Abstract
One of the biggest challenges for Original Equipment
Manufacturers (OEM) today is to build and manage their
global networks. There will be production in
industrialized countries also in the future, but more and
more goods are produced closer to the developing end
customers. Academics have, for decades, argued that in
industrialized countries companies should move into high
value adding activities (Skinner 1974, Ferdows 1997,
Pavitt 2002). Pavitt (2002) suggests that R&D services
could be one of the primary sources of competitive
advantage in highly industrialized countries. Empirical
observations regarding company strategies also point the
same. A recent study that focused on activities
off-shored from Finland pointed out that R&D is still
located mainly close to the company head quarters and not
in LC (low cost) countries close to the end customer
(Ali-Yrkkö 2006).
These changes and trends raise the research question of
this paper: Could there be potential for certain supplier
companies to specialize into prototype production? This
paper will discuss how a traditional serial production
supplier company could specialize into prototype
production and what could be the role of a prototype
supplier in an industrial network. We conducted a case
study regarding one global equipment manufacturer and its
supplier network. We analyzed the research question from
both the OEM's and the supplier's point of view.
For the case OEM, a specialized prototype supplier means
separating different manufacturing processes in the
manufacturing network (Figure 1). The primary drivers for
process separation are increased manufacturing volumes
and assembling serial products in production line.
Separating the processes to different suppliers would
support OEM to separate R&D and production
geographically. In the geographical areas that are not
involved in R&D activities, suppliers could specialize
into serial production and at the one area where R&D is
located suppliers could transform their resources towards
new product development.
Figure 1: Separating different manufacturing processes in
the manufacturing network
Could prototype manufacturing be then good business for
supplier? So far prototype manufacturing has been an
underpaid task that suppliers have done pretty much in
order to get the serial production orders. If there were
specialized prototype suppliers, the case OEM should
commit to compensate enough for prototype parts and
concepts. The logic of this change is to pay more for the
high value adding prototype parts and less for the serial
product parts and get the cost benefits in the long run
through increasing serial production volumes. To
specialize fully just into prototype parts would need
several customers to keep costs moderate. In such
geographical areas where many big OEMs have product
development activities this kind of prototype supplier
service could be in great demand.
Depending on the resources of the supplier, prototype
manufacturing could mean developing the product with the
customer, manufacturing the prototype parts, optimizing
manufacturability and conceptualize the manufacturing
process for fast ramp-up in serial production unit. This
paper contributes to earlier literature by introducing a
set of attributes that affect the circumstances in which
these processes could be separated. This distribution of
work in the supplier network is possible but needs
long-term commitment from both the OEM and the supplier
company.
Original language | English |
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Publication status | Published - 2008 |
MoE publication type | Not Eligible |
Event | 15th International Product Development Management Conference - Hamburg, Germany Duration: 29 Jun 2008 → 1 Jul 2008 |
Conference
Conference | 15th International Product Development Management Conference |
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Country/Territory | Germany |
City | Hamburg |
Period | 29/06/08 → 1/07/08 |