Exploring the cross-tier ripple effect of materials criticality in an automotive supply chain

Exploring the cross-tier ripple effect of materials criticality in an automotive supply chain

Yulia Lapko1,2, Paolo Trucco1

1Politecnico di Milano, Italy; 2KTH Royal Institute of Technology

The present discourse on materials criticality focuses on mining and export of raw materials rather than issues related to the production chain (Buijs et al. 2012; Dewulf et al. 2016). Although importance of a better understanding of supply chain structure was acknowledged in the literature, particularities of materials criticality at each supply chain position, the transformation of materials criticality along the supply chain has not been examined so far. This study aims to analyze how materials criticality affects companies across multiple tiers in a supply chain and how employed mitigation strategies differ with a company’s position in a supply chain. Using an exploratory case study approach, the study analyses companies corresponding to three tiers in an automotive supply chain. The main sources of data collection were semi-structured interviews conducted with informants from the procurement function. In addition, secondary data such as companies’ sustainability and annual reports are analyzed. The results indicate that materials criticality appears through different sets of factors at different supply chain tiers. Although a company may be aware of a problem in a supply chain, it does not necessarily consider it as its own problem, but instead its supplier’s one. Companies may apply the same mitigation strategies to address different criticality factors; or they may apply different strategies to address the same criticality factor. Consequently, the ripple effect of materials criticality can be described as the following: criticality factors trigger adoption of certain mitigation strategies; employed strategies modify materials criticality by eliminating or transforming it in different set of factors experienced at the next tier. The study offers insights for management of critical materials, taking into consideration interactions and interdependencies between firms towards a coherent supply chain wide mitigation strategy; it also gives insights for policy-makers to shape a better environment for mitigating constraints from critical materials.