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Faculty of Engineering and Science
MSc in Engineering Management
Academic Year: 2015/2016
COURSE: GEEN1017 MSc Individual Project
Course Module Co-ordinator: Dr. Satya Shah

MSc Dissertation

Flexibility Investigation in the European
Automotive Industry Supply Chain

Produced by Pavel Aleksandrov
ID NO: 000873249
Produced for Dr. Satya Shah
Word count: 9093
Date: 10.11.2015

1

Abstract
Supply chain flexibility has risen as a vital technique for accomplishing competitive
advantages. This study elaborates on one effort to build up an applied system of producing
conceptual flexibility and investigate the sophisticated connections among the precursors,
driving forces, supply chain flexibility, and its impact on the overall performance. Legitimate
measures of supply flexibility, logistics flexibility, connections flexibility, and outsourcing
were produced. The instrument development process included an expansive review, organized
questionnaire with professionals and assessments with specialists in the field, and a large-scale
study.
This research studied the current awareness and practices in flexibility improvement,
particularly in the European automotive industry. Through case studies, they can extract more
information about the experiences of companies in the planning, implementation, and
operations of manufacturing flexibility.
This study gave understanding into how diverse elements of flexibility relate to each other and
how they contribute to firm efficiency. Furthermore, the development of legitimate, reliable,
and summarizing measures of manufacturing flexibility give a more appropriate instrument for
the further advancement of this research area.

2

TABLE OF CONTENTS
Abstract……………………………………………………………………………………….2
List of Figures…………………………………………………………………………………3
List of Charts………………………………………………………………………………….3
List of Tables………………………………………………………………………………….3
Acknowledgements…………………………………………………………………………...6

CHAPTER 1
1. Introduction to the research……………………………………………………………….7
1.1 What is “Flexibility”? ........................................................................................................7
1.2 Background of the Study…………………………………………………………………8
1.3 Research Objectives………………………………………………………………………8
1.4 Outline of Dissertation……………………………………………………………………9

CHAPTER 2
LITERATURE REVIEW
2.1 What is Supply Chain Flexibility? ..................................................................................11
2.2 Definition of Flexibility in Supply Chain……………………………………………….12
2.2 Properties of Flexibility…………………………………………………………………13
2.2.1 Option Value of Flexibility………………………………………………………...12
2.2.2 Cost of Flexibility…………………………………………………………………..12
2.2.3 Nature of Flexibility………………………………………………………………..12
2.2.4 Degree of Flexibility………………………………………………………………..14
2.2.5 Magnitude of Flexibility…………………………………………………………...14
2.3 What is Automotive Supply Chain? ……………………………………………………15
2.4 Environmental Uncertainty as Driving Forces for Supply Chain Flexibility……….16
2.5 CASE STUDY – Bayern Motor Works “BMW”……………………………………...17
2.5.1 Mass Customization at BMW……………………………………………………..18
2.5.2 Benefits and Challenges……………………………………………………………19
2.5.3 The Future of Mass Customization……………………………………………….19
2.5.4 The Leipzig Plant Example………………………………………………………..19
3

2.6 CASE STUDY – Volkswagen Motor Group “VW”….………………………….…….21
2.6.1 Operations …………………………………………………………………………21
2.6.2 Logistics…………………………………………………………………………….22

CHAPTER 3
RESEARCH METHODOLOGY
3.1 Data Collection Methodology…………………………………………………………..23
3.2 Secondary data collection……………………………………………………………….24
3.3 Primary data collection…………………………………………………………………25
3.4 Questionnaire……………………………………………………………………………26
3.5 Structure of the Questionnaire………………………………………………………….27
3.5 Data analysis and results………………………………………………………………..28
3.5.1 Respondents Background………………………………………………………….28
3.5.2 Review of the questions…………………………………………………………….29

CHAPTER 4
SUMMARY AND RECOMMENDATIONS FOR FUTURE RESEARCH
4. Summary of Research……………………………………………………………………36
4.1 Verification of Research Objectives……………………………………………………37
4.2 Limitations of Research…………………………………………………………………38
4.3 Recommendations for Future Research………………………………………………..38

CHAPTER 5
CONCLUSION
5. Conclusions………………………………………………………………………………..39
5.1. References…………………………………………………………………………….....41

4

LIST OF FIGURES
Figure 1: Professional Background of Respondents………………………………...……28
Figure 2: Survey question 1………………………………………………………………...29

LIST OF CHARTS
Chart 2: Survey question 2………………………………………………………………….31
Chart 3: Survey question 3………………………………………………………………….33
Chart 4: Survey question 4………………………………………………………………….34

LIST OF TABLES
Table 1: Survey question 1………………………………………………………………….30
Table 2: Survey question 2………………………………………………………………….32
Table 3: Survey question 3………………………………………………………………….34
Table 4: Survey question 4………………………………………………………………….35

5

Acknowledgements
This journey would not have been possible without the support of my family, professors and
mentors, and friends. To my family, thank you for encouraging me in all of my pursuits and
inspiring me to follow my dreams. I am especially grateful to my parents, who supported me
emotionally and financially. I always knew that you believed in me and wanted the best for
me. I owe my sincere gratitude to Dr. Satya Shah, who supervised me from the beginning of
my Masters course, for his professional, insightful advices and recommendations, guidance
and the continuous encouragement during the thesis completion. My sincere thanks to George
Kiourktsoglou for offering me the opportunity to attend his lecturing and for the persistence
effort in leading me in knowledge obtainment throughout the whole academic year. Last but
not least, I want to give my thanks to the anonymous respondents for their valuable comments
and kind replies.

6

CHAPTER 1
Introduction to the research
This part gives insight of the frameworks of the examination including foundation, objectives,
target of the study, and research scope. At the end of this part is set the structure of the thesis.
Section 1.1 describes the foundation of the study and the thought holistic definition of
“flexibility”. The background examination is identified in Section 1.2, the aims and objectives
of the research are then introduced in Section 1.3, and the construction is described in Section
1.4. The purpose of this dissertation is to investigate the concept, the different aspects, and
elaborate on supply chain flexibility in the European automotive industry. To deliver
understanding of how the flexibility framework perform in the European automotive industry,
and how to achieve flexibility implementation, an analysis of a conducted online survey with
number of questions will be performed, which will concern: department managers, project
managers, CEOs, development managers, sales managers, head of business etc. However as
part of the secondary research, a literature review will be carried out, in order to bring
comprehension of the supply chain basic foundation and eventually managing its uncertainty.

1.1 What is Flexibility?
Flexibility provides a hedge that allocate or diminishes risk. The quantity flexibility contracts
provides the retailer with certain advantage to counter against extreme demands which are
unusual, but possible. Another application of similar protection mechanism is when the retailer
maintain flexible lead times. One of the objectives is to investigate this supporting mechanism,
and its’ benefits for the retailer and accordingly to the whole supply chain. Findings of the
research suggest, flexible lead times are more adequate to be adopted by the manufacturer,
because manufacturer's shipments are never alter, unlike the flexibility contracts. In other
words, manufacturers, who wish to stabilize their production or strengthen their inner relations
with the retailer, may prefer to exercise lead time flexibility, rather than quantity flexibility.

7

1.2 Background of the Study
One of the initial steps to understanding and enhancing a manufacturing capability, similar to
quality or flexibility, is the ability to indicate it. (e.g., De Toni and Tonchia 1998, Gerwin 1993,
Sethi and Sethi 1990). Yet, a single summarizing measurement of flexibility has not yet been
developed. The absence of functional measures of flexibility has likewise been convicted by
different researchers. The resolution of this issue is fundamental, if flexibility is intended to be
seen in its entire significance. The current study takes a step in that direction by examining the
theoretical basis of the concept, and then using this theory to eventually create a tool for
manufacturing flexibility.
Flexibility improvement becomes an important issue for the managers by which they must
evaluate the degree of manufacturing flexibility, implement flexibility, and measure the
performances, especially in today’s uncertain business environment (Gerwin 1993). A number
of articles have attempted to improve the level of flexibility by various means. The studies of
flexibility in manufacturing are mostly concerned with the operational level: the selection from
a wide variety of available system configurations and control strategy alternatives in the light
of several criteria of flexibility, quality, productivity, costs, etc. (Gerwin 1993).

1.3 Research objectives
This study looks at the current flexibility research and expands on that information base. A
comprehensive review of the flexibility literature is first attempted with an effort to distinguish
the constituent elements of flexibility. Further, the researcher perceive that, those components
should be equally well adaptable and applicable to various dimensions of manufacturing
flexibility. Such an effort allows to breach the gap between the existing knowledge base and a
comprehensive understanding of this concept. In particular, the objectives of the current
research are:
1. To identify and define constituent elements of flexibility.
2. To use these conceptual definitions along with inputs from plant managers to develop
valid, reliable, generalizable measures for each dimension of flexibility that is relevant to
manufacturing organizations.
3. To use these newly developed measures for exploring and understanding the relationships
among different elements and dimensions of flexibility.
4. To identify the impact of flexibility on firm performance.

8

5. Explanation of manufacturing control, flexibility performance of European leading
manufacturers.
6. To deliver clarification and understanding of the main issues of achieving flexibility in
supply chain and operations.
The aim of the thesis is to understand the impact flexibility has on the supply chain and its
operations, nevertheless how flexibility generates value, it strategic impact on supply chain
efficiency and incentives, and, most importantly, how different types of flexibility interact.
The research determines the structure of the optimal policy, quantifies the value of advance
demand and delivery of flexibility suggests that introducing flexible delivery is a win-win
solution. It is the objective of this research to gain an understanding of supply chains to enable
a potential supply chain manager to co-ordinate the various organisations in that supply chain
to better serve the end customer. However, the views in the literature on what this
"understanding" should be and how it might be gained are many and varied. The work therefore
attempts to draw from these literatures and synthesize this means of understanding.
Managing uncertainty, creating flexible organizations, and utilizing that flexibility in supply
chains, is one response to dealing with rapidly changing business conditions. If an organization
is flexible and possesses a set of different strategic options, it can more effectively respond to
dynamic competitive environments. As such, the competitive potential of flexibility at the
organizational level is widely recognized by managers.

1.4 Outline of dissertation
The dissertation describing the current research project is divided into five chapters. The first
chapter reviews several diverse streams of identification that comprise flexibility. Short
background study is represented. Then, in the second chapter definitions that incorporate these
elements are derived for various dimensions of Flexibility. Also explores the relationships
among the elements of flexibility, as well as the definition of Automotive Supply Chain. This
exploration is illustrated through an analysis of the automotive industry. Secondary data at the
industry level is used to evaluate how producers have built their flexibility capability in
different fashions and accommodating various strategies. Chapter 3 outlines the research
methodology and what is comprises. Conducted exploration is represented with charts and

9


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