Supply Chain Management:Toyota Recalls - Opportunity in disguise

Over the last few weeks a lot of noise has been created with the recall of millions of Toyota's prized brands. Even the best selling cars like the Prius and now Corolla were not spared. Not to say the least that it is acceptable but I am amazed at the coverage being given to this. Car recalls in the automobile industry is a fairly common practice even with other large auto manufacturers having recalled their vehicles at one point of time. Rarely has this tarnished the image of a company to the extent it is affecting Toyota. In fact, recalling vehicles back was not long ago, considered a mark of maturity on the part of the manufacturers, its dedication to quality and regard for customer satisfaction. This definitely gives a sense of the changing times in the automobile industry and the supply chain market as a whole. But if we leave aside the company part of it and dive into the reasons I feel that a lack of Integration between the various entities is a possible reason for this fiasco. I will just take two points into consideration that I feel account for a major part of this issue - First, incomplete supplier collaboration, Secondly, improperly planned growth.

Incorrect supplier collaboration - As in the case of Toyota a lapse in the coordination between the two parties can have serious repercussions. Their needs to be a seamless integration between the two to make sure that all relevant information ( be it parts design, forecasts or any other ) is transferred to the other party seamlessly and so also their must be adequate check points to create alerts in the event of any deviation from the set procedure.

Improper planning - Over the last decade we have seen a phenomenal growth for Toyota, and I feel that though the goal to achieve 15% of global auto industry was set correctly the execution has failed at multiple points. Among these failed points is the failure to anticipate growth with a back up of skilled resources leading to unskilled workforce and deteriorated quality being applied to the production. The crux of the problem here too I feel is the lack of proper Integration between various Enterprise functions. A proper sharing of forecasted growth with the right amount of planning between various functions like the manufacturing, HR and finance would have resulted in a better management and efficient tracking. This would definitely have resulted in proper hiring plans, better training and lower quality defects.

Though not to say that Toyota lacks in the systems but it definitely shows the opportunity that is available for leading IT service providers. Not to mention that if a company of this proportion has so such a humungous opportunity, then for the industry as a whole , the supply chain market has just started to open up. Clearly its not about having best systems working in isolation or processes that are benchmarks in the industry, it is about having a confluence of the two aided by real time transfer of all business relevant information to each stakeholder.

I am sure there would be a lot of thoughts and inputs on this opportunity at hand, do share them across to all.

Comments

I didn't quite understand the connection between recalls and improper planning. What I can imagine though is the importance of a supply chain visibility solution that can continuously evaluate suppliers, note trends etc. There are very few solutions in the market to do this. There may very well be none that can track return orders with reasons against a BOM from a manufacturing system that finally updates scores in a supplier visibility solution.

Posted by: Satheesh Vattekkat | April 22, 2010 11:28 AM

Thank you!It was an usefule post. The blog has re-emphasized the fact that IT has a major role to play in SCM

Posted by: Balachandru | April 23, 2010 2:15 PM

@ Satheesh - The better the discussion the more enlightening the literature becomes so thanks for your response.You are correct that there are not many good solutions to aid the Supply Chain Visibility in respects to what you have mentioned and probably yes that planning and recall were not directly related.But my point of view is that it is all about proper communication. The situation that led to recalls would never have occured had there been a higher degree of symbiosis between the various enterprise functions. It is at on this that we as Application as well as Integration consultants play a vital role by providing good methodologies to create a seamless environment, that caters to the complete requirements of all the business functions.

Posted by: Saurabh Goyal | April 24, 2010 7:35 AM

@Balachandru - I really feel that IT and SCM as on date have just met and its a long road to complete synergy between the two functions. Thanks for you response.

Posted by: Saurabh Goyal | April 24, 2010 7:36 AM