Global vehicle production in 2015 rose by 1.1% to reach a record of 90.88 million vehicles, up from the 89.78 million units produced in 2014 (AIEC 2016:18). Nineteen countries topped the one million mark in 2015, which is regarded as an internationally significant vehicle production level. South African vehicle production increased to a record 615 658 vehicles in 2015, up from the 566 131 units produced in 2014 – a gain of 49 527 vehicles or 8.7% (AIEC 2016:18). South Africa improved its global ranking to 21st (24th in 2014) in the world, with a market share of 0.68% (AIEC 2016:18).

Although the South African automotive industry is ranked only 21st in global vehicle production, it is the largest contributor to the country’s GDP, namely, a contribution of 7.5% (AIEC 2016:9). The South African automotive industry remains the most critical sector that drives sustainability, job creation and economic growth (AIEC 2015:9; Ambe 2014c:638). The South African government is actively involved in supporting the automotive industry though various initiatives with the vision to drastically expand the industry production by the year 2020 (AIEC 2016:21).

South Africa’s truly global automotive supply chain is represented by seven OEMs in three automotive clusters, namely, Gauteng, Eastern Cape and KwaZulu-Natal (Ambe 2014c:638) (see Table 1). These OEMs are from different countries of origin, such as Europe, Asia and America. In recent studies, Ambe (2014a:59, 2014c:638) found that cultural diversities play an important role, and thus, significantly different approaches to supply chain strategy between OEMs of different countries of origin are visible.

The automotive supply chain is mainly dictated by the parent companies of the OEMs that have tight and long-term supply chain management relationships (Ambe 2014a:50, 2014c:638). Therefore, the Tier 1 supplier (direct supplier of modules to the OEM) is usually of the same country of origin as the OEM and usually comprises the same strategic supply chain management focus (Ambe & Badenhorst-Weiss 2013:6).

The South African automotive industry manufactures a broad range of vehicles, including passenger cars, light commercial vehicles, medium commercial vehicles, heavy commercial vehicles, extra heavy commercial vehicles and buses (AIEC 2016:9). The study reported on in this article only focused on the supply chain of light commercial vehicles or passenger cars and investigated relationship value between first- and second-tier suppliers in the South African automotive supply chains.

Supply chain management in the global arena poses many opportunities, but also a number of risks for supply chain stakeholders (Ambe 2014b:1539). With the various challenges of supply chain management, such as shorter life cycles in an ever-changing global arena, companies tend to strive towards supplier rationalisation where closer relationships are fostered with fewer suppliers to secure optimised performance and cost savings (Ambe 2014b:1539; Cadden et al. 2013:87). The South African automotive supply chain is no exception to this and is faced with challenges such as intensified global competition with the main aim of cost reduction, low levels of global co-operation, low market reaction and numerous logistical challenges (Ambe 2014b:1540). In addition to these challenges, Tolmay and Badenhorst-Weiss (2015:3) believed that automotive component suppliers are dealing with more sophisticated and knowledgeable customers with rapidly changing buying patterns. It therefore would make sense to seek superior supplier relation strategies in order to overcome these challenges and to secure success (Ambe 2014a:47, 2014c:638; Tolmay & Badenhorst-Weiss 2015:3).

It should further be noted that the South African automotive supply chains are represented by companies with various countries of origin and diverse backgrounds and approaches (Ambe 2014a:48). These cultural diversities play a role in planning supply chain management strategies and should at all times be taken into consideration (Ambe 2014a:48, 2014c:638; Cadden et al. 2013:87). Different supply chain strategies might change relationship value requirements, and it is important to determine what is valued the most in order to secure long-term supply chain optimisation (Barry & Terry 2008:228). As OEMs and their suppliers originate from different cultures, it could be argued that these cultures influence their vision and supply chain strategy, including the relational exchange with suppliers within supply chains (Ambe 2014c:638; Cadden et al. 2013:87).

Supply chain management involves close co-operation with upstream and downstream suppliers, and the automotive industry leads in this field through long-term relational exchange (Cadden et al. 2013:87; Tolmay & Badenhorst-Weiss 2015:3). Moreover, Li (2006:118, 2012:5445) and Ambe (2014a:47) pointed out that supply chain management practices are based on supplier partnerships, customer relationships and information sharing and that relational benefits tend to connect all the stakeholders across the supply chain. According to Yeh (2016:138), supply chain management aims to identify the most appropriate partners and suppliers, as well as raw materials and product efficiency, in order to create superior value in the long run.

Within supply chain management, supply chain collaborations are formed with appropriate partners in the supply chain with the ultimate aim to add value (Tolmay & Badenhorst-Weiss 2015:1). This collaboration, according to Wisner, Tan and Leong (2016:528), means the working together with suppliers and customers through the sharing of information on various activities. This supply chain collaboration is viewed as a discipline within supply chain management (Figure 1). The supply chain collaboration specifically refers to the personal interaction between supply chain partners on a daily basis. Supply chain management constantly evaluates suppliers and then determines whether to maintain, terminate or invest in new supply chain collaborations (Yeh 2016:138). Therefore, suppliers should constantly ensure that they add sufficient value towards their customer.

According to Yeh (2016:138), supply chain activities pose an ideal opportunity to increase value. Therefore, a strategic supply chain approach should be followed in order to enhance competitiveness and sustainability for supply chain role players (Yeh 2016:137). Research studies have suggested that relationship value forms part of supply chain collaboration where more value is added through the actual relationship between supply chain partners (Yeh 2016:137) (Figure 1). This article will thus examine the correlation between relationship value within supply chain collaboration in more detail.

Relationship value can be conceptualised as the total sum of benefits and sacrifices generated over a long-term relational exchange (Geiger et al. 2012:84). Eggert et al. (2006:21), as well as Barry and Terry (2008:229), stated that relationship value encapsulates benefits and sacrifices. Relationship value benefits comprise a core offering, a sourcing process and customer operations in the supply chain (Eggert et al. 2006:21). The core offering is inclusive of all aspects relating to the quality and performance of the actual product as well as the delivery performance, such as logistical activities, by the supplier. The sourcing process includes service supports such as customer information and personal interaction such as communication and problem-solving abilities. The customer operations are inclusive of customer know-how relating to knowledge, as well as time-to-market relating to prototype development and testing (Barry & Terry 2008:229; Eggert et al. 2006:21). All these relationship value activities mentioned form part of supply chain collaboration (Wisner et al. 2016:528) and can therefore be viewed as the centre of supply chain collaboration (Figure 1).

Higher relationship value is viewed by various authors as important (Eggert et al. 2006; Geiger et al. 2012:84; Sun et al. 2014:80; Yeh 2016) (Table 2), and the ultimate purpose of relationship value in the supply chain is to work together with the aim of realising benefits for both parties (Sun et al. 2014:80). Relationship value creates superior value in a supply chain and increases trust and commitment (see Table 2). The financial benefits of relationship value (Geiger et al. 2012:83) promise to reduce cost (Li 2010:314; Moon 2011:47; Sun et al. 2014:79; Yeh 2016:138) and result in business retention (Sun et al. 2014:79) (see Table 2). With more research required on business expansion (Lynch & Jin 2016:11), literature fails to indicate whether relationship value increase business (or business expansion) which was investigated in the South African automotive supply chain.

As the literature proposes that higher relationship value results in business retention, more empirical research should be undertaken (Sun et al. 2014:79), also within the South African automotive supply chains (Badenhorst-Weiss & Tolmay 2016:10). These limitations in literature spurred the research in the South African automotive supply chains reported on in this article. With various challenges facing the South African automotive supply chain, it would make sense to invest more in relationship value with the promise of retaining and even expanding business. With stringent prescriptions from customers, supply chains offer limited opportunities for differentiation through production, price and logistics, and component suppliers are left with only relationship value to differentiate themselves (Yeh 2016:137). As automotive supply chain stakeholders represent different backgrounds and countries of origin, it is important to determine whether these stakeholders attach the same importance to relationship value.

Yeh (2016:138) calls the management of relationship value ‘relational governance’ where supply chain role players maintain a long-term relational exchange with partners. This relational governance, according to Yeh (2016:135), is inclusive of planning, adjustment and monitoring of relational activities to achieve the desired results for both parties. However, it is important to note that relational governance should be actively and directly managed to influence the formation and maintenance of relationship value between parties (Yeh 2016:139). Through the management of relational governance, both parties have to understand their partners and their distinctive activities in the supply chain, in order to add maximum value under various circumstances (Yeh 2016:149).

The methodology towards testing the correlation between relationship value and business expansion in the South African automotive supply chain is explained in the section dealing with the research approach.

The research reported on in this article followed a positivistic paradigm, and a quantitative research method was applied (Saunders et al. 2009:138). Causality was determined by measuring customer’s perspectives of their suppliers by utilising a survey approach.

The research was conducted in the South African automotive supply chains and specifically focused on the perceptions of the first-tier suppliers in the supply chain (customer in relationship) with regard to relationship value with second-tier suppliers (supplier in the relationship). As the majority (approximately 70%) (NAACAM 2016, http://www.naacam.co.za) of first-tier suppliers are members of the National Association for Automobile Component and Allied Manufacturers of South Africa (NAACAM), managers of the member companies were interviewed. A quantitative research methodology was followed where the management of NAACAM member organisations was asked about perceived relationship with their best Tier 2 suppliers.

The questions for the structured questionnaire were obtained from a survey utilised by Eggert et al. (2006:26). After a qualitative questionnaire validation process had been conducted within the automotive industry, questionnaires were forwarded to all management representatives of the NAACAM database via email accompanied by an ethical clearance letter. Participation was voluntary, but non-respondents were followed up telephonically after 1 month, and telephonic interviews were conducted with them if they agreed to be interviewed.

The researcher obtained questionnaires from 114 respondents out of the 140 that were sent out, securing a response rate of 81.4%. The data contained in the questionnaires were captured using SPSS, although not all respondents answered all the questions.

As it was important to sample companies with different countries of origin, respondents were asked about their different shareholding profile. A total of 106 out of the 114 respondents indicated their company’s shareholding, of which 29.2% (31) indicated that their company had local shareholding, 44.3% (47) indicated international shareholding and 26.4% (28) said that their company had a mixture of local and international shareholding (see Table 3).

The spread of shareholding profiles was deemed satisfactory and suggested a good spread of local and international shareholding.

This article reports on the relationship value in the South African automotive supply chain and its directional correlation with business expansion which was tested through a linear regression model.

Three items relating to the dimension of relationship value were included (see Table 4). Business expansion was utilised as a single observation. A bipolar seven-point semantic differential scale was used in the questionnaire ranging from ‘strongly disagree’ to ‘strongly agree’.

The first step was to conduct a principal component analysis (using principal component extraction and varimax rotation) to determine the unidimensionality of the relationship value construct (business expansion was viewed as a single observation).

The Kaiser–Meyer–Olkin Measure of Sampling Adequacy was 0.714, which is above the acknowledged threshold of 0.5, and the Bartlett’s Test of Sphericity was significant (p < 0.001) for relationship value, indicating that factor analysis was appropriate.

The analyses confirmed unidimensionality for relationship value, as the analyses recognised only one factor, based on the eigenvalue criterion (eigenvalue > 1). The factor loading of relationship value as a single factor is reflected in Table 4 and explains 73.3% of the variance.

Using Cronbach’s alpha, the internal consistency (reliability) for relationship value was found to be 0.812, and business expansion was utilised as a single observation (Table 4). The factor-based score for relationship value was calculated as the mean score of the variable included in the factor.

The mean scores revealed that respondents were in agreement about the importance of relationship value and business expansion (5.74 and 5.62, respectively) (see Table 4).

As shown in Table 5, a linear regression is used to evaluate the directional relationship between the independent variable (relationship value) with the dependent variable (business expansion). As a result, the regression model reveals that relationship value is a strong positive statistical significant predictor (at the 1% percentile of statistical significance) of business expansion.

It can be reported from that relationship that value strongly relates to business expansion in the South African automotive supply chains (Figure 2). Therefore, it can be argued if relationship value is increased, this will result in business expansion.

Within supply chain management, supply chain collaboration refers to the daily interaction with supply chain partners. This supply chain collaboration suggests enhancing relationship value which ultimately results in business expansion. Although literature alludes to the fact that relationship value may result in business retention, the finding of this research is unique as it indicates that business will actually expand with more business to be realised.

According to the items utilised in the questionnaire (Table 4), customers perceived the relationship value from their suppliers as added value resulting in more benefits. Customers further perceived that their suppliers with higher relationship value hold them in higher regard, and therefore, they will be willing to expand their current business with their valued suppliers.

The implications of the findings for the South African automotive supply chain are discussed in the conclusion and recommendations.