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5. THEORETICAL FRAMEWORK: PROTON SUPPLIER
DEVELOPMENT MODEL
In Proton, the component parts supplied by its primary suppliers are
considered strategic products because the parts represent about 50 per
cent in the total cost of end product and most of them are sourced from
only one supplier (see Appendix 1), As Kraljic (1983) suggested,
"Strategic products are generally obtained from one supplier, which
the short- and long-term supply is not guaranteed and represent a high
value in the cost price of the end product. The strategy is to strive for
a partnership-like relationship with the suppliers in order to obtain
significant improvements in quality, costs, delivery, product
development and innovation."
Before the establishment of Proton, the component parts manufactured
locally were initially few and catered basically for the replacement
market. However, with the introduction of specific localisation
programme by Proton through its Vendor Development Programme
(PVDP) for the industry in the mid of 1980's, more components were
produced to cater for the original equipment and replacement parts
market for domestic as well as export markets. As the President of
Proton Vendors Association (PVA) said;
"....many vendors were born, nurtured, and later developed
and grew solely as a result of this VDP. There were only 17
vendors supplying 52 parts when Proton commenced
operations in 1985, most of which were low-tech traditionally
local parts like batteries, tyres and etc. To date there were 140
vendors supplying more than 4,000 parts to Proton." (From
interviews with the President of Proton Vendors Association).
In 1986, Proton has established the Procurement and Vendor
Development Division (PVD) which an objective to develop its own
group of suppliers in order to formulate and implement the local
content programme for the national car. It was envisaged that with the
implementation of this local content programme the automotive parts
industry would expand. This expansion was much needed not only by
Proton in its endeavor to build a strong industrial base to depend on,
but also by the Government as a source of employment absorption and
reduction of imports. The supplier development programme achieved
quick results. In 1985, the local content of Proton car was only 18
percent in terms of value. By 1988, this ratio had climbed to 60
percent, touching 65 percent in 1991, and 70 percent in 1992. (see
Appendix 2 and 3). The programme is illustrated in the theoretical
framework as shown in Figure 2.