Key factors required to be classified as a world-class supplier from a South African automotive industry perspective

• Main Author: Cook, Gavin Trevor
• Format: Others
• Language: English
• Published: Nelson Mandela Metropolitan University 2009
• Subjects: Automobile industry and trade > South Africa
• Online Access: http://hdl.handle.net/10948/935

Over and above the fact that South African automotive business firms do not have the advantages of a major domestic market and are far removed from the major world markets, they face the challenges of operating in a tough and ever-changing environment. This environment is characterised by a global recession, aggressive global competition, high inflation and more demanding customers. To overcome these obstacles and to ensure their continuous success and existence, these domestic firms need to create a competitive advantage. The establishment of such a competitive advantage is dependent on a number of factors which mainly include sourcing from a world-class supplier base in terms of price, quality and service delivery. The main objective and central theme of this study is to determine the factors that are required by a supplier in the South African automotive industry to be classified as a world-class supplier. In support of the main objective, it was necessary to source the reasons why a firm would find it important to trade with a world-class supplier base, and to determine whether the current levels of supplier performance as experienced by buying firms in the Eastern Cape automotive industry, could be regarded as world-class. Furthermore, the study set out to determine the consequences to customer firms of inferior supplier performance, as well as the actions currently taken and support programmes in place to bring suppliers in line with world-class standards. As a starting point to the study, a literature review was undertaken which revealed the definite interdependence between a business firm and the environment in which it operates. The review underlined the need for environmental scanning as a means to proactively manage the impact of environmental changes on a firm. Porter’s value chain and business process re-engineering, as discussed in the study, are also perceived as means to manage environmental changes. The literature study further revealed some of the latest business trends followed by automotive business firms, as well as the expected supplier buy-in to ensure success. A statistical analysis on the quantitative data gathered, grouped specific items (questions) that relate to the study’s main objective with three respective individual supplier performance areas. A confirmatory factor analysis which focused on the three factors, namely quality, pricing and service delivery was carried out to assess the validity of the questions used for gathering the research data. The Cronbach Alphas determined for the three factors portrayed the reliability of the research instrument as acceptable. The empirical study revealed a few main factors that automotive business firms strongly perceive as being key to the establishment of a world-class supplier base. These factors are: a culture of continuous improvement; consistently meeting delivery deadlines by being able to respond to customer schedule changes; quoting fair prices and having respect for business ethics; as well as the consistent application of a quality policy which leads to conformance to specifications and subsequent high levels of product reliability. The empirical study also identified the following benefits enjoyed by customer business firms when trading with a world-class supplier base: Firms are able to be more flexible to customer schedule changes; they receive products that meet specifications; and they are able to operate at lower costs. The empirical findings with regard to the current level of supplier performance in the Eastern Cape Province automotive industry highlighted mainly three problem areas. These are late deliveries; the inability of suppliers to respond to customer schedule changes; as well as a lack of continuous improvement. Late deliveries which lead to production stoppages, with its resultant high costs, as well as the receipt of below-par quality products, were revealed as the main consequences when dealing with suppliers whose performance are not world-class. The main actions taken and programmes or incentives offered by automotive business firms to bring inferior suppliers more in line with world-class performance, include the rewarding of good suppliers by granting them more business; applying formal supplier performance evaluations; and having regular supplier audits.