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Rajesh Nellore

DBA Graduate - 2000

Thesis title

The role of specifications and contracts in outsourced product development in the automotive industry
Much attention has been paid to relationships between supplier and buyer firms, especially in the field of product development and in particular in the automotive industry. There has been a growing debate about the need to increase the responsibilities for suppliers and attain a win–win relationship with them, instead of an adversarial relationship. Research has been extensive and dealt with issues such as the location of suppliers, just in time, tiering of suppliers, and so on, though little attention has been paid to the issue of specifications and contracts, which are an important part of the product development process. The specification flow between the buyer and suppliers is necessary to obtain the product. Specifications could be validated with the help of written contracts and thus can represent an important part of the contracts. The objective of the study is to understand the role of specifications and contracts in these companies and thus contribute to academic knowledge, as well as the understanding of practitioners. One automotive original equipment manufacturer (OEM) located in Europe provides the subject for a case study. An aircraft OEM, also located in Europe, supports supplementary data collection. In-depth interviews with five first-tier suppliers and an open-ended questionnaire survey (internal and external) provide complementary perspectives. The research is guided by a qualitative inductive approach, aimed at developing ideas grounded in field observations. Strauss and Corbin’s (1990) method for coding qualitative data is followed to model the role of specifications and contracts. The data were gathered through semi-structured interviews with various managers in the OEMs and supplier companies, participant and direct observation, internal documents, and questionnaires. The identified specifications have a role in guiding outsourcing decisions, function as a means of communication, help determine the time of involvement of the suppliers, differentiate suppliers, create visions for suppliers, and help provide competitive advantage. Furthermore, contracts have a significant role in reaching agreements for continuing supply and help assist in the validation of specifications.