TRANSFORMING BUYER-SUPPLIER RELATIONS Also by Jonathan Morris FLEXIBLE FU1URES: Prospects for Employment and Organisation (edited with Paul Blyton) JAPAN AND THE GLOBAL ECONOMY (editor) TransforDling Buyer-Supplier Relations Japanese-Style Industrial Practices in a Western Context Jonathan Morris Lecturer in Organisational Behaviour Cardiff Business School and Rob Imrie Lecturer in the Department of Geography Royal Holloway and Bedford New College, University of London M e Jonathan Morris and Rob Imrie 1992 Softcover reprint of the hardcover 1st edition 1992 All rights reserved. No reproduction, copy or transmission of this publication may be made without written pennission. No paragraph of this publication may be reproduced, copied or transmitted save with written pennission or in accordance with the provisions of the Copyright Designs and Patents Act 1988, or under the tenns of any licence pennitting limited copying issued by the Copyright Licensing Agency, 90 Tottenham Court Road, London WIP 9HE. Any person who does any unauthorised act in relation to this publication may be liable to criminal prosecution and civil claims for damages. First published 1992 by MACMILLAN ACADEMIC AND PROFESSIONAL LTD Houndmills, Basingstoke, Hampshire RG21 2XS and London Companies and representatives throughout the world Copy-edited and typeset by Cairns Craig Editorial, Edinburgh ISBN 978-1-349-11202-9 ISBN 978-1-349-11200-5 (eBook) DOI 10.1007/978-1-349-11200-5 A catalogue record for this book is available from the British libraI)' Contents List of Tables vi List of Figures vii Acknowledgements viii 1 Buyer-Supplier Relations and Changes in Industrial Organization 1 2 Economic Change, Vertical Disintegration and Buyer-Supplier Relations: Some Theoretical Considerations 19 3 Vertical Disintegration and New Forms of Work Organization: a Review of Empirical Evidence 40 4 Nissan Motor Manufacturing UK: Best Practice Under Pressure 62 5 Lucas Girling: New Practices, Old Constraints 93 6 Sony UK: Supplier Development and the Cooperative Ethos 119 7 IBM UK: From Control to Collaboration? 143 8 Beyond Adversarialism: the Advent of New Supply Practices? 163 Bibliography 172 Index 185 v List of Tables 1.1 The UK's share in the volume of manufactured exports (per cent) 4 1.2 Britain's balance of trade in manufactures (SIC, divisions 5-8, £ millions) 4 1.3 Manufacturing investment in the UK economy, 1979-88 4 3.1 The proportion of production and service activities contracted out by the sample firms 43 3.2 Numbers of firms in the sample using new operating methods with their suppliers 44 4.1 Domestic production and distribution facilities of Nissan Motor Company Ltd 64 4.2 Key suppliers to Nissan Motor 68 4.3 Nissan overseas production facilities and output 69 4.4 Nissan Motor UK production levels 71 4.5 BEC based suppliers to Nissan 78-79 5.1 Major European automative components suppliers, 1988 96 5.2 Lucas sales (in £ millions) by division, 1982-1989 98 5.3 Lucas sales (in £ millions) by geographical division, 1982-89 98 5.4 Employment in Lucas Industries PLC, UK and Overseas, 1985-89 ('OOOs) 99 6.1 Sony's European manufacturing operations 123 6.2 Japanese owned electronics suppliers in the UK 130 7.1 Top ten data processors, 1988 145 7.2 Electronic contract manufacture in the USA 156 vi List of Figures 1.1 Traditional supply chain 8-9 1.2 Partnership supply chain 12-13 4.1 Supplier organizations to Toyota and Nissan 67 6.1 Sony's supplier policy 132 Vll Acknowledgements Although this book has been a collaborative effort, Rob Imrie is responsible for writing Chapters 1 to 3 and, substantially, Chapter 8, while Jonathan Morris wrote Chapters 4 to 7. We wish to acknowledge the Welsh Devel- opment Agency for funding the research and the companies for generously participating. We would also like to thank various colleagues at Cardiff for reading the manuscript and offering helpful suggestions. Included are Tod Rutherford, Pete Wells and Sarah Fielder. Finally we wish to thank Louise Jones for her part in the preparation of the manuscript. Vlll 1 Buyer-Supplier Relations and Changes in Industrial Organization 1 INTRODUCTION By the mid-1980s, many commentators on the British economy were in agreement that British industry was in the process of a series of major changes in managerial styles and strategies, industrial relations, and associated working practices. The Treasury's Economic Progress Report (1986) was typical in noting the Government's intent on encouraging the development of 'an enterprise culture and a more flexible and responsive economy'. This political agenda has incorporated a number of enabling measures, including the deregulation of private capital, the privatization of significant parts of the public sector, and the introduction of com- mercial criteria into residual state sector activities. These changes have occurred alongside a major restructuring of industrial production, work and employment, with the emergence of new forms of flexible economic and labour organization, characterized by a diverse range of new technologies, products, and services (Boyer, 1987; Jones, 1988; Martin, 1988; Wood, 1989). In particular, a major feature of contemporary industrial change is the restructuring of large corporations (Shutt and Whittington, 1984, Thrift, 1988). While the post-war trend of an increased scale of employment has been reversed, with average plant sizes diminishing, new firm formation rates have risen quickly and there has been a commensurate rise in the numbers of small businesses. These transformations are illustrative of wider changes in multinational corporations (MNCs), including a mixture of forward and backward disintegration, diversification into new product markets, and the development of a much more fluid set of intra-firm and interfirm organizational networks than has hitherto existed. A plethora of research indicates how MNCs are devising a whole host of new product and market strategies (Amin and Robbins, 1990; Castells, 1988; Dunning, 1986). This is occurring in the face of rising Research and Development (R & D) costs, rapidly changing and shortening product life cycles, greater 1