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Managing resource dependencies in electric vehicle
supply chains: a multi-tier case study
Abstract
Purpose – To investigate dependencies that arise between companies during the ramp-
up of production volume in the electric vehicle (EV) supply chain.
Design/methodology/approach – An inter-company case study method has been used.
Data was collected via tours of manufacturing plants, workshops and interviews from
multiple tiers in a supply chain, namely a niche EV manufacturer, as well as two of its
tier one suppliers and five of its tier two suppliers.
Findings – As production volumes increased, a more relational approach was found to
be necessary in inter-company relationships. Our research showed that key suppliers, in
addition to providing the parts, pursued a supply chain orchestrator’s role by offering
direct support and guidance to the niche EV manufacturer in designing and executing its
development plans.
Research limitations/implications – Resource Dependence Theory (RDT) is used to
analyse and explain the changing dependencies throughout the planning and execution of
production ramp-up.
Practical implications – This study will help supply chain managers to better manage
resource dependencies during production ramp-up.
Originality/value – This study explores dependencies during the early stages of the
production ramp-up process in the EV sector, which is in itself in the early stages of
evolution. RDT is employed for the first time in this context. This study has moved
beyond a simple dyadic context, by providing empirical insights into the actions taken by
an EV manufacturer and its suppliers, toward a multi-tier supply chain context, to better
manage resource dependencies.
Keywords – Electric Vehicle, Resource Dependence Theory, Supply Chain
Management, Production Ramp-up, Case Study.
Paper type – Research paper
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1. Introduction
The electrification of transportation is widely considered to be a viable strategic
alternative to oil dependency and its associated harmful environmental impacts;
governments in different countries have recognised this as an opportunity. For example,
the US Electric Vehicle (EV) industry has had strong growth, exemplified by the
California-based start-up, Tesla Motors, which has now gained a significant market share,
with nearly 57,000 electric cars sold. The UK, over the last three years, has also seen a
remarkable surge in demand for EVs. New registrations of plug-in cars has increased
from 3,500 in 2013 to more than 166,000 by August 2018 (Lilly, 2018). It is projected
that the overall number of electric vehicles could range from 9 million to 20 million by
2020 and from 40 million to 70 million by 2025 (IEA, 2017). EV manufacturers must
therefore ramp up their production output to meet an increasing demand for EVs
(Andersen et al., 2016). Yet manufacturers face a number of supply chain challenges. For
example, the supply of batteries for EVs has been identified as a potential constraint for
Tesla Motors, due to the scarcity of lithium hydroxide and rare earth metals needed for
the batteries (Kam, 2016).
Production ramp-up issues have received attention in the automotive industry (e.g.
Almgren, 2000; Held, 2010; Surbier et al., 2014), but supply chain implications specific
to the emerging EV sector have received less emphasis. Therefore, there are a number of
factors in the EV sector that require further exploration and explanation, especially as
some of the technologies are still immature (e.g. battery systems, fuel cells, supporting
infrastructure). For instance, the EV industry’s new innovative products are undergoing
continuous modification, while the industry’s new business models are rapidly changing
and often significantly vary from the business models associated with traditional internal
combustion engine (ICE) vehicles (Rossini et al., 2016; Klug, 2013).
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Moreover, EV supply chains have not yet been fully established, as companies are
often start-ups or small-to-medium sized enterprises (SMEs) with limited resources
(Clegg, 2018). These start-ups and SMEs may not be currently involved in traditional ICE
automotive supply chains. However, these companies may go on to become critical
players in future EV supply chains (Bierau et al., 2015; Rossini et al., 2016). Research
efforts (e.g. Terwiesch and Bohn, 2001; Niroomand et al., 2012) have so far explored the
implications of ‘internal production’ ramp-up on various metrics of manufacturing
performance, such as quantity of product, cost, quality. But fewer researchers have
highlighted the role of resource dependence connections in multi-tier case studies (e.g.
Christensen and Karlsson, 2016; Filla and Klingebiel, 2014). Issues relating to resource
dependency in EV supply chains will become more pressing in the future, as governments
and original equipment manufacturers (OEMs) mandate, and in some cases outlaw,
wholly ICE powered vehicles.
In response to the research context described above, this paper provides insights
into a multi-tiered supply chain case study that focuses on a niche EV manufacturer,
referred to as EV-Co (the company’s name has been changed to preserve its anonymity).
This case study also encompasses the EV manufacturer’s suppliers of those drivetrain-
related components that most distinguish the EV from an ICE vehicle (e.g. motor, battery,
fuel cells, and electronic control units). The identity of these suppliers is also disguised
to preserve their anonymity.
EV-Co plans to move from producing five units to 30,000 units within five years.
As a relatively new start-up company, EV-Co will be highly dependent upon its suppliers
to achieve quick volume ramp-up and all-round improved operational and supply chain
performance, in order to be able to overcome their resource deficiencies and the risks
associated with expansion. To compound their relatively weak position in the supply
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chain, EV-Co presently accounts for a very low average proportion (about 10%) of their
suppliers’ sales/revenue; this gives EV-Co very little relative buying power. This study,
in part, adds much-needed insight into how buyer dependence on suppliers (Kähkönen et
al., 2015) during production ramp-up can be better managed. This study explores and
attempts to explain strategies to positively develop supply chain
relationships/dependencies during production ramp-up activities, based on specific
contingency factors. Thus, there are two specific questions that drive this research:
Research Question 1. What factors influence the level of dependence of niche
manufacturing companies on their suppliers’ resources during production
ramp-up in an EV supply chain?
Research Question 2. What strategies can be used by niche manufacturing
companies to manage their resource dependencies during the production ramp-
up in an EV supply chain?
In this study, Resource Dependence Theory (RDT) was chosen as a theoretical basis to
explain research findings, because of its primary emphasis on strategic resources that are
owned and controlled by companies using power, position and role differences. Other
theories (e.g. Resource Based View, Transaction Cost Economics, and Relational View)
would be less relevant, because of their lack of focus on asymmetric power-based
strategies for resource distribution and the need to gain control over external resources.
RDT was used to analyse dependencies in this multi-tier supply chain study, and
study resource dependencies, because the focal company (EV-Co) was very highly
dependent on its suppliers to cope with such ambitious production ramp-up targets.
The remainder of this paper proceeds as follows. The paper starts with a literature
review of studies in the EV sector, in respect of production ramp-up and supply chain
management. Next, RDT is presented and its key elements discussed, followed by the
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research methodology and the case study findings. Lastly, conclusions and further
research opportunities are set out.
2. Literature review and theoretical background
2.1. Supply chain ramp-up in the emerging EV sector
In recent years, EV technology has rapidly evolved and begun to disrupt the automotive
industry (Weforum, 2017), as pathways towards environmentally sustainable post-ICE
transportation solutions (Steinhilber et al., 2013) have become seen as viable.
In the supply chain management literature, previous studies have focused on
sustainability issues (e.g. Hawkins et al., 2012; Günther et al., 2015; Juan et al., 2016).
For instance, Hendrickson et al. (2015) investigated optimal locations for battery
recycling in California. By contrast, other studies have examined impacts on traditional
automotive supply chains, as EVs become more prolific (e.g. Klug, 2013; Rossini et al.,
2016). Challenges associated with EV adoption and use, ranging from technical issues
(e.g. battery technologies) to user-related concerns (e.g. range anxiety), have also been
explored (Li et al., 2015, p. 371).
In the production ramp-up literature, previous studies have explored cost, quality
and timeliness factors (e.g. Surbier et al., 2014), as well as the impact of late engineering
design changes, effects of supply-chain network configuration, process and product
complexity, and the degree of novelty (e.g. Elstner and Krause, 2014). Glock and Grosse
(2015) reviewed quantitative decision support models for ramp-up planning by focusing
on typical planning problems, and the process characteristics of the ramp-up phase. Other
studies have proposed different ramp-up strategies. For example, Clark and Fujimoto
(1991) proposed two different strategies for ramp-up of new products in final assembly,
