Inside and outside the factory: just-in-time manufacturing systems, subcontracting and geographic proximity

Abstract

This paper studies the spatial extent of subcontracting linkages for a sample of medium-sized and large Spanish manufacturing firms operating in the automotive and electronics industries. In particular, we analyse how Just-in-Time (JIT) organisation of production is related to the spatial pattern of these sourcing relationships when contractors' structural and organisational characteristics, as well as contract characteristics, are taken into account. We find that firms which implement new technologies and manufacturing systems at the plant level tend to prefer regional to extra-regional outsourcing. This is consistent with JIT’s reliance on flexibility in ordering and quick and frequent deliveries, as well as reliable arrival times, to guarantee the disruption-free production which proximity facilitates. Our results support the view that JIT, in the context of production subcontracting, increases the importance of proximity.