Proximity Matters? Geographical aspects of changing strategies in automotive subcontracting relationships:the case of domestic suppliers to Volvo Troslanda assembly plant

Abstract: This study analyses the significance of geographical proximity in the restructuring process of a domestic subcontractor system in the Swedish automotive industry, using the Volvo Torslanda assembly plant as a case. The focus is on: i) the organisation of buyer-subcontractor relationships, ii) time-related delivery strategies, iii) the significance of geographical proximity. The findings provide an empirical contribution to the general understanding of the geographical buyer- subcontractor relationships in the automotive industry. The case covers the development of the domestic subcontractor system in the 1990s and is subdivided into three parts: i) the 40 most important domestic subcontractors in 1996/97, ii) the development of the Arendal supplier-park project 1997-1998, and iii) an analysis of Hydro- Raufoss Automotive Plastics AB, a Norwegian subcontractor, 1993-1998. Up until 1996/97 geographical proximity played a marginal role in the organisation of domestic subcontracting. The system was in the initial stage of an organisational restructuring, showing the first signs of an emerging subcontractor hierarchy. The average delivery frequency increased from weekly to daily deliveries during the 1990s, facilitated by a good infrastructure. Proximity became an important strategic factor with the development of the S80-model, launched in 1998. The main reason was the accelerating use of sequential production on the Volvo assembly line, which directly integrated the production processes of Volvo and its subcontractors. To better respond to the tight time schedule, a number of subcontractors established operations in the new Volvo-led supplier-park, five minutes from the assembly plant. In the introductory phase, there were no explicit plans for subcontractor co-operation. Instead, the park served as a Odelivery-pointO where incoming components were sorted in sequence and delivered to Volvo on an hourly basis. An exception to this was Hydro-Raufoss, which had developed from a delivery-warehouse into a complete production unit. The launch of new models offers an opportunity to implement structural changes in the subcontractor system. Whether the recent change in VolvoOs ownership will also have a bearing on this is, however, a moot point.