News U Can Use

A Supply Chain/Strategic Sourcing learning community devoted to ideas you can use in your work or daily life.

Archive for February, 2010

When Giants fall…………

Posted by dalipraheja on February 25, 2010

………does the earth tremble??? Well, perhaps that is an exaggeration, but maybe not much? After all, Toyota has been a Giant for quite some time, and not just in the auto industry. Its influence in Japan and the global economy is unparalleled; the Toyota way has changed the way the world approaches Manufacturing and Supply Chain Management. But the point that I want to make is that when a Giant like Toyota falls, what does it say about us mere mortals? And, just as we all flocked to Toyota to learn from them during their success, are there any opportunities to learn from their failure?…the answer is a resounding YES!

This is the first of a series of posts that will explore what is happening to Toyota and lessons learned from their fall from grace. (By the way, I am a fan and customer of Toyota and I don’t see that changing in the near future.)

Allow me first to refer back to some questions I raised when the Toyota recall was just breaking news:

“Did the “globalization” of Toyota perhaps dilute its core values and change its culture in any way? Did that have anything to do with why the original problem occurred? Did it have anything to do with how Toyota handled the problem?”

Well it looks like the “punditocracy” is also starting to ask the same questions and reach similar conclusions. At the end of the day, the much vaunted Toyota Way, Toyota Production System, LEAN, Kaizen, MUDA etc. were clearly NOT sufficient to keep Toyota out of trouble. In fact, some would argue that it was exactly the dependence on all of them that may have led to the current situation…but I’m getting ahead of myself. Let’s first look at what the punditocracy is saying.

I think one of the first things we need to deal with is whether Toyota is a global company. And before the tomatoes start flying, I ask that question in all seriousness. I understand that Toyota is a global company in the sense of selling, producing and buying all over the world, but that does not make it a Global company…it just means that Toyota operates on a global scale. One can argue that Toyota has continued to be a Japanese company that operates globally…and therein lies the crux of the issue. What worked inside Toyota did not translate well at all when it was applied on a global scale because the dynamics of a global company are dramatically different. Toyota continued to essentially be a very Japanese company operating within a global context.

Here is what NPR (National Public Radio) had to say about this:

“Many Japanese managers are convinced that the economics of homogeneity, of being ethnocentric, outweigh the advantages of being a globally integrated enterprise,” explains Stefan Lippert, a former management consultant with McKinsey and Company who teaches at Temple University’s Tokyo campus.

And if you don’t believe him, here is another excerpt from the same segment on NPR where they are interviewing an employee from Toyota:

“I’d never think that this could be the end of the Toyota Way or that we should ever change our ways at all. We just need to tackle this minor issue that affects only a small number of people; maybe in the past, we didn’t take it seriously enough,”

Lippert goes on to say:

“Does it (Toyota) want to follow the old model, being an ethnocentric Japan-based organization that exports to the world? Or does it want to be globally integrated? To what extent should they open up their operations [to] international talent, to what extent should they compromise on their corporate spirit, which is the kaisha spirit, which is basically a very Japanese spirit?”

By the way, one company that I think does an excellent job at this is McDonald’s (a client of ours but I would still say that if they weren’t).

I think the second issue that must be explored is where were all these much ballyhooed processes (TPS, LEAN, Kaizen etc.) when all this was happening?? And this is where I will get a little agitated because we keep telling clients that the magic is not in the process itself but what you do with it. It’s how you Apply, Execute, Implement these processes. I have often told clients that we will be happy to give them our process for free and they are highly skeptical of that offer. If you don’t believe me, look at what Curtiss Quinn has to say as he discusses why LEAN efforts fail:

“What always amazes me is how gracious Toyota is about sharing its philosophy, thoughts and lean tools to anyone willing to visit its plants and listen. The company feels safe, knowing that the knowledge it provides to others will either never be acted upon or will be started but not sustained. I know when I revisit Toyota plants each year that the same standard work and continuous improvement processes are in place.”

And this dependence on finding the latest perfect process and implementing it is nothing but a Don Quixote (I’ve always wanted to use that name in a blog post!!) type attempt at looking for the Holy Grail (now how did I connect those two dots from totally different times in history??)


Success depends on whether we have widespread Utilization of the process. Are the people trying to Optimize the process? And Toyota made the classical mistake of assuming that the processes that had worked so well for them in Japan would work just as well across the globe.

If Toyota couldn’t do that, what chances do mere mortals like us have?? Because Toyota didn’t realize that the stakeholders were different! That the alignment issues and challenges were totally different! Communications needed to be handled differently! Governance and decision-making were different! And how people Applied, Executed, Implemented, Optimized and Utilized the processes were totally different. Those of you that have trained with our firm will quickly recognize and realize all the Change Management issues that I am talking about.

We will continue to explore this situation as it unfolds. Suffice it to say that there is as much, if not more to learn from Toyota now than there has ever been. In future posts, we will examine a number of other fascinating issues that future case study developers are sure to tackle. Be prepared for another diatribe against using the label “soft” skills for what are clearly much more strategically important than any process skills.

And if you are a Toyota owner, are you concerned about the instant depreciation of your assets????

Don’t forget to take the poll and feel free to comment and disagree with me!!!!!!!!!!!


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Cheese, Chocolate and Lessons for Supply Chain

Posted by ron sanderson on February 19, 2010

The recent announcement of the Kraft acquisition of Cadbury reminds us of the many “big news” mergers over the years that ultimately failed.  Daimler Chrysler comes to mind.  But even if such a merger is not an actual failure, there is a serious question about whether the expected benefits of a merger will be realized.  Kraft is predicting some $300 million in operating savings with a combined company, but skeptical minds wonder if these savings might be overstated.

Sure, there have been many successful mergers and acquisitions too, and Kraft had a big success with its acquisition of Nabisco in 2000, as did Unilever with the Ben & Jerry’s acquisition in the same year.  In both cases, the acquired company retained its original brand identity, the transition appeared seamless to the market, and supply chains were combined effectively.

However, mergers between organizations that have two different cultures, two different histories and two different operating processes, to say nothing about different markets and brand images and marketing strategies, are inherently risky ventures. 

The Kraft acquisition of Cadbury brings to mind three questions:

  1. Is the estimated $300 million in operational cost saving that Kraft is predicting in consolidation of such areas as manufacturing, procurement, supply chain and other operations realistic?  Companies attempting to justify a big merger tend to overstate savings, and unless some good analysis has been done on realistic tangible savings areas, this may be no different.  Kraft has already done a great job of using optimization software and management to maximize its supply chain.  Are there any real savings in consolidating Kraft and Cadbury supply chains?  If the projected savings do not materialize during implementation, watch out! 
  2. Does Kraft have the competency required to reduce the uncertainty that both Cadbury and Kraft employees feel right now?  Kraft needs to act fast to reassure everyone that the Easter Bunny will still be delivering those Cadbury eggs.  At the same time, everyone needs to be reassured that there are certain operational and strategic advantages to having a combined company – and that their own situations will be secure. 
  3. Are there any combined procurement and sourcing opportunities?  Is there any leverage in the combined companies in terms of common food ingredients or indirect materials?  If procurement is outsourced, how will that affect the newly integrated organization?  How much procurement spend savings is achievable in the combined company?

We invite your feedback and thoughts on these and other questions.  Have any readers been involved in a merger?  Do you have any lessons or other insights to share from the experience?

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Gas Pedals and Supply Chains – Lessons from Toyota

Posted by dalipraheja on February 3, 2010

So, here is an example of taking some current news and drawing some learnings from it.  No doubt by now everyone has heard about the massive problems Toyota is experiencing.  Below is one of the many articles on the topic (full disclosure…we were interviewed and are quoted in it).  The challenge is that articles like this rarely dig into the deeper impacts of recent events.  There’s so much to be learned from Toyota, but who is asking the right questions?  I’ve posted a few below to get the discussion going…looking forward to your responses. 


January 28, 2010

Some points to ponder…

Was this a Supply Chain problem?  If so, where do you think the problems were?

Was this a breakdown of the much vaunted T.P.S.?

Did Toyota’s desire to beat GM and be the Number One auto maker have anything to do with this?  Did their growth outpace their Supply Chain?

Do you think Toyota did an adequate job of Risk Management before this event?  How about after the event?

Did the “globalization” of Toyota perhaps dilute their core values and change their culture in any way?  Did that have anything to do with why the original problem occurred?  Did it have anything to do with how Toyota handled the problem?

Does this mean an opportunity for their competitors to take away market share permanently?

The latest news says that the acceleration problem may have nothing to do with the accelerator pedals; it may instead be an electronics issue.  What does that tell you of the integration between their design engineering and their sourcing process?

Did Toyota have an adequate Supply Chain Risk Management process (NOT only a supplier risk process) in place?

The fact that Toyota could not switch from the supplier in question to another supplier because of variability in design…what does that tell you about their design engineering process (and risk management)?

These are merely some questions to provoke your thinking.  Feel free to add your own commentary and not be restricted by these questions.

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