Who Coordinates Automotive Steel Sheet in Japan?

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Abstract:

 This paper aims to analyze how and who coordinate the transactions of steel sheet within an automobile supply chain in Japan. Steel sheet is the largest supply for manufacturing automobile in terms of both weight and amount. Nevertheless, it has received less attention of scholars than other processed auto parts. Japanese integrated steel producers are the big business which has lead Japanese industrial society for long time, and the transaction of steel products has the particular characteristics based on their historical paths. On the other hand, Japanese automakers, as today’s industrial leaders, tend to develop certain inter-firm system suitable for their strategy. As a result, steel transaction system seems complicated from the view of NIE.

We focus on two institutional characteristics in automotive steel sheet transactions in Japan, “tied sales” and “centralized purchasing system (CPS).” Tied sale is a form of selling in which steel wholesaler plays a quasi- intermediary role as the designated distributor between a steel maker and its customers: Wholesaler would not commit price negotiations in most tied sales contracts, but they handle payment collection and deliveries. CPS is a form of purchasing in which an automaker attempts to procure steel sheets not only for its own use but also for the use of its keiretsu parts suppliers and OEM assemblers.

These two transaction features may cause the view that neitWher parts suppliers, assemblers nor wholesalers take any meaningful role in this kind of distribution, and that automaker, as the core firm of its keiretsu network, perfectly coordinate steel sheet supply within its keiretsu network. But, it is not correct.

Surveying the procedure in several cases of automotive steel sheets, I will insist that there are variations in the mode of division of labor among automaker, parts suppliers, assemblers and wholesalers, and that must mainly depend on the automakers’ capabilities and strategies.