Nested patterns in large-scale automotive supply networks

We draw on the network theoretic analysis of two large-scale empirical datasets describing the Toyota Motor Company and the Ford Motor Group to show that macroscopic production characteristics of supply networks are neither randomly assembled nor purely hierarchical, but are highly nested. A nested pattern means that suppliers produce proper subsets of what other suppliers produce, and niche products are produced only by those firms that already have highly diversified product portfolios. Preliminary examination hints that the pattern may be caused by large, older firms choosing to add new, unique products into their portfolio along a growth process, whilst small, young specialists produce only standard technologies. Nested networks are more robust than non-nested networks as suppliers that fail can be substituted - but on a strategic level, nestedness also means that small suppliers face more competition as their production capabilities are redundant. This gives large, diversified companies the advantage of niche production as well as operational efficiency advantages resulting from their size and large breadth of operations, possibly resulting in exponential growth.