The Patterns of Subcontracting arrangements In the Malaysian Automobile Industry

Abstract

This paper presents empirical insights into the patterns of subcontracting arrangements and management in the Malaysian automobile industry. Despite a small sample size, the empirical results contribute some knowledge to the subcontr acting-related patterns. This study found that two out of four proposals were consistent with the Japanese, but the results still show some distinctive patterns. Although outsourcing is a common practice among the three auto makers under investigation, its patterns are different from the Japanese average: the level of outsourcing was much higher for the production of commercial vehicles than passenger cars; and for functional parts than the general parts. Moreover, multi-sourcing instead of single sourcing as in the Japanese for most auto parts was adopted by the national auto makers. It is also agreeable that a mixed combination of market, hierarchy, and social capital factors were hand-in-hand responsible for managing and binding the auto maker-supplier relationship, but the absence of a full-fledged hierarchical configuration and distinct job specialisation has contributed to a less efficient management system in the subcontracting which would hinder the ability of the national auto makers to compete in the global market. Further research should give attention to global sourcing, subcontracting in services, and subcontracting in non-national auto makers.