- 17
- FEB
- 2010
Supply chain management blueprint puts Toyota in the red
Author: Maggie Slowik - Categories: Procurement Intelligence
In 1950s Japan, Toyota hit on something – not out of any great feat of ingenuity, rather out of necessity. Now, with lawsuits pending totalling over US$2 billion and one of the automotive industry's most potentially damaging recalls in full swing, it needs to do likewise. And fast.
Following the end of the war, the company devised its Toyota Production System (TPS) – a manufacturing process based on lean inventory, which revolutionised supply chain management and provided a blueprint that the automotive industry eagerly seized upon.
By introducing 'just in time' delivery – and keeping inventory to a bare minimum – Toyota was hailed as a company well ahead of its time. This system transformed the company from an also-ran to a well respected leader on the global stage. However, right now, Toyota manufacturing is more synonymous for technology mishaps and supply chain glitches.
In a recent article in Time magazine, John Paul MacDuffie, co-director of the International Motor Vehicle Program (IMVP) at the University of Pennsylvania's Wharton School, blamed Toyota's current crisis on the firm's huge expansion over the past decade, an expansion which has coincided with an equally dramatic increase in manufacturing problems.
MacDuffie pointed to the fact that in 2000, Toyota produced 5.2 million cars. In 2009 – thanks to the creation of 17 more production sites - that capacity had risen to 10 million.
With that kind of increase it's little surprise that Toyota was looking to drive down its manufacturing costs by standardising parts across its product ranges. The brakes on Toyota's hybrid Prius, for example, are also present in the firm's high-end Lexus 300. It's a supply chain management model that many others in the automotive industry have followed, and one that certainly seemed to make sense (at least before the current crisis).
Toyota had previously prided itself on a reputation for quality forged in the grinding poverty of post-war Japan. Its philosophy of kaizen (Japanese for continuous improvement) was prevalent throughout its operations, and coupled with jidoka (automation with a human touch) it appeared to ensure that Toyota's future was as bright as its past had been humble.
There has been a distinct, and entirely understandable, lack of gloating from those involved in the automotive industry since Toyota finally, and apparently reluctantly, rubber-stamped recalls that caused shockwaves across the world.
It could be that others know that what has happened to Toyota could easily happen to them - under pressure to innovate quickly to make up for their losses and start competing for market share again. While innovation and efficiency are undoubtedly good, quality management cannot be sacrificed for speed-to-market.
All of which makes this a troubled time for an industry still reeling from one of the biggest slumps in its history. And while Toyota plots the best way of repairing its tarnished reputation, others will be frantically applying band aids to their own supply chains – and hoping that, like the Japanese giant, they don't come unstuck.
Comments
Pete Mosgofian
Fri 19 Feb 2010 12:42
I don't understand this comment. Toyota's issues are not supply chain is quality derived from R&D. You don't see these problems at Benz do you.
Toyota still manufactures world class vehicles. Their problems are not cost but of continuing quality as the vehicle ages. It appears that as their vehicles are ridden out in the real world for some time, the problems show up that were not expected in the design phase.
I don't think that they have done a very good job of understanding this issue and the public relations issues around their reputation after the care has left the showroom.
I don't think many manufacturers have thought much about this. This is more of a 6sigma issue than a lean issue.
Manufacturers if you want to be world class have to think out many years regarding how well is their product performing in the afterlife.
Life after delivery. More attention in development will save $$$$ in warranty & litigation later.
keith Berry
Fri 19 Feb 2010 16:39
If something goes wrong.... blame purchasing!!
Eamonn Phillipson
Fri 19 Feb 2010 22:40
I think the point of the article is that component standardisation (use across a very wide product range) increases the effect of any problem. People have short memories - remember Ford and the famous door hinge? In a very real sense this IS a Supply Chain issue. We (Procurement professionals) need to stand our ground when risk analysis tells us that component standardisation posess an unacceptable threat. Six Sigma tells us that we can't get it 100% right, 100% of the time - for ever!
By the way - Mercedes are not immune either........
Maggie Slowik
Mon 22 Feb 2010 10:15
Standardising parts across different models is a common practice in the automotive industry as it allows companies to simplify production methods and create economies of scale. However, this can backfire when quality issues arise. Somewhere down the line of Toyota’s supply chain, something slipped and while this is not to say that procurement is to be blamed, it also does not take away from procurement’s responsibility to quality control parts. What happened to Toyota could have, realistically, happened to any other car maker, and it certainly has in the past (with Ford being only one example).
KeithRodgers
Wed 24 Feb 2010 21:59
Hi Maggie,
Standardising parts to push volume up and reduce unit cost makes good economic sense, but it does leaves you very exposed to risk.
Thats the problem with this model, it still makes sense to have two sources of supply then if quality fails at one the other can pick up the slack.
Dual sourcing is not fashionable at the moment but it does mitigate quality risk. I remember Volkswagon having a similar problem with a starter or solenoid which was fitted across a range of vehicles.Same thing happened there massive recall and rework cost.
We cannot be naive enough to think that the other major vehicle manufacturers(USA & European) have similar quality problems that they also cover up because of recall and rectification costs.
Do you remember the exploding tyres on Ford vehicles? Or a similar problem with the speed control on Ford Explorers.They all have legal adivsors assessing risk eg do we keep our mouths shut or tell general public?.
Its all managed by the corporate legals and its sad when a company is not man enough just to stand up and say looks guys we screwed up.People are human we make mistakes !