The effects of follow sourcing on local suppliers: an exploratory study of the automotive industry in Brazil

Abstract

Rapid changes in the area of supply chain management in the last twenty years formed a whole new approach towards doing business. As one of the most affected industries by those recent changes, the automotive industry adjusted its approach towards global supply chains and internationalization drastically. New opportunities in a global environment led to new sourcing strategies and Brazil as one of the youngest automotive markets integrated theses changes quickly. One of the new arising sourcing practices in the automotive industry during the last two decades is a phenomenon named “follow sourcing”, which describes the parallel network establishment of supplier and manufacturer around the globe. Suppliers started to following manufactures to foreign markets and fight local suppliers in their own territory. This paper explores the effects of follow sourcing practices on local suppliers of the automobile industry in Brazil. Therefore, this study follows an exploratory qualitative approach in form of a single case study. In order to gather the necessary data a series of interviews were conducted with mainly CEOs of the industry or related businesses. The findings show the immediate and long-term effects differ drastically. Main effects of follow sourcing on competition and positioning of local suppliers in the Brazilian automotive industry were discovered and a theoretical framework was developed to clarify these effect during different periods in time.