Towards the strategic outsourcing of core competencies in the automotive industry: Threat or opportunity?

Faced with shorter product life cycles and increased cost of capital, companies can no longer afford the capital outlay for new facilities, which may become underutilised as processes improve over the first few years of operation. Outsourcing the production capacity can remove this uncertainty. However, fast-moving automotive environment companies, faced with increasingly demanding customers, have to deploy the resources and expertise of the best-in-class provider. To achieve this, they have further reduced their functions to a handful of core activities. Outsourcing core activities can bring about benefits under certain circumstances, but also possesses the risk that companies may become 'hollow', and lack a core deliverable. Within the next couple of years, companies in the automotive sector will further outsource activities in order to free up investment capital. The trends and areas of outsourcing have been explored and a guiding framework has been developed for practitioners.