The Effects of a Shortened Development Cycle on the Purchasing Department regarding Engineering Changes in an Automotive Environmen

Abstract: This master thesis looks at a topic especially relevant for procurement activities within the automobile industry. 18 interviews within an automobile firm producing premium cars showed that reducing the overall development cycle entails a great threat that more engineering changes arise. Engineering changes are all adaptations that are made to a component after the supply contract with the chosen supplier was signed. This is especially the case for innovative projects where not everything can be planned for in advance and it is unsure in the beginning how certain components will look like. This uncertainty, together with the development cycle reduction, causes more engineering changes overall. The job of the purchasing department is to negotiate these engineering changes with the respective suppliers. This thesis further shows that with more engineering changes, costs for these components increase because the supplier has an improved negotiation position when asking for financial compensation for these adaptations. Furthermore, with an increasing number of engineering changes the buying company has a lot of additional internal work to do which requires the firm to adapt its activities accordingly. The findings also suggested that especially components which are connected to a lot of other components, as well as components that are implemented in many different car models are crucial for the issue of engineering changes. It is therefore recommended to use the negotiation position before signing the supply contract, which is often favourable for the purchaser, to determine rules on how upcoming engineering changes should be negotiated between the buyer and his supplier. Supervisor