Proximity as a key factor to narrow the relationship between supplier and its customer – a case study in the auto industry

Abstract

The modern literature shows that the Just in Time (JIT) utilization in the relationship between client and its supplier aims at optimizing the flow in the supply chain. Nevertheless, there are other aspects to be considered for the full utilization of the lean supply practices. Among those, the proximity tries to improve the liaison between the client and its provider of materials and components as a possible response to an increasing competitiveness level. To explore this subject this work had the objective of evaluating the determinant factors that could possibly explain the partial relocation of a manufacturing facility to create proximity conditions with one of its clients. For that purpose, a case study was developed in which a Brazilian auto parts manufacturing company belonging to the first tier of the automotive supply chain was considered. Because of such study, it was possible to conclude that the strategic advantages resulting from the proximity overpassed the conventional reasoning of considering financial gains as a key factor to justify such a decision. In fact, the cost savings obtained with the plant relocation were not enough to justify the investment made.