German car manufacturers achieve cost-cutting through sub-contracting and outsourcing. How the process of outsourcing affected the German car industry, how it is done specifically, the related laws on outsourcing and labor and the impact of the recent crisis on the process of outsourcing and sub-contracting are the questions that this paper wishes to answer. With the aid of information coming from company reports, datamonitor, newspapers, websites, and researches, we try to examine all these aspects of outsourcing in the German car manufacturing industry.
Business Process Outsourcing is one of the latest trends in business. To outsource is defined in the Merriam-Webster online dictionary as "to procure (as some goods or services needed by a business or organization) under contract with an outside supplier" (Merriam-Webster Incorporated, 2010). This is applied in either the manufacturing stage, the marketing stage or after-sales stage. Germany, specifically the automobile industry is one of those that adopt business process outsourcing as part of the business.
The paper will include a detailed study and description of the use of outsourcing practices (to include outsourcing in areas such as components manufacture, servicing and retail operations) in the automotive industry in Germany. Before going into details about different outsourcing practices, I will present a brief overview of supply chain of automotive industry which is crucial to understand in order to fully apprehend the benefits and limitations of outsourcing. Consequently, I will analyze major car manufacturers in Germany in terms of their outsourcing activities and processes. Specifically I intend to focus on three major car producers: BMW, Daimler and VW. Their websites contain detailed annual reports that include also information relevant to outsourcing. In addition, I found substantial amount of information in Datamonitor database about specific outsourcing practices of each car manufacturer as well as trends, competitive landscape and supply chain analysis for global automotive industry, specific countries, particularly Germany.
A necessary part of the paper is an investigation of the effect of outsourcing policies on German car manufacturing companies in the past and in the present. The comparison between the past and the present will be to ascertain the effect of financial crisis and how it has changed the policies and practices of the car manufacturing companies regarding their outsourcing policies.
The Research Questions and Objectives