"The importance of collaborative frontloading in

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Journal of Manufacturing Technology Management

Mario Binder, Peter Gust and Ben Clegg

The importance of collaborative frontloading in automotive supply networks Mario Binder Automotive Business Unit, ZLU – Zentrum für Logistik und Unternehmensplanung GmbH, Berlin, Germany and Operations and Information Management Group, Aston Business School, Aston University, Birmingham, UK Peter Gust Engineering and Design Group, Department of Mechanical Engineering and Production, Hamburg University of Applied Sciences, Hamburg, Germany Ben Clegg Operations and Information Management Group, Aston Business School, Aston University, Birmingham, UK Abstract Purpose – The purpose of this paper is to investigate how research and development (R&D) collaboration takes place for complex new products in the automotive sector. The research aims to give guidelines to increase the effectiveness of such collaborations. Design/methodology/approach – The methodology used to investigate this issue was grounded theory. The empirical data were collected through a mixture of interviews and questionnaires. The resulting inducted conceptual models were subsequently validated in industrial workshops. Findings – The findings show that frontloading of the collaborative members was a major issue in managing successful R&D collaborations. Research limitations/implications – The limitation of this research is that it is only based in the German automotive industry. Practical implications – Practical implications have come out of this research. Models and guidelines are given to help make a success of collaborative projects and their potential impacts on time, cost and quality metrics. Originality/value – Frontloading is not often studied in a collaborative manner; it is normally studied within just one organisation. This study has novel value because it has involved a number of different members throughout the supplier network. Keywords Research and development, Automotive industry, Supplier relations, New products Paper type Research paper

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The authors wish to thank all of the German automotive companies for participating in the interviews, validation questionnaire and workshops essential for this research. For reasons of confidentiality individual firms and people remain anonymous.

Introduction After Fordism and Toyotism the automotive industry is facing its third revolution (Jürgens, 2004; Voss, 1995), driven by a fundamental rethinking of current business strategies and industrial models. It is characterised by moving away from the traditional adversarial and contractual model towards a partnership and relational model between all players in the industrial landscape. It can be argued that this time Europe (and especially Germany) takes the lead within the triad (U.S., Japan, Europe) based on the restructuring of its automotive industry that began in the 1990s: “If the future lies in the increased specialisation of [and collaboration between] actors in the value chain, the European automotive industry seems to be specifically well positioned in terms of structures and capabilities” (Jürgens, 2004, p. 132). Recent developments in automotive product lifecycle practice contrast to the past. Earlier research identified the product research and development (R&D) per se as the most critical area that facilitated a company’s competitive advantage (Cooper and Kleinschmidt, 1994; Harmsen et al., 2000). However, more recently research has began to emphasise the benefits of inter-organisational collaboration to encourage the innovative competitiveness of firms (Doz and Hamel, 1998; Dyer, 2000; Blomqvist et al., 2004; de Man and Duysters, 2005). Nevertheless, Petersen et al. (2003) stress the fact that despite these emerging studies, models, frameworks and guidelines to encourage collaborative competitiveness of firms are sparse. This is especially true for early stages of collaboration (Kelly et al., 2002). Also, most of these studies have focused on the individual company as unit of analysis and ignore the supply network as a whole. This paper seeks to extend previous research (Binder and Clegg, 2007) by proposing a collaborative approach for improving the competitiveness of inter-firm R&D collaboration by integrating suppliers earlier in the product development process. It takes a holistic perspective of the whole supply network to explore collaborative frontloading. It is based on existing theoretical perspectives and new empirical insight from the German automotive industry.

Background Over time, two contrasting models for characterising the relationships between buyers and suppliers in the automotive industry have emerged: the contractual and the relational model. The contractual model is characterised by adversarial relationships that aim at maximising ones own power position; the relational model involves high levels of collaboration and information exchange between the partners. Firms in the Western automotive industry (particularly U.S. based firms) have traditionally been located within the contractual model, whilst Japanese companies have been more closely related to the relational model (Dyer et al., 1998; Singh et al., 2005). However, this ignores hybrid models which suggest that the „European model“ is moving towards partnerships in the automotive industry. Three different generic approaches towards can be identified as shown in Table 1. However, the boundaries between these distinct models are becoming increasingly blurred. For example, due to years of recession the Japanese keiretsu seem to give way to more competition in their relationships (Lamming, 2000; Zirpoli and Caputo, 2002). Moreover, each of these models has to be considered as a continuum of approaches and strategies. Whereas, for example, German volume manufacturers such as Volkswagen or Opel (GM) are closer to the US-European interface, premium manufacturers such as BMW and

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Porsche are closer to the Japanese-European interface. Original Equipment Manufacturers (OEMs) such as AUDI and DaimlerChrysler (DC) seem to be more centred within the hybrid European model. Similar results are revealed by Zirpoli and Caputo (2002) for the Italian automotive industry. Nevertheless, the necessity for more effective and efficient collaboration within the context of these models is postulated more than ever, especially in the areas of R&D, product development and innovation (Calabrese, 2001). Factor

U.S. adversarial model

European premium model

Japanese model

Sourcing strategy

Parallel sourcing with multiple partners Traditional commodity purchasing (contractual)

Dual / single sourcing Towards strategic sourcing

Sole / single sourcing Strategic sourcing (partnership)

Contracting

Short-term contracts Less formalised (flexible) Price focused

Towards longer-term contracts Less formalised based on Service Level Agreements Technology and innovation focused for critical components, price focused for standard parts

Long-term contracts Formalised (fixed) Quality and delivery focused

Supplier involvement

Low supplier involvement Constant search for new suppliers Involving suppliers as late as possible

High involvement of system and module suppliers Basic supply base and variation for peak volumes Increasingly involving suppliers at early product development stages

High supplier involvement Suppliers chosen for vehicle life time Involving suppliers as early as possible

Supplier management

Arms length relationship Single functional interface (sales to purchasing) Self-centred focus on own manufacturing lines

Increasingly relational model Multiple functional interfaces Mainly self-centred with focus on some big system suppliers

Intensive sharing of technical and cost information Frequent and planned communication Joint product specification

R&D collaboration

Minimal sharing of technical and cost information Sporadic and problem driven communication OEM determines product specifications

Intensive sharing of technical know how but little cost information Mainly problem driven communication Joint product specification for parts with critical supplier know how

Intensive sharing of technical and cost information Frequent and planned communication Joint product specification

Table I. Comparison between USA, European and Japanese governance models

Inter-firm R&D collaboration can be aligned with several different theoretical concepts emerging from an inter-disciplinary body of knowledge that combine endogenous (inside-out) and exogenous (outside-in) perspectives of the firm (De Toni and Tonchia, 2003). A basic explanation of buyer-supplier relationships is given by Coase’s (1937) and Williamson’s (1975) concept of transaction cost economics which argues to align transactions with governance structures in a transaction cost economising way. However, this fails to consider situations in which suppliers are seen as partners in a joint strategic relationship which goes beyond the mere contractual situation to other issues such as developing a competence network (Cousins and Crone, 2003). Looking at the competence or resource base of a firm implies focusing on the internal organisation

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and structure to understand the competitive advantage of firms, as suggested by the resource-based view (Wernerfelt, 1984). This recognition, married with the idea that a firm’s competitiveness derives from the ability to build and maintain competencies at lower costs more quickly than competitors is partly explained by competence theory (Prahalad and Hamel, 1990). However, endogenous theory should be complemented by relational theory as organisations should invest to ensure that both parties create joint value, in the form of relational rents (Dyer and Singh, 1998). Organisational design theory also proposes that firms may place competence based issues in front of organisational economics when deciding to engage in inter-firm collaboration (Combs and Ketchen, 1999). The combination of exogenous and endogenous factors is characteristic of a contingent approach adopted by some successful organisations (Watson, 2003; Osborn and Hagedoorn, 1997). However, frameworks and guidelines on how and why to integrate suppliers earlier in the R&D process in order to improve the competitiveness of the whole supply network are currently absent from the literature. To address this deficiency, a collaborative frontloading approach based on empirical observations from the German automotive industry is proposed in this paper.

Methodology The facts presented in this paper are part of a wider recently finished research project on inter-firm collaboration in the German automotive industry. Considering the nature of this exploratory study, the research has followed an inductive approach based on Grounded Theory (Glaser and Strauss, 1967). Two distinct empirical phases were employed: collection and analysis of data via semi-structured interviews, and empirical validation of findings through questionnaire survey. In this study, 28 semi-structured interviews were conducted involving 31 experienced managers in the German automotive industry covering 16 companies (four OEMs and 12 supplier firms) from December 2004 until March 2005. Interviews were conducted within companies that reflect different roles within automotive supply networks (Pettigrew, 1990; Eisenhardt, 1989; McIvor and Humphreys, 2004) such as: OEMs, systems suppliers, module suppliers, parts or components suppliers, and engineering service providers. Interviewees held middle and senior management positions in R&D, purchasing, quality assurance, logistics or marketing/sales. All of these functions are involved in inter-firm R&D collaboration between OEMs and their suppliers. An interview guide was derived from a literature review; it was used to structure the interviews (Bryman, 2004). Topics that were discussed included exogenous and endogenous aspects of collaboration between OEMs and their suppliers such as: • the company’s industrial and competitive environment; • the company’s value system and competence context; and • the basic collaboration issues between car manufacturers and suppliers in their inter-firm relationships. The interviews (each lasting between 1 and 2.5 hours) were conducted face-to-face, taped and transcribed, which ensures the reliability and traceability of the data (McCutcheon and Meredith, 1993). Each transcript was later validated by the respective interviewee to ensure the validity and reliability of the data. This feedback enabled corrections, clarifications and improvements to be made. The analysis of the data was done via computerised textual codification using the QSR NVIVO 2.0 TM software tool from June 2005 until November 2005. It was based on Strauss and Corbin’s (1990) hierarchical coding paradigm involving open, axial and selective coding steps. Following the open coding approach together with

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the constant comparison method of Grounded Theory 157 useful codes emerged that were subsequently condensed, aggregated, and clustered into 16 analytical categories (axial coding) leading to the formation of five abstract themes or core categories (selective coding). The findings were summarised by developing a set of 35 tentative propositions clustered around the five themes. These propositions have been validated in a questionnaire survey in the German automotive industry receiving 110 valid responses in a three month survey period starting December 2005. The responses came from 52 different companies with each respondent having an average of 11.27 years relevant working experience in the automotive industry. Each respondent was asked to assess the tentative propositions in two dimensions on a 5-point Likert scale: • Agreement (A). whether they agreed or disagreed with the proposition (strongly agree = 2, agree = 1, neutral = 0, disagree = -1, strongly disagree = -2). • Importance (I). the importance of the proposition for daily business activities (very high = 5, high = 4, medium = 3, low = 2, very low = 1). Based on the numerical codification of the dimensions the quantitative descriptive analysis of the data was conducted using the SPSS for Windows 13.0TM software tool to represent its basic characteristics (Blaikie, 2003). From the 35 propositions derived 10 can be directly related to the issue of collaborative frontloading. An overview of these propositions together with their calculated means for the two measured dimensions „Agreement“ (A) and „Importance“ (I) is given in Table 2, showing that respondents agreed with the proposition to a high degree and considered them to be important. No.

Proposition

Mean A

Mean I

1

Establishing inter-firm collaboration is an effective way of improving quality and innovation of products as well as reducing development lead-times and cost in a supply network

1.05

4.04

2

An inter-firm collaboration in the supply network needs to be formed on the basis of technical competencies and mutual exchange of knowledge

0.87

3.76

3

Competencies of separate organisations participating in a collaboration within the supply network need to be linked via cross-company project infrastructures

0.80

3.75

4

Early and intense integration of strategic collaborators facilitates the successful delivery of a project within the supply network

1.64

4.28

5

At early stages of the collaboration process technical and social rather than monetary aspects have to be measured and compared

1.06

4.13

6

The boundaries of responsibilities between collaborating parties need to be clearly defined to deliver a successful inter-firm project within the supply network

1.69

4.51

7

Strategic and long term thinking for the whole supply network increases the chance of successful inter-firm collaboration

1.42

4.19

8

Functional and short-term thinking within an organisation produces sub-optimisation for the supply network

0.96

3.71

9

There is the need for a coordinator and leader within the supply network that has the competence to evaluate and manage the interfaces

1.30

4.13

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No.

Proposition

Mean A

Mean I

10

The co-ordinator of the supply network should have its own core competencies and encourage those of other organisations to participate

1.37

4.08

Table II. Validated propositions related to Collaborative Frontloading, Note: N=110

Findings from a theoretical perspective Frontloading can be defined as „a strategy that seeks to improve development performance by shifting the identification and solving of [design] problems to earlier phases of a product development process” (Thomke and Fujimoto, 2000; p. 132). However, in addition to these authors, who focused on the early and quick solution of problems during the product development of a single company, the collaborative frontloading approach used in this study extends the idea to the inter-firm level of problem solving in co-development within inter-firm R&D relationships. In the following, each of the propositions shown in Table 2 above are discussed in more detail from their empirical perspective and are simultaneously contextualised with relevant theoretical perspectives from extant literature, which is an important feature of inductive grounded research (Eisenhardt, 1989). Empirical results of this research show that successful inter-firm R&D collaboration is an effective means to maintain and achieve competitiveness for the whole supply network via improvement of product quality and innovation as well as the reduction of development lead times and costs (proposition No. 1). This is widely accepted in the literature and has been proven in many studies and industries, and particularly so in the automotive industry (Caputo and Zirpoli, 2001; Dyer, 1996a and 1996b). Kanter (1994) uses the term ‘collaborative advantage’ to describe this phenomenon and Dyer and Singh (1998) as well as Liker and Choi (2004) use Toyota and its keiretsu as an example in which buyer and suppliers prosper together. Results reveal that this can be achieved by the underlying know how sharing and simultaneous engineering process that facilitates the improvement of competencies and hence the management of the interfaces between the partners in the project (propositions Nos. 2 and 3) making good collaboration practice an „important element for business success” (General Manager Mechatronic Drives, Module Supplier). Similarly, existing literature (Lang et al., 2002; Petersen et al., 2003) argues that the core of successful supplier integration in R&D and product development is the transfer and application of technological knowledge because collaboration is a team effort and often a task can only be achieved when the collective resources and expertise are assembled (proposition No. 2). However, due to the complexity of the knowledge to be conveyed these innovation networks need infrastructural and organisational tools to support cross-company coordination and to regulate the collaborative activities within the relationship (proposition No. 3) (Cigolini et al., 2004). Thereby, Wagner and Hoegl (2006) claim that a focus on the project level is a necessary departure from supplier involvement on the inter-organisational relationship level stressing the criticality of supplier involvement on the project level. Moreover, this research shows strong support for an intense integration of strategic partners early in the inter-firm R&D and development projects to facilitate the successful delivery of these projects in terms of quality, development time, and cost (propositions Nos. 1 and 4). This is due to more ownership and willingness to take risk within the inter-firm project by the collaborating partners. Those suppliers that are involved and engaged early in repeat long-term business with the OEM will be able and willing to invest in their people, facilities, equipment and infrastructure “knowing that their own success and the success of the OEM are

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linked together” (Head of Department Body and Trim, OEM). It is similarly acknowledged in extant theory that early supplier involvement in product development projects has become an increasingly popular method for improving project effectiveness and efficiency, i.e. reduced development cost and lead time, improved product quality, easier and earlier access to innovative technologies, and reduced opportunistic behaviour of the suppliers (Primo and Amundson, 2002). Dyer (1996b, p. 51) subsumes this discussion under the banner of „presourcing“: Presourcing means choosing suppliers early in the vehicle’s concept-development stage and giving them significant, if not total, responsibility for designing a given component or system. This research also observes that an evaluation of technical rather than monetary competence aspects of the suppliers is necessary to achieve this early integration and collaboration successfully (proposition No. 5). This is a rather underdeveloped issue in the extant literature. Only Chen and Chen (2006) recently argue that quality is the fundamental factor for supplier evaluation among various criteria because the quality of the parts obtained from the suppliers determines the quality of the end product. However, Liker et al. (1996) in their research on the automotive industry found that often buyers’ R&D staff were not competent enough in the technology provided by the suppliers and could not evaluate it properly. It is essential that a car manufacturer leading a supply base needs capabilities and competencies to evaluate and coordinate the interfaces between partners in inter-firm R&D projects (proposition No. 9) becuase they are a critical source of competitive advantage. Baldwin and Clark (1997) and Noori and Lee (2004) claim that increasing modularisation of products makes this even more necessary. OEMs must rethink the form of their external connections; they must assess the trade-offs between improving internal skills and accessing superior external capabilities through collaboration with partners that may offer the same competencies to competitors (proposition No. 10). In other words, the challenge is to maintain open knowledge exchange by securing, preserving and leveraging the unique competencies of the partners whilst controlling a sufficient level of technological knowledge to avoid complete dependency on the partners (Takeishi, 2001). Karlsson (2003) refers to this as „feature engineering“ which involves the development of the total product concept, its functions and characteristics internally, and the „specialised engineering“ of parts, components and modules externally. In order to yield desired outcomes in such a situation Johnsen and Ford (2005) call for supply network leadership rather than supply chain control. Potential barriers to „pre-sourcing“ are closed-thinking within creative design circles (McIvor and Humphreys, 2004) caused by design departments being orientated around components rather than total solutions (Henke, 2000) (proposition No. 8). Encouraging early and intense supplier involvement and facilitating successful collaboration were identified as the factors that could alleviate these (proposition No. 7). It was also necessary to have clear roles and responsibilities for each partner (proposition No. 6) by having a strategy that reached beyond the boundary of a single company and focused more upon inter-firm relationships within an extending enterprise (Boardman and Clegg, 2001; Afuah, 2000; Garel and Midler, 2001)). This is however difficult to achieve and often leads to confusion and conflicts about who is responsible for what activities in the R&D process (Kelly et al., 2002). The above rationale is shown in Figure 1 (the numbers related to the propositions as defined in Table II).

Putting collaborative frontloading into practice During a focus group session (conducted in July 2006) the basics of collaborative frontloading (Table II and Figure 1) were presented to the six senior managers (the discussion lasted for 3 hours, was recorded, tran-

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Figure 1. Conceptual model for collaborative frontloading

scribed and validated (Corbett and Van Wassenhove, 1993)). Overall the general opinions of these industrial experts was that despite all good intentions R&D practice was still predominantly adversarial and focused upon traditional metrics such as time, cost and quality. It was felt that collaborative front-loading should be practiced and have an affect as sketched out in Figure 2. The horizontal axis shows the number of months remaining before Start of Production (SOP). The vertical axis describes the percentage of project completion, quality as the percentage of problems / defects occurring, and cost as the percentage of total target cost. Figure 2 shows that it is often necessary to make changes in the supply base. This may be due to inappropriate initial supplier selection criteria based on short-term thinking (e.g. initial acquisition cost rather than long-term total value creation, a late and insufficient involvement of suppliers in the development process, and a lack of open communication and information sharing) which can have a negative impact on the SOP deadline. Therefore, the later the changes take place the more severe the impact will be (symbolised by the length of the arrows in Figure 2). Furthermore, it became evident during the focus group session that the reasons for supplier switches change as the project moves along the development stages, „… during the early concept stages technology and innovation issues are drivers for supplier switches, in the later stages quality and time issues are more important” (Specialist Engineer Design Car Body, OEM). Paradoxically, this increases the dilemma of time delays, quality problems and cost increases. Although the ideals of frontloading were endorsed by the expert focus group many of the factors that would enable collaborative frontloading to flourish were still not being practiced. Therefore, the main purpose of this expert workshop was to identify ways to progress towards a more collaborative approach. A list of guidelines as seen below was put together.

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For OEMs • Commitment to suppliers. An early and long-term commitment (with a high chance of return business for suppliers over a vehicles’ lifetime) should be practiced allowing for long term planning by suppliers, which should in turn lead to higher commitment to achieve cost, quality and innovative targets: The supplier accepts the target price which the OEM has calculated in his cost estimation. Therefore, the supplier is involved from the beginning and affects the planning stability (R&D Director, Module Supplier). • Open book accounting. The target price of each product should include a mutually agreed profit margin for the suppliers that is assured and that is not affected by any re-negotiations for unplanned changes: Experience shows that our current approach is normally very expensive, because you have to re-negotiate for unplanned changes, eventually switch suppliers shortly before SOP, develop new tooling, change concepts, etc. This could be avoided with a more collaborative approach (Manager Project Integration, OEM). • Life cycle costing. OEMs should start to think strategically in terms of the whole life cycle costs of a product (including warranty cost) rather than just the short-term R&D costs upfront: We agree that errors occur early during the development stages and that if you work well at these stages you will get the benefit at the end. However, this is hard to measure and hence difficult to argue (R&D Director, Module supplier) • Open communication and information sharing. Design data in form of drawings and CAD data should be shared with the suppliers as well as time schedules for development and production processes, production volume data, etc. in order to allow the supplier to get a bigger picture of all the aspects involved and to be more adaptive to issues other than product development: In product development it is the question how to get the knowledge to the supplier. Thereby, trust as well as open and constant communication are the key factors to achieve this. Only then both parties will benefit (Specialist Engineer Design Car Body, OEM). • Leadership. OEMs should pursue the role of the leader and coordinator within inter-firm R&D projects with the final decision making authority. Therefore, they must increase the speed and quality of their decision making to ensure a more effective and efficient management: A critical aspect is the definition of boundaries of responsibilities and performances. Who does what and when and who is responsible for what. This is absolutely crucial. The network has to be built and integrated as early as possible (Project Manager, Engineering Service Provider). It is beneficial to have a competent OEM as partner because he can assess which supplier is competent and which not. This reduces effort for the suppliers because you can collaborate with the OEM on a much higher technical level instead of explaining everything in very much detail and underpinning it with relevant data (General Manager Customer Team, System Supplier).*

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Figure 2. The impact of collaborative frontloading on time, cost and quality

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• Balancing internal and external know how. Collaboration should be based on the exchange of technical know how. Therefore it is essential that the OEMs build up a sufficient level of product specific technical competencies to effectively manage the interfaces between the partners and their know-how effectively: In order to be able to evaluate and manage the interfaces of car components [e.g. doors] and modules and their related suppliers properly, you need to do it yourself from time to time. … It is common for the OEM to develop cars in certain segments itself which then serve as a reference for developing ones own competencies because even if we outsource more responsibilities to the suppliers, we need to make sure to keep the necessary know how for the overall car (General Manager, OEM). • Balanced supply base. For their sourcing strategies OEMs should take into consideration product attributes (e.g. complex system, standard commodity, innovative and differentiating product, etc.) as well as supplier attributes (e.g. R&D competence, high quality, low cost, etc.). Therefore, a multiplicity of sourcing criteria (e.g. technical, efficiency, social, etc.) could be applied when selecting an appropriate supplier for collaboration: For a long-term partnership it is important that you clearly define the component and its functionality. Then, you need to transfer this information to the supplier and integrate the appropriate supplier in the development of the detailed specification of the part (Manager Design Car Body, OEM). • Customer focus. OEMs should be aware of customer needs and requirements and simultaneously translate these into technical functionalities and specifications for the suppliers in order to develop innovative products. • Boundary spanning. The traditional role of purchasing should evolve into a more strategic sourcing function more able to achieve real cross-boundary collaboration but that has a dedicated alliance function acting as a „Ombudsman“ (Handfield and Bechtel, 2002) between OEM and suppliers. This does not have to be a single person but could involve an independent cross-functional and inter-firm NPD committee of OEM and suppliers: This means to apply a strategic sourcing and purchasing role by selecting a supplier at day one of a new project and then making the decision on this supplier even before we know the exact details, specifications and cost of the component. We will select the supplier based on its capability and competence and nominate him at day one as the partner for this vehicle which will comprise the development and the production (Head of Department Body and Trim, OEM).

For suppliers • Ownership. Suppliers should take more ownership in the product development and play a more active role during inter-firm R&D projects through investments in testing and tooling (customer-specific assets), active commitment towards quality goals, meeting negotiated requirements such as target price, etc.: In the context of competition, as a commodity supplier you try to differentiate yourself from competitors and thereby create more added value for the OEM. Hence, you become more and more integrated into the

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car; partly due to your own drive, but the OEM has seen advantages in this as well (Sales Director, System Supplier). In addition to the traditional R&D topics in the areas body, interior, powertrain, etc. we also developed the areas testing, prototyping and tooling. That way we tried to cover the whole process of car development, i.e. from concept design and definition of vehicles to the start of production (Managing Branch Director, Engineering Service Provider). • Offer exclusivity. In return for early and long-term commitment with potential return business from the OEM (see above) the supplier should offer the OEM exclusive rights to the innovation and not aim at standardising the deliverable amongst other OEMs: You will be more likely to invest into a new product line if you have an OEM in the background that wants to this with you (Group Leader Design, Systems Supplier).* • Organisational adaptation. Suppliers should adjust their organisational structures and processes to allow for increasing and changing product requirements particularly on a systems and module level: Via our key accounts we have built a bridge to ensure a know how transfer from our internal competence centres towards the OEMs, especially in R&D (General Manager Marketing and Sales, Module Supplier).* • Sub-supplier management. Inter-firm collaboration should be carried out at the more complex systems and module level. These suppliers (especially first tiers) do not often possess the competence for all sub-parts in-house and should develop skills (relationship-specific assets) for effectively and efficiently managing their sub-suppliers in accordance to the overall project requirements: … we transfer the quality requirements of the OEMs onto our sub-suppliers because only then the quality of the final product can be assured (Group Leader Design, Systems Supplier). • Information sharing. Suppliers should be more willing to share their information (especially cost information) with the OEMs in a transparent manner. • Total process partner. Suppliers should increase their efforts to identify future technological trends and developments (independent from the OEMs) based on end consumer desires and requirements: If you do not constantly develop further, i.e. if you do not deliver new ideas, knowledge, innovations or solutions, it is possible that you will be demoted to the 2nd tier level and have to supply your parts to a bigger system supplier on the 1st tier level (Sales Manager, Module Supplier). • Physical proximity. Local or regional presence and proximity to the OEM should be considered to facilitate face-to-face contact at critical phases of projects. Even though the terminology reflecting collaborative frontloading is commonly used in the German automotive industry, the underlying philosophy is not yet so (Binder and Gust, 2006). Therefore it will take both sides to overcome past bad experiences and move on in an unbiased and unprejudiced way (tabula rasa).

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Furthermore, the German automotive industry as a whole needs to focus on high technology and innovation rather than price dumping.

SUMMARY AND CONCLUSIONS This inductive research study has proposed a collaborative frontloading framework to improve the competitiveness of inter-firm R&D collaboration in automotive supply networks. It argues for a holistic and strategic view towards R&D projects through: • • • • •

an early and intense involvement of key suppliers; an open and intense sharing of know how between the project partners; a long-term orientation towards inter-firm R&D relationships; an involvement of multiple cross-functional interfaces and clearly defined responsibilities; and an existence of a competent leader within the supply network who manages the interfaces between the project partners.

The framework is based on a set of validated propositions that are grounded in new empirical insights from the German automotive industry. These propositions were confronted with extant literature and resulted in a model for collaborative frontloading which was validated through an expert focus group in form of an industrial workshop to investigate what the potential impacts might be on time, cost and quality metrics.

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Further reading Strauss, A.L. and Corbin, J. (1998), Basics of Qualitative Research: Grounded Theory Proceduresand Techniques, 2nd ed, Sage, Thousand Oaks, CA.

Corresponding author Mario Binder can be contacted at: [email protected] To purchase reprints of this article please e-mail: [email protected] Or visit our web site for further details: www.emeraldinsight.com/reprints

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