich University of Applied Sciences, Munich, Germany Accepted 20 October 2011

Abstract
Purpose – In recent decades the automotive industry has established a variety of new forms of
logistics integration between automobile assemblers and their suppliers, in particular those in the first
tier. The purpose of this paper is to outline which form of logistics integration original equipment
manufacturer (OEM) assembly plants use to link up with proximate suppliers, and to classify and
compare different types of logistics supplier integration.
Design/methodology/approach – The data and insights for this paper come from a literature
review of research and practitioner papers and studies to survey logistics integration models in theory
and practice. In addition, data are collected through semi-structured interviews and site visits.
Findings – The main findings are summarised in five conditions which characterise logistics
supplier integration in the automotive industry. These conditions vary significantly between local
dedicated supply as discussed in this paper and the traditional supply, which is distant and scattered
around suppliers. These main conditions are “geographical proximity”, “delivery contents, volume and
sequence”, “shared investment and asset specificity”, “information sharing and information
technology system integration” as well as “transport system”. Although all of the five conditions
were considered relevant for the description of existing integration forms, only the “geographical
proximity” dimension is emerged as most suited for a formal typology. Therefore, a seven-step
integration model was developed which allows for a categorisation and comparison of existing
logistics integration forms of proximate supply.
Research limitations/implications – This research aims to support the academic study of
cross-company and inter-organisational supplier integration by providing consistent criteria for
cross-site comparisons. A holistic and consistent understanding of different logistics integration types
will be necessary, which will help in evaluating the actual integration forms such as supplier parks.
Originality/value – The majority of studies into the supplier integration phenomenon conclude that
logistical concerns are the driving factor behind supplier co-location. Therefore, the focus of this
research is on the spectrum of vertical integration in logistics between the vehicle manufacturers and
their suppliers.
Keywords Automotive industry, Supply chain management, Suppliers, Channel relationships,
Logistics supplier integration, Modular consortium, Condominium, Supplier park
Paper type Research paper

1. Introduction
In past decades growing externalising tendencies in the automotive industry led to International Journal of Operations
divestment of the ownership of various operations and a dislocation to dispersed & Production Management
Vol. 32 No. 11, 2012
suppliers (Sako, 2006). Vehicle manufacturers (VMs) are outsourcing more and more pp. 1281-1305
q Emerald Group Publishing Limited
“non-core” processes to suppliers to become more market responsive and become 0144-3577
less exposed to demand fluctuations by reducing their investment in fixed assets DOI 10.1108/01443571211274558
IJOPM (Harrison, 2004), while leveraging specific supplier capabilities (Collins et al., 1997).
32,11 Therefore, it is not enough simply to optimise in-house structures especially in
the automotive industry where nowadays the automotive suppliers account for
70-80 per cent of total value creation (Harrison and van Hoek, 2008). In consequence,
supplier management as an integrative philosophy has gained growing importance. The
integration of suppliers has been widely cited as a source of potential competitive
1282 advantage and improved performance of the value/supply chain (Stevens, 1989;
McGinnis and Kohn, 1990, 1993; Eloranta and Hameri, 1991; Cooper and Ellram, 1993;
Lewis et al., 1993; Shapiro et al., 1993; Dyer, 1996; Frohlich and Westbrook, 2001).
There are different principles and perspectives under which supplier integration can be
seen (see Figure 3 the top line). The technological perspective is concerned with questions
regarding the design aspect of the product and its development and manufacturing
process (Larsson, 1999; Littler et al., 1995). The supply perspective asks about competitive
strength according to its subcontracting structure (Dyer and Ouchi, 1993). Especially
just-in-time (JIT) (Sadler, 1997; Mistry, 2005), build-to-order (BTO) (Holweg and Pil, 2001,
2004; Parry and Graves, 2008) and modular supply play an important role in the
automotive industry (Star, 1965; Schonberger and Gilbert, 1983; Waters-Fuller, 1995;
Doran, 2005; Howard and Squire, 2007). The information technology (IT)-perspective
stresses electronic integration. The traditional way to exchange orders and delivery
information has been replaced by means of electronic data interchange (EDI) (Sheombar,
1992; Walton and Marucheck, 1997). EDI refers to a technology that is used to
electronically exchange information and data across organisation on a standardised basis
(Germain and Dröge, 1995). EDI transactions involve the electronic transmission of a
fixed-format document with predefined data and information fields (Harrison and
van Hoek, 2008). The process perspective argues to create and coordinate operations
seamlessly between manufacturers and suppliers. This is fulfilled by fundamental
rethinking and radical redesign of business processes to achieve dramatic improvements
in measures of performance, such as cost, quality, flexibility and speed (Hammer and
Champy, 1994; Burgess, 1998). The logistics perspective is concerned with the forward
physical flow of deliveries between suppliers and manufacturers (Grant et al., 2006).
Physical coordination and integration aspects are in focus, like transport, handling and
storage combined with the necessary information flows. The collaboration perspective
stresses the joint buyer-supplier work to optimise value chain efficiency, by partnering
with vendors and sharing valuable knowledge through organised supplier networks
(Dyer and Hatch, 2004). The supply chain partners collaborate on customer demand,
inventory, capacity and bottleneck planning and forecasting, replenishment and work
closely to align their organisations’ plans. The lean perspective is beyond collaborative
partnership. The difference between the collaboration and lean aspects can be seen to a
matter of strategy. The strategic development necessary for both parties on this layer of
integration is equality in partnership with sharing of responsibility and benefit, as a result
of increased confidence and cooperation (Lamming, 1993).
The review of the literature on supplier integration in the automotive industry has
shown that logistical concerns are a major driving factor behind supplier
location (Millington et al., 1998; Gullander and Larsson, 2000; Larsson, 2002).
Constant evolvement of the synchronous supply process combined with spatial
integration is ongoing, which has developed a number of inbound logistics solutions,
from automotive supplier clusters and supplier parks to condominium assembly and
beyond to modular consortia, largely at the instigation of the VMs. The shift in the Logistics
automotive value chain is considered the main driver for the establishment of closer, more supplier
integrated material and information flows between automotive assembler and their
suppliers (Larsson, 1999; Frigant and Lung, 2002). Reduced value-added operations integration
combined with increased delivery frequencies and use of sequential production on the car
assembly line, evolve new relationships within the inbound supply chain (Harrison, 2001).
High integrated suppliers, based in proximity to the assemblers, enable simple, 1283
standardised, speedy and certain logistics processes according to reduced complexity of
logistics operations (Harrison and van Hoek, 2008).
The key themes in the debate of logistics integration in the automotive industry follow
the implementation of the JIT delivery system. This constant evolvement of the
synchronous supply process between VMs and tier-1 suppliers has been the subject of
intense discussion in literature for many years (Schonberger, 1982; Monden, 1983; Suzaki,
1987; Cusumano, 1988; Wildemann, 1988; Chapman and Carter, 1990; Harrison, 1992;
Lamming, 1993; Waters-Fuller, 1995; White et al., 1999; Kros et al., 2006). Toyota started in
the late 1930s to concentrate their suppliers on the Southern fringe of Nagoya, as its centre
of production (Larsson, 1999). This green-field automotive town, which was renamed
Toyota City in 1959, allowed Toyota to push the JIT system to an extreme (Hayter, 1997).
Inspired by the Toyota experience and growing outsourcing tendencies many automotive
manufacturers started to concentrate their suppliers in close proximity to the assembly
lines. Driven by this empirical evidence, academic research started to investigate
questions concerning the relationship between supplier location and JIT. One major
contribution to this quest delivered the economic- and especially industrial-geography
(Hill, 1989; Linge, 1991; Glasmeier and Sugiura, 1991; Reid, 1995; Fujita and Hill, 1995;
Frigant and Lung, 2002; Sako, 2004). Larsson (2002) provided an extensive academic
research to the significance of geographical proximity in the restructuring process of a
domestic subcontractor system in the Swedish automotive industry. In addition, he
analysed geographical aspects of suppliers in some major automotive producing regions
(Japan, North America, Europe). Reichhart and Holweg (2008) analysed the forms,
functions and theoretical perspectives of co-located supplier clusters in the automotive
industry. One main conclusion of the research is the suggestion “that future investigations
should focus on consolidating the contributions on the spatial dimension of sourcing
configurations” (p. 53). Sako (2003) concludes of her research about supplier parks, that
“we need to delve deeper into some aspects of operations management and logistics to
understand why proximity is considered necessary” (p. 17). For the adjacent and more
recent supplier integration forms in automotive logistics (condominium and modular
consortium) the main focus of research lies on industrial, regional and sociological aspects
(Zilbovicius et al., 2002; Rodriguez-Pose and Arbix, 2001). An emphasis of research can be
found in the Brazilian automotive industry (Sako, 2005, 2006; Guarnieri et al., 2006) with
special interest for the only worldwide existing full modular consortium in Resende
(Abreu et al., 2000; Corrêa, 2001; Ramalho and Marco Aurelio, 2002). The reason can be
seen in the new developing Brazilian auto industry and therefore as experimental ground
for new ideas and practices in supplier integration (Sako, 2006). In general logistics
concerns are not the core of research interest, although the discussed organisational and
sociological aspects sometimes overlap with physical flow concerns.
Overall literature review on logistics supplier integration in the automotive industry
shows that there is a lack of consistent criteria separating supplier base on the spatial
IJOPM dimension and describing all existing forms of proximate supply in a single model.
32,11 Although previous contributions have discussed a number of morphological differences
between certain logistics integration forms (Collins et al., 1997; Larsson, 1999; Larsson,
2002; Reichhart and Holweg, 2008) no consistent and formal typology has been proposed
over the whole range of proximate supply. This lack of consistent criteria coupled with
the sparse academic literature on the logistics issues of the condominium and modular
1284 consortium cases makes a strong case for further investigation. Therefore, this paper
outlines, which form of logistics integration VM use to link up with proximate suppliers
and classifies and compares different categories of integration. Our proposed typology
considers the general theoretical foundations and implications of logistics supplier
integration in the automotive industry and puts forward definitions for the future study
of this phenomenon. Our main research interest was not the establishment and/or formal
planning and management process, which led to the creation of different forms of
logistical supplier integration. We were focusing mainly on organisational aspects like
morphological differences and operational running in daily business.
As logistics supplier integration we will define the process of joint planning,
operating and controlling of all shared logistics activities between the point of delivery
at the automotive assembler (VM site) back to the point of value-adding activities at the
supplier’s facility (supplier site). The local supplier facility is just a small part of a larger
and in most cases globally operating company, where central functions like R&D and
purchasing are based in central facilities. To separate the traditional distant supplier
from the proximate suppliers in the automotive industry focused in this research, we will
use the following separation criteria (Figure 3):
.
The investigation will only focus on dedicated locations of suppliers in a
confined area based on a strategic decision of one or more VMs in the automotive
industry.
.
Based on our empirical research the supplier facility must be based in proximity
to the vehicle assembly plant with a maximum distance of 130 km (Section 4).
.
Each supplier facility produces exclusively for the automotive industry.
.
Supplier facility buildings and infrastructure are purpose-built as a result of a
formal planning process.

2. Differences in logistics conditions

To understand different forms of proximate logistics supplier integration, one has to seek
an understanding of the factors that contribute to adjacent suppliers in the automotive
industry. Independent of the question of optimal integration depth we analysed the
logistics-relevant conditions of proximate supply. We therefore used a multi-step approach
starting to analyse secondary data concerning logistics supplier integration in the
automotive industry, as described in the section on the research approach (Section 3). The
main ideas were gathered in a brainstorming phase. Following this, we structured and
formulated six logistics-relevant conditions of proximate supply with the help of a fish-bone
diagram. After some sessions of rework, the outcome was a consensus picture (Figure 1).
This structure also includes professional and academic experience of the authors.
According to the close link between “shared investment” and “asset specificity”
(see below) we combined the two criteria and summarised the main findings of our
research in five principal conditions:
 Logistics
supplier
integration

1285

Figure 1.
Analysis of
the logistics-relevant
conditions of proximate
supply

(1) geographical proximity;

(2) delivery contents, volume and sequence;
(3) shared investment and asset specificity;
(4) information sharing and IT-system integration; and
(5) transport system.

These conditions characterise proximate logistics supplier integration and vary

significantly between local dedicated supply as discussed in this paper and the
traditional supply, with distant and scattered around suppliers. The conditions were used
to create our questionnaires and guided the process of our semi-structured interviews
(Section 3). There are a number of key variables that emerged from the interviews that
need to be considered when explaining the principal integration conditions. Based on this
analysis of our primary data (interviews) we identified categories for each principal
condition (Figure 2). These categories can be seen as a sub-structure, which allow for a
common classification to enable cross-case comparison. This conceptual framework

Figure 2.
Identified categories for
the principal conditions
of logistics supplier
integration
IJOPM subsequently guided the development of our seven-step model of existing logistics
32,11 integration forms of proximate supply (Section 4).

Geographical proximity
The close proximity of suppliers makes it economical to deliver several times a day and
keep minimal inventories. Larsson (1999) showed that the higher the deliver frequency
1286 the more important is the geographical and temporal supplier proximity in order to
minimise transport costs and maximise reliability. Geographical supplier proximity
improves responsiveness as the transport time from finished component to assembly is
very short (Larsson, 2002), which enables meeting customer orders in short lead times,
react quickly to quality or delivery problems without building stocks. Distant suppliers
are more likely to experience disruptions in delivery, for instance, as a result of the
transport infrastructure or from weather and traffic conditions (Svensson, 2000).
Therefore, proximate suppliers can raise the reliability of delivery while strengthening
the links between the VM and supplier.
More complex technology in the automotive industry has led to the recognition by the
VMs that they do not necessarily have the knowledge and expertise to build modern cars
entirely on their own and so closer relationships with suppliers are required (Morris et al.,
2004). Supplier proximity improves the conditions to devolve assembly tasks from VM
to supplier. Devolved assembly not only increases the efficiency of the assembly line in
the VM plant, by removing stages of assembly, which disrupt the smooth operation of
the line, but also adds value to the assemblies produced by the supplier (Millington et al.,
1998). All these facts support a BTO strategy through responsive manufacturing
and logistics. Chen et al. (2003) highlighted that BTO production and logistics systems
rely strongly on the tight integration of the upstream supplier.
With the establishment of the co-located supplier not only VM but also inter-supplier
proximity increases, which leads to intangible benefits. It can facilitate increased
face-to-face contact, quicker problem resolution, rapid transfer of knowledge and better
mutual understanding (Frigant and Lung, 2002). This clustering effect leads to the
creation of knowledge sharing networks, ease inter-firm communication and improve
quality (Porter, 1998). The main advantages of proximate suppliers can be summarised
to reduced inventories, transport costs and damage, lower capital and working costs,
cheaper handling/loading/unloading/packaging costs, quicker problem resolution by
increased face-to-face contact, increased organisational and technological
integration and improved delivery reliability (Millington et al., 1998; Morris et al.,
2004; Reichhart and Holweg, 2008). In contrast, the very close geographical proximity
reduces independence of suppliers (Morris et al., 2004). Also proximate supplier
production may impose, contrary to a distant parent plant, significant costs by reducing
the gains from economies of scale (diseconomies of fragmented production) and
reducing the ability to respond flexibly to changes in the VM pattern of demand, while
output is tight to a single customer (Millington et al., 1998).

Delivery contents, volume and sequence

The growing variant number of individual vehicles has led to an increase in the part
numbers required by assembly plants and thus has had an impact on the inventory
policies of VMs and the general need to maintain mix flexibility to remain competitive
(Berry and Cooper, 1999). Complex parts such as seats, bumper systems or front and rear
axles require late configuration and demands that suppliers deliver in sequence to the VM Logistics
plant. Sequenced in-line supply (SILS) is a standard delivery approach in synchronous supplier
supply. In this concept, the entire vehicle assembly process is dependent upon the timely
delivery of components. SILS requires suppliers to deliver customer-ordered components integration
and modules in the same sequence and synchronised with the final assembly process
(Lyons et al., 2006). Production and delivery according to SILS arrangements puts
reliability in focus in such a way that temporal and spatial proximity between supplier and 1287
VM becomes of strategic importance (Larsson, 1999). Proximity enables low inventory,
late configuration and also last-minute revisions in the sequencing to cope with planning
failures (Sako, 2006). Where short order cycle time is only a matter of hours, the supplier
must be located in close proximity to provide the correct modules within tight time
constraints (Fredriksson, 2006a). Although nowadays VM assembly schedules are more
and more “frozen” over a period (so-called “frozen-horizon” or “pearl necklace concept”) of
some days which gives the supplier more time to react on material call-offs, so sequenced
supply can be accommodated sometimes over substantial geographical distances.
Besides SILS VMs can mitigate the negative impact of product variety on logistics
performance by using modularity (Salvador et al., 2002). Modularity means that a car is
divided into less complex modules with specific interfaces to the supplier (Baldwin and
Clark, 2000). Modular supply is the result of a change towards a modular product
architecture combined with outsourcing, and has led to the creation of large suppliers
who supply complete modules (Reichhart and Holweg, 2008). Larsson (2002) highlighted
that it is modular supply that is often cited as one of the major motivations behind the
organisational and locational logic of logistics supplier integration. Holweg (2008) states
that, “the drive towards modularity also called for a geographical change in the supply
chain”. Hence logistics supplier integration depends on the local value-added content of
the suppliers (Reichhart and Holweg, 2008). Automotive supply chains have multi-tier
complex supply structures, which have been simplified through the wide adoption of
modularity and the proximity of suppliers to the VM (Lyons et al., 2006). Modular supply
tends to reduce the number of tier-1 suppliers the VM needs to coordinate and reduces
the complexity that needs to be handled during final assembly (Reichhart and Holweg,
2008). Modularity in production and logistics implies a dispersed assembly system, in
which some activities are pre-assembly done (of components into modules) and other
activities are final assembly (of components and modules into vehicles) (Fredriksson,
2006a). The decoupling of assembly activities has been reported in the automotive
industry to lead to both efficiency and flexibility gains (Kinutani, 1997; Wilhelm, 1997;
van Hoek and Weken, 1998). After module assembly, transport volume and costs grow
tremendously. The primary reason for the increase is lower packaging degree when
transporting the modules that are physically big and cannot be stacked as densely as
small parts. Bulkier modules compared to former component supply in combination
with a growing volume of module flows, which increased inbound transport volume per
car, acknowledge the importance of controlling the costs for transporting finished
modules to the main assembly line (Fredriksson, 2006b). Fragile modules with high
value and a larger number of variants compared to the components that they are
assembled from require special containers with higher investment costs as standard
containers. Therefore, it is a substantial consideration to transport bulky modules with
high value – packed in expensive special containers – over a short distance, which
favours proximate supply.
IJOPM Shared investment and asset specificity
32,11 Asset ownership is split up or outsourced in most cases of supplier integration to
economise on overhead and fixed costs by sharing them with suppliers. OEMs wish to
save on capital costs as an attempt to enhance their return on capital employed (Sako,
2003). Outsourcing is seen under an economist view as divestment of assets (Baker et al.,
2002) as well as under a management view, focusing on the reallocation of responsibility
1288 for carrying out tasks from within an organisation unit to another unit (Baldwin and
Clark, 2000). Outsourced assets are mainly unique to a particular situation and have no
alternative use. These customised investments can create values like JIT systems show.
A dedicated infrastructure is one of the most visible signs of the degree of integration
between suppliers and VMs (Reichhart and Holweg, 2008). These shared investments
create logistics interdependence and thus substantial buyer and supplier switching
costs (Dyer and Ouchi, 1993). Hence, the higher the investment in specific assets and the
switching costs, the longer the reference time horizon of the relationship, as the VM is not
able to change the current supplier without costly implications (Masella and Rangone,
2000). According to Williamson (1996) this investment related supplier-buyer
dependency can be seen as one of the mechanisms to ensure reciprocal commitment
to ensure contract fulfilment. The risk of post-contractual opportunistic behaviour is
dependent on how specific the assets are to the transaction. Williamson (1979) classifies
asset specificity in site, physical, and human asset specificity, which are all relevant in
the proximate supply case. The effect of asset specificity is amplified when the assets are
also capital intensive and durable and when they give rise to high fixed-cost structures
(Stuckey and White, 1993). If supplier facilities at proximate supplier have highly
specific assets then the risks of opportunistic recontracting are higher. In addition, a
supplier production very close to the VM reduces the degree of strategic flexibility of
both sides. This emphasises the need for trust and collaboration between the partners
within a long-term relationship (Millington et al., 1998).
Site-specific investments depend strongly on the local value-added. The least supplier
investments in customised assets can be seen by more sequencing activities, which are
very common for less expensive commodity parts and components. The highest degree on
asset specificity exists when a supplier maintains full manufacturing operations with
specialised machinery (e.g. injection moulding machines for bumpers, robotic welding
machines for exhausts) which requires capital-intensive machines. The distance between
the local supplier facility and its central mother plant has an important impact on the local
value-added. In the presence of central facilities suppliers are more likely to favour low
value-adding tasks, such as pre-assembly or late configuration, in order to leverage
existing scale economies at their central mother plant (Pil and Holweg, 2003).

Information sharing and IT system integration

The closer suppliers are integrated the more important is the information sharing.
Interfacing with proximate suppliers dissolves fixed information boundaries and the
supply process must be managed as a single organisation (Soosay et al., 2008). Frigant and
Lung (2002) noted that proximity permits a close articulation between a product’s physical
flow and the information flows that are associated with the delivery process. The
information shared includes the metronomic build sequence transmitted on a continuous
basis by EDI. Achieving visibility throughout the supply chain by electronic integration
is of paramount importance in the search of competitive advantage (Shah et al., 2002).
Mackay and Rosier (1996) indicate that the success of EDI is linked to the degree of Logistics
integration of suppliers and the VM. Proprietary or partly proprietary IT systems of the supplier
suppliers must be modified to fulfil the needs of the VM. Sometimes new investment in
software is necessary to be fully integrated into the VM material control system. The integration
stages of material control convert VM production schedule into module requirements and
then finally turn these into component requirements. Resultant orders and call-offs are
processed sometimes just hours ahead of when the car is built. Entering the VM site in the 1289
supply centre, condominium or modular consortium cases also requires the use of VM
IT-systems (Section 4). Besides enterprise resource planning (ERP) software this entails
data bases, computer networks and electronic equipment for downloading software into
modules and into vehicles (Fredriksson, 2006a). Therefore, information flows and systems
must be synchronised. IT integration enables the VM and its suppliers to share logistics
information such as production-plans and capacities, delivery-orders and stock levels in
real time. This IT networking maintains the flow of materials in time to the rhythm of the
production process.

Transport system
The traditional role of transportation as a mover of goods to the lowest possible price has
shifted, as the coordination of physical flows between suppliers and assemblers became
one of the most critical stages in lean logistics (Larsson, 1999). A synchronisation
between supplier and VM logistics with low buffers, an even workload in the assembly
system and reliable module and vehicle deliveries is supported by proximate supply.
Co-located suppliers can bundle transport volume, which reduces transport costs and
simplifies transport coordination. Especially in-house supplier integration models allow
the VM to take the JIT delivery concept to a whole new level. Different types of logistics
supplier integration use different modes, structures and frequencies of transport. In the
modular consortium case in general no transport system is needed at all, whilst
condominium logistics uses simple means of transport like small push wagons or
gravity conveyors. Supply centres and adjacent supplier parks apply electrical conveyor
systems, automatic guided vehicles and trolley-transport whereas regional supplier
parks and automotive supplier communities perform inbound logistics via trucks over a
longer transport distance. The longer and less frequent the transportation is, the more
likely is the use of heavy goods vehicles (HGV’s).
Besides the above mentioned five main conditions of logistics supplier integration
there are a lot of further criteria like product architecture, central parent plant location,
VMs built-to-order strategies and the availability of land in the proximity to the VM
plant which will qualify for either high or low supplier integration (Reichhart and
Holweg, 2008).

3. Research method
We adopt an exploratory research design, comprising of a multi-method approach, to
understand different forms of proximate supply (Yin, 2003). This includes collecting data
and analysing the data via explanatory case studies, which is a consideration made to the
case evaluations within this paper. Such an exploratory research design is particularly
suited for understanding phenomena in their specific context, and to understand “how”
and “why” various logistics integration forms differ from each other (Yin, 2003). In order to
study the complex process of different logistics integration forms, this paper will use
IJOPM a number of different theoretical and methodological approaches as analytical
32,11 frameworks depending on the question and geographical integration. The data and
insight for this multiple case approach comes from a literature review of research and
practitioner papers. In addition, studies to survey logistics integration models in theory
and practice have been used. In total we studied 35 integration cases, which are mainly
based in Europe (30 cases) (Table I). To undertake an in-depth study we restricted our
1290 sample size to 35 information-rich cases. The selection of case study targets was motivated
by the need to cover the whole scope of logistics supplier integration. Furthermore, the
chosen cases were determined by availability of information, logistical focus of our
research, size by number of people employed and existing business contacts. All logistics
integration cases are well established and were created between 1991 and 2006. Besides,
data is collected through semi-structured interviews and site visits. The facilities at all
organisations interviewed were observed. The choice for the ten interviewed cases (out of
the total sample of 35 cases identified during the background research) was opportunistic
and determined by access to the respective facilities. The study comprises a total of 21
site-specific interviews of logistics and operations executives at German, Czech and
British automotive suppliers, logistics service providers and VMs. The intention here was
to gain a real world understanding of logistics integration concepts for suppliers. Our
industry focus on automotive industry guarantees the depth and richness of detail that an
explanatory case study provides. Semi-structured interviews were considered to be the
most suitable data collection technique as access was given for interviews to take place
with each respondent, which lasted approximately 90 minutes. All interviews were
recorded and transcribed. To overcome the main weaknesses commonly associated with
qualitative research, we interviewed respondents from different positions and functions
within the proximate supply process. We used three different types of questionnaires, each
type focusing on the special goals and needs of VM, logistics service provider and supplier
according to their position in the logistics supply process. Each questionnaire concentrates
on operational (mainly logistical) aspects according to our research focus. For the VM we
focused on operational needs in high mix flexibility in inbound delivery, reliable supply
processes and the possibilities of quick reactions of suppliers and logistics service provider
to changes on the daily volume and mix of production. Logistics service providers are
integrated in the supply and even manufacturing process and offer a wide range of
services, such as light assembly, sequencing, storage and transport. Here we interviewed
respondents from different functional areas (assembly, transport, handling, storage) to
gain insights into their resource management, especially the container, warehouse and
truck management processes. For the supplier we focused on their distinctive logistics
capabilities related to their co-location such as asset specificity, delivery frequency, mix
flexibility, information sharing and compatibility as well as material call-off stability. The
supplier questionnaire, for example, was split up in the following sections related to our
main areas of research interest:
.
General information about the history, planning and building process with a
focus on the geographical location decision of the supplier site.
.
Investment and infrastructure of the investigated supplier site with focus on
existing handling, storage and transport systems.
.
Delivery programme by type, volume, mix with special interest in stability over
time, packaging and sequencing needs.
 Logistics
Year of
Plant location Country VM foundation Integration type Data source supplier
integration
Resende Brazil MAN 1996 Full modular consortium Literature
Hambach France Smart 1997 Partial modular consortium Literature
Camaçari Brazil Ford 2001 Condominium Literature
Sunderland UK Nissan 2006 Condominium Literature, 1291
interview
Mladá Czech Skoda 1996 Condominium Literature,
Boleslav Republic interview
Leipzig Germany BMW 2004 Supply centre Literature,
interview
Hannover Germany VW 2003 Supply centre Literature,
interview
Sandouville France Renault 2000 Supply centre Literature
Palencia Spain Renault 2001 Supply centre Literature
Douai France Renault 2003 Supply centre Literature
Rastatt Germany Daimler 1997 Supply centre Literature
Vitoria Spain Daimler 2002 Supply centre Literature
Rüsselsheim Germany GM 2001 Supply centre Literature,
interview
Köln Germany Ford 2002 Supply centre Literature
Matorell Spain Seat 1991 Adjacent supplier park Literature
Ingolstadt Germany Audi 1995 Adjacent supplier park Literature,
interview
Neckarsulm Germany Audi 1996 Adjacent supplier park Literature,
interview
Valencia Spain Ford 1996 Adjacent supplier park Literature
Saarlouis Germany Ford 1998 Adjacent supplier park Literature,
interview
Genk Belgium Ford 2000 Adjacent supplier park Literature
Chicago USA Ford 2004 Adjacent supplier park Literature
Bridgend UK Ford 2005 Adjacent supplier park Literature
Palmela Portugal VW 1993 Adjacent supplier park Literature
Glauchau Germany VW 1996 Adjacent supplier park Literature,
interview
Pamplona Spain VW 2000 Adjacent supplier park Literature
Emden Germany VW 2003 Adjacent supplier park Literature
Halewood UK Jaguar 1997 Adjacent supplier park Literature
Gravataı́ Brazil GM 1999 Adjacent supplier park Literature
Ellesmere UK GM 2001 Adjacent supplier park Literature
Port
Ghent Belgium Volvo 1999 Adjacent supplier park Literature
Torslanda Sweden Volvo 1999 Adjacent supplier park Literature
Melfi Italy Fiat 1993 Adjacent supplier park Literature
Lozorno Slovakia VW 2002 Regional supplier park Literature
Wackersdorf Germany BMW 1998 Automotive supplier Literature,
community interview
Rosslyn South Africa six 2001 Automotive supplier Literature Table I.
VMs community Research overview
IJOPM .
Material- and information flows between the VM and supplier focused on used
32,11 ERP-systems, data integration standards, call-off systems, container circulation
system (full- und empty containers) and the planning, managing and controlling
of the used means of external transport.

4. Towards a new framework for logistics supplier integration

1292 An integration model (Figure 3) was developed which allows for a categorisation and
comparison of the respective logistics integration forms in the automotive industry
(Bennett and Klug, 2009). This consistent typology is based on the morphological
dimensions identified in previous research, which are synthesised to the five conditions
characterising logistics supplier integration as discussed in Section 2.
Our background research showed that the creation of these specific integration forms in
automotive industry is driven primarily by operational (mainly logistical) concerns
(Gullander and Larsson, 2000). An explanation through an accepted theoretical framework
can be found for the five conditions characterising logistics supplier integration.
Comparing the five integration conditions in Figure 2 shows that “delivery contents,
volume and sequence” is related to a customer and therefore to the market driven view. The
growing variant number of individual vehicles has led to an increase in the part numbers
required by assembly plants and thus has had an impact on the general need to maintain
mix flexibility to remain competitive (Berry and Cooper, 1999). This flexibility is performed
by synchronous SILS supply (Section 2), which contributes to the car assembler’s
competitiveness through logistical supplier integration. The remaining four conditions
characterising logistics supplier integration can be linked with the resource-based and as an
extension to the relational view, which focuses on the exchange relations between plants as
a strategic medium for achieving superior resource-based performance (Duschek, 2004).
The resource-based view of the company (Wernerfelt, 1984; Penrose, 1995) suggest that the
companies resources and capabilities should be the foundation for the manufacturers’
strategy as they are the primary source of profit and provide a much more stable basis to
define the companies’ identity than the dynamic and often unpredictable external
environment (Grant, 1991). These resources and capabilities refer to unique skills, assets,
technologies or various activities and practices that serve as the basis for a sustained
competitive advantage. This resource-based view is discussed by Ferdows (1997) as the
extent to which certain competencies that go beyond simply manufacturing are present at

Figure 3.
Typology of logistics
supplier integration in
automotive industry
a production site, which entails logistical supplier integration. The coordination of resources Logistics
is fundamental in obtaining competitive advantages therefore, the supplier-assembler supplier
related capabilities, how to link dispersed resources and activities gain importance –
especially related to the successful management of logistics processes (Hensel, 2007). integration
Although all of the five conditions were considered relevant for the description of
existing integration forms, only the “geographical proximity” condition is emerged as
the most suitable for a formal typology. The supplier distance to the final assembly track 1293
is the main criterion of separation, whilst spatial integration of the suppliers and the VM
plant is the only dimension that is consistent comparing 33 out of 35 integration firms
(two forms of automotive supplier communities are separated by the number of supplied
plants). The “geographical proximity” condition allows defining disjunct categories and
puts forward definitions for the future study of this phenomenon. The supplier location
factor as the predominant factor of integration was therefore chosen to propose six
distinct types of logistics supplier integration: full modular consortium, partial modular
consortium, condominium, supply centre, adjacent supplier park and regional supplier
park. Based on our empirical research the boundary conditions between different types
were chosen with the assembly shop border (modular consortium and condominium),
the plant border (supply centre), 10 km distance to assembly line (adjacent supplier park)
and 35 km distance to assembly line (regional supplier park). Automotive supplier
communities, as the seventh type of logistics supplier integration, deliver more than one
assembly plant so there is a wide range of distance, in our empirical case, to assembly
lines from 0.5 to 130 km which overlaps this category with the regional and adjacent
supplier park by geographical proximity (Table I). For this special type of logistics
supplier integration we added a second classification criterion by “number of supplied
VM plants”. This auxiliary criterion allows a clear separation between the “regional
supplier park” and “adjacent supplier park” concepts, which are supplying only one
assembly plant and the “automotive supplier community” concept, which is delivering
more than one assembly plant.
Whilst the spatial separation criteria for the modular consortium, condominium and
supply centre are clearly fixed by the plant border of the VM, the definitions of the distant
integration types differ, depending on the empirical background of our samples. In recent
years more and more just-in-sequence suppliers have settled down in supplier parks.
Usually associated with new assembly plants, the parks are located very near to factories.
In our sample 18 out of 19 supplier parks are situated in distance up to 10 km to the VM
assembly line, which was selected as a boundary condition in our typology between
adjacent supplier parks (up to 10 km) and regional supplier parks (up to 35 km). Our
research showed that a maximum of 10 km distance of supplier parks suit the VM
requirements best. This distance to the assembly plant guarantees a smooth and efficient
logistics with high inbound transport frequency and therefore minimal inventory at the
assembly plant. The boundaries of 35 km for the regional supplier park and 130 km for the
automotive supplier community are based on our sample. According to the low number of
cases found in this constellation (one regional supplier park and two automotive supplier
communities), we suppose that these integration types can be seen as special types of
proximate supplier integration. The creation of these integration types was founded on
political reasons (BMW Wackersdorf) or infrastructural reasons, like lack of land in the
vicinity of vehicle assembly plants (VW Lozorno). Our research does not claim to provide
a comprehensive survey of proximate supply. Therefore, further research into this
IJOPM phenomenon is needed, which could enlarge the distances of 35 km for regional supplier
32,11 parks and 130 km for automotive supplier communities. Independent of these boundary
conditions it must be seen that the further the distance between supplier and VM the less
we can talk about local dedicated supply as discussed in this paper. Therefore, we regard
suppliers in a distance between 35 and 130 km to the VM assembly line as transition types
from proximate to traditional supply, with distant and scattered around suppliers.
1294 Subcategories within each integration type can be defined by using all the other four
integration conditions. The four conditions “delivery contents, volume and sequence”,
“shared investment and asset specificity”, “information sharing and IT-integration” and
“transport system” need to be considered when explaining and describing an empirical
case in the automotive industry. So, for example modular supply with highly integrated
IT-systems between VM and supplier can be found in supplier parks as well as in the
condominium and modular consortia cases but supplier location and distance to
assembly line is the predominant condition, which allows a disjunct categorisation.
From our point of view, the used methodology first to define distinct categories based on
one condition (geographical proximity) in addition to one auxiliary criterion (number of
supplied VM plants) is conceptually more successful than assigning the investigated
cases to five separation variates. As each empirical case of automotive supplier
integration will feature characteristics from several conditions (apart from geographical
proximity) no clear distinction is possible where a combination of all five conditions
generates practicable types of supplier integration forms (Ghauri and Grønhaug, 2010).
Although our research is based on a description of the current situation in the
automotive industry, a comparison of long-term trends showed that there is no evidence
of transforming one supplier integration type into another. All 35 investigated cases
have been created at the present stage, so that a future shift in other integration forms is,
from our point of view, very unlikely.

Full and partial modular consortium

Modular consortium is the highest possible logistics integration step for suppliers in the
automotive industry. The whole assembly operation is divided into separate modules and
the module supplier has the responsibility of assembling its module directly on the
automaker’s assembly line (on-line modular assembly). Therefore, the suppliers not only
manage their supply chains and assemble the modules, but also perform the final vehicle
assembly. All direct workers are paid by the suppliers. The modular consortium is
designed according to modular principles, where interdependencies and complexity are
reduced as all manufacturing and logistics activities are allocated to the module suppliers
(Sanchez and Mahoney, 1996). Here the VM is not directly involved in manufacturing, but,
nevertheless, it owns the buildings and land, remains in control of the entire supply chain
(Morris et al., 2004). This radical shift in the automotive value chain allows VMs to focus on
their core competencies, while leveraging specific supplier capabilities (Collins et al., 1997).
At the full modular consortia type the VM focuses on planning, design, engineering,
quality assurance, coordination and administration (Harrison and van Hoek, 2008). The
VM is not involved in the assembly operations but is responsible for the final inspection of
the completed vehicles.
The first and most prominent example of modular consortium is the MAN (former
VW) truck plant in Resende (Brazil). Resende is a pioneering pure modular consortium
model, which radicalises supplier integration in the automotive industry (Pires, 1998).
This unique existing full modular consortium is a revolutionary concept, established Logistics
under particular conditions, e.g. green-field site with no tradition in the automotive supplier
industry, easy modularisation of trucks and the urgency in building a new truck plant
after a joint venture between Ford and VW in Latin America ended 1995 (Pires, 1998). integration
The main reason for choosing such radical supplier integration was the lack of necessary
core competencies regarding the production of the truck modules (Corrêa, 2001). At
Resende, this supplier integration model in terms of employment leaves the VM in a 1295
minority position. Out of the 2,100 people working at the truck plant in Resende in 2004
only 23 per cent were VM employees. The VM staff work in functional offices
overlooking the main assembly line, responsible for product development, purchasing
and process engineering in order to tightly control process engineering in its body shop,
paint shop, and final assembly (Sako, 2006). The VM invested about US$ 250 million,
and the module supplier together invested a total of US$ 50 million mainly in the
equipment of the plant (Pires, 1998). Whilst at MAN Resende, as a full modular consortia
type, all final assembly work is done by suppliers, the Smart plant in France is an
example for a partial modular consortium where final assembly work is shared between
VM and suppliers. So for Hambach the final assembly line starts within the area
managed by Continental, which assembles the cockpit module and fixes it onto the body
frame. Thereafter, the final assembly line is managed by Smart (Sako, 2005). Finally the
retention of final assembly work is a matter of VM’s strategic choice. Nonetheless only
around 900 people out of 2,200 who work at the plant are actually employed by Smart.
Modular consortium is linked to the opening of green-field plants. The full modular
consortium such as Resende would not be possible in European and North American
assembly plants. Union resistance against outsourcing tasks to automotive suppliers
has a strong history in the USA (e.g. the failure of GM’s Yellowstone project) and
Europe (Reichhart and Holweg, 2008). Historically unions oppose extensive supplier
integration on the factory floor because of concerns to speed up production and
transfer more and more work to lower-paid supplier employees. Independent of the
question what influence unions play in the proximity of supplier integration, the only
worldwide existing example of a full modular consortium at Resende can be regarded
as an extreme experiment in logistics supplier integration. Although the former VW
manager López de Arriortúa, who was driving force behind the Resende model, stated
that he strongly believes that this model should be the supply chain project of all the
VW plants worldwide, none of the following assembly plants inaugurated after 1996
were designed according to the full consortium model (Corrêa, 2001).

Condominium
The condominium approach goes a step down in integration. In this case, suppliers
reside and operate under the same assembly shop roof as the VMs. Due to outsourcing
and lean management OEMs sometimes do not need the space adjacent to the final
assembly track any longer and therefore offer part of their factory space to suppliers
(Jürgens, 2003). Condominium suppliers assemble their own modules inside the
assembly area, which are then fed into the assembly line using small buffer stocks, to
perform the final vehicle assembly. The VM owns the premises and leases out or rents
space to the suppliers (Morris et al., 2004). All vehicle final assembly work is done and
controlled by the VM itself. Although the suppliers are not responsible for fitting their
modules on the final assembly line, some of them employ a quality check person at the
IJOPM point of fit, indicating the need for seamless coordination of assembly tasks.
32,11 Condominium reduces transportation of the finished product from supplier production
to customer handover to a distance of “several metres”.
An example for a condominium is the Ford Industrial Complex at Camaçari, in the
state of Bahia in Brazil. At Camaçari, more than twenty suppliers operate right inside the
Ford complex, in many cases producing components and modules alongside Ford’s main
1296 production line. In 2004, the so-called Amazon project employed around 7,750, of whom
44 per cent are just on Ford’s payroll. At Ford’s Camaçari plant suppliers paid around
40 per cent of a total investment of US$ 1.9 billion (Sako, 2006). Skoda’s plant in Mladá
Boleslav (Czech Republic) and Nissan’s European assembly plant in Sunderland (UK)
had also played an important pioneering role in in-house-supplier assembly ( Jürgens,
2003). In all condominia cases availability of floor space adjacent to assembly line is the
key criterion rather than national or corporate strategies. Historically grown assembly
line structures and the implementation of lean principles to improve space utilisation
determine the use of a condominium. Usually VM plants, especially brown-field sites
lack enough adjacent free floor space to install an in-house-supplier assembly.

Supply centre
Supply centres are characterised by co-located suppliers situated on the production site
close to the assembly hall of the VM. Buildings and equipment are either fully invested
by the VM (e.g. BMW Leipzig) or partially invested by the VM and logistics service
provider (e.g. VW Hannover). In the former case the VM makes its on-site infrastructure
available to its suppliers. All suppliers and logistics service providers are just tenants on
location, so there is still enough flexibility for the VM to change partners. The proximity
of suppliers enables a late module configuration in the supply centre with a smooth
material flow. The stable material flow, with concentrated suppliers in a short distance
on site, favours the automation for line side delivery. So, BMW Leipzig, for instance, uses
an electrical conveyor system to connect external and internal suppliers between the
on-site supply centre and the final assembly line.

Adjacent and regional supplier park

During the 1990s most VMs implemented, or were in the process of implementing, some
kind of supplier park initiative. The supplier park model is the most widely followed
integration type in Europe and Latin America (54 per cent of our sample). Those in
Europe are commonly attached to brown-field sites such as at Audi at Ingolstadt and
Jaguar at Halewood. More recently, the Big Three have opened up supplier parks at some
of their brown-field plants in the USA – like Ford in 2004 – which opened its first
supplier park adjacent to the Chicago assembly plant (Jürgens, 2003).
In order to reap the benefits of proximity with their major tier-1 suppliers, many VMs
have made arrangements with the local authorities to create supplier parks adjacent to or
at least nearby their productions sites. Often the infrastructure investments are carried
jointly between investor groups and the local community (Jürgens, 2003). A supplier
park is a cluster of suppliers located outside but in proximity to the site of final product
assembly. Typical activities carried out by supplier parks include warehousing and
inventory management, sequencing, manual assembly and late configuration. The
extent of the operations managed by the suppliers is dependent on the complexity
of the module, sub-module or component supplied (Mondragon et al., 2006).
The suppliers maintain either full manufacturing operations or just low value-adding Logistics
tasks like pre-assembly with late configuration and feed parts to the line on a demand led supplier
basis, and often at very short notice. Supplier parks are also represented by suppliers of
commodity components, parts that are bulky, and high variety parts that can be integration
late-configured just before delivery to the vehicle assembly line (Miemczyk and Howard,
2008). More and more logistics service providers are integrated and offer a range of
services, such as light assembly and sequencing, to firms that do not maintain local 1297
manufacturing operations (Reichhart and Holweg, 2008). Adjacent supplier parks are
linked with conveyor belts, tunnels or bridges with the final assembly track of the VM.
By contrast, regional supplier parks deliver over longer distances by truck.

Automotive supplier community

The looser type of logistics integration is the automotive supplier community. This is a
dedicated co-location of suppliers in the region of dedicated VMs. The suppliers inside
the automotive supplier community are likely to perform different activities, scattered
along the value-adding spectrum form sequencing to own manufacturing and assembly.
The big difference to all the other integrations types is that deliveries are made to more
than one vehicle assembly plant. Such a scenario can occur if different VMs are locally
concentrated or a VM has more than one assembly plant within relatively short
distances and would like key suppliers to locate in a dedicated area close to all of those
assembly plants (Reichhart and Holweg, 2008).
An example for supply of more assembly plants of the same VM is the BMW
Innovation Estate in Wackersdorf where several external and internal suppliers provide
the BMW plant in Regensburg (distance 50 km) and Dingolfing (distance 130 km).
A worldwide unique example for an automotive supplier community where more than one
VM is supplied is the automotive supplier park Rosslyn in South Africa. The supplier park
is based close to the production facilities of Tata (0.5 km), Nissan/Renault (1.3 km), BMW
(3.3 km) and Ford/Mazda (35 km). In the automotive supplier park Rosslyn are 14 suppliers
with more than 4,400 employees based, which supply six different VMs (Tata, Nissan,
Renault, BMW, Ford, Mazda) and further national and international customers.
Automotive supplier communities seem to be the exception rather than the rule. The BMW
Wackersdorf example is based more on a political decision than on logistics needs.
Whereas the automotive supplier park in Rosslyn South Africa is linked to the long-range
distance suppliers. Consolidation of long-distant materials supply and the need to
cooperate in competitive markets with an African infrastructure were the main reasons for
implementation.
Table II summarises the main features of the above discussed logistics supplier
integration types.

5. Conclusions
This paper has reviewed the academic literature on the logistics supplier integration of
proximate suppliers. The main findings of our research are summarised in five
conditions which characterise logistics supplier integration in the automotive industry.
These conditions vary significantly between local dedicated supply as discussed in this
paper and the traditional supply, which is distant and scattered around suppliers.
These main conditions are “geographical proximity”, “delivery contents, volume and
sequence”, “shared investment and asset specificity”, “information sharing and
IJOPM
Full Partial Adjacent Regional Automotive
32,11 Integration modular modular Condo- Supply supplier supplier supplier
type consortium consortium minimum centre park park community

Supplier Positioned Positioned Positioned On the Off but Based in Based in

distance to on the final on the final at the production very close the the
1298 final assembly assembly final site close to the production production
assembly track track assembly to the production site region site region
track track assembly site
hall
Assembly Tier-1 VM/tier-1 VM VM VM VM VM
work in supplier supplier
the main
assembly
track
Number of One One One One One One More than
supplied one
OEMs or
OEM
Table II. plants
Supplier integration Site owner VM VM VM VM/LSP Investor/ Investor/ Investor/
typology community community community

information technology system integration” as well as “transport system”. Although all

of the five conditions were considered relevant for the description of existing integration
forms, only the “geographical proximity” dimension is emerged as most suited for a
formal typology. This framework was used to propose a structured definition for
different integration types of proximate suppliers. The typology of logistics supplier
integration in the automotive industry consists of seven different integration types: full
modular consortium, partial modular consortium, condominium, supply centre, adjacent
supplier park, regional supplier park and automotive supplier community. The
proposed conditions for logistics supplier integration as well as the proposed seven
different types of integration lead to a number of theoretical and practical implications.
From the research side the classification system provides a theoretical foundation for
the future study of respective entities and their morphological differences. Our research
supports the academic study of cross-company and inter-organisational supplier
integration by providing consistent criteria for cross-site comparisons. A holistic and
consistent understanding of different logistics integration types will be necessary,
which will help in evaluating the actual integration forms. Our study set a spatial
boundary condition, which allows clustering different forms of logistics supplier
integration in the automotive industry and puts forward structured definitions for the
future study of this phenomenon. This research supports the evidence that it is modular
supply that is one of the major motivations behind the organisational and locational
logic of logistics supplier integration. The shift in the automotive value chain by a
modular car architecture combined with outsourcing the production of those modules to
proximate suppliers will be a critical issue when searching for a suitable theoretical
framework for logistical supplier integration.
In terms of practical implications, this study represents a template to companies that are
currently considering the establishment of co-located suppliers, by giving categorisation
and comparison of existing logistics integration forms of proximate supply. Furthermore, Logistics
existing integration forms can be analysed and better distinguished by the use of polarity supplier
profiles. The proposed categorisation of logistics supplier integration conditions, like
shown in Figure 2, allows creating and comparing polarity profiles of specific empirical integration
case in the automotive industry. The automotive industry plays a leading role in the
implementation of new strategies for supplier restructuring, and thus provide the most
extensive example of the spatial aspects of logistics supplier integration (Larsson, 1999). 1299
Considering the reduced number of cases investigated in our study, we found that supply
centres and adjacent supplier parks are the preferred standard integration forms of
proximate supply. This shows that the closest logistical relations in the modular consortia
and condominia cases, as well as the looser type of logistical integration of regional
supplier parks and automotive supplier communities, can be seen as special and therefore
more exotic forms of supplier integration. Future research is encouraged to test our
findings by applying them to additional integration cases.
Our research was mainly driven by structural and operational aspects. We did not
investigate the behaviour of decision makers in the planning and management process,
which led to specific integration forms between supplier and vehicle assembler. Existing
logistics operations are based on human behaviour in firms and therefore our research
provides only a part of the answer to why the spatial landscape of automotive supplier
integration looks the way it does. Further research into the planning and management
process behind the creation of different forms of logistical supplier integration will
provide a holistic and consistent understanding of different integration types, especially
concerning its geographical and temporal differences and changes.
A major issue of our proposed integration model will be the extension of existing
theories of inter-firm relations. We argue that by adding a spatial dimension to inter-firm
relations the notion of firm boundaries has to be transformed. The highest logistics
integration forms, based on the consortium, condominium and supply centre cases, where
suppliers are located directly on the VM site, lead to an integration of assets in time and
space. Efficiency considerations explaining firm boundaries originated with the famous
essay by Coase (1937) have to be reconsidered while responsibilities and performances are
becoming more amalgamated. Asset ownership is concentrated but fragmented between
supplier and VM. Locating suppliers on-site combines vertical integration of material
flows and vertical disintegration of ownership. The prevalence of on-site suppliers in the
automotive industry suggests that the organisational boundaries of the firm are becoming
blurred (Santos and Eisenhardt, 2005). Unified asset ownership is not now the confinement
for a firm. Conjoint manufacturing and logistics operations physically concentrated in one
site create a collective identity with new tasks, which can be better related to a novel notion
of the firm. Whilst proximity is a necessary condition, the joint operations, decisions and
performances determine the sufficient condition for defining firm boundaries. To make
this framework of use it is necessary to analyse manufacturing and logistics operations in
detail. Hence, additional research is required to investigate the relationship between
operational processes and spatial layout in the context of the proposed logistics supplier
integration model. An explanation of changing firm boundaries, which is still amiss, has to
reconcile theoretical aspects, such as the resource-based and relational view, with aspects
of operations management and logistics. Sequential synchronous deliveries with
minimum inventory, high delivery frequency and small lots and reliable deliveries have
been the basic rational behind the operational aspects to proximate supply in the
IJOPM automotive industry (Gullander and Larsson, 2000). Hence it is necessary for future work
32,11 to delve deeper into the operations management context of proximate supply determined
by the individual goals of VMs and their suppliers.

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Further reading
Saunders, M., Lewis, P. and Thornhill, A. (2009), Research Methods for Business Students, 5th ed.,
Prentice-Hall, Harlow.

About the authors

David Bennett is a Senior Lecturer and Programme Leader for the MSc Global Logistics and Supply
Chain Management Programme at Newcastle Business School, Northumbria University, Newcastle
upon Tyne, UK. He holds a PhD in Supply Chain Management and also an MA (distinction) in
Management Studies from Northumbria University. Beginning as a Technical Apprentice in the UK
automotive industry, he progressed into engineering design/development and on to project and
programme management positions working for British, French, North American and Japanese
manufacturing organizations, predominantly with Tier 1 suppliers to major international vehicle
manufacturers for over 30 years, before turning to academia. His research focuses on automotive
supply chain management and supplier integration. He regularly presents at international
conferences, with a number of conference and journal articles published. David Bennett is the
corresponding author and can be contacted at: d.bennett@northumbria.ac.uk
Florian Klug is Professor of Logistics in the Department of Business Administration at the
University of Applied Sciences, Munich. He holds a PhD in Operations Management from
the Johannes Kepler University Linz, and received his degree in Business Administration from
the University of Passau. Following a number of years in international consultancy, he moved
into logistics management at Audi in Ingolstadt. His research focuses on logistics planning in the
automotive industry, logistics supplier integration, lean logistics and non-linear dynamics in
supply chains. He regularly presents his work at international conferences in Europe and has
published more than 30 articles in the field of logistics management.

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