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 April, 2010

Does it matter if a 600 lb gorilla is Chinese or American?

Posted by lowellyarusso on April 15, 2010

In a recent post, I commented on the possibility that Toyota could “win by losing”.  The point was that Toyota’s efforts to rekindle sales through rebates, financing deals, and other inducements could lead to long term problems for, in particular, Chrysler and GM which are trying to match those promotions.  By so doing, the cash-poor American manufacturers could easily recreate many of the situations that led to their recent bankruptcy filings.

Now, we see that the U.S. government is talking about imposing fines on Toyota that would be, as reported in the April 6 Chicago Tribune, “…by far the largest civil penalty U.S. auto safety regulators have levied against an automaker.”  From a Strategic Sourcing and Supply Chain perspective, this raises a number of issues we all should be tracking. <p>

First, if, indeed, Chrysler and GM are at risk in trying to match Toyota’s use of deeper pockets to stimulate sales, one solution for their owners, the U.S. Government, is to reduce the depth of Toyota’s pockets.  A $16.4 million fine may not seem like much by itself, especially for a company that lost $10 billion over the last two years.  In this case, the point is largely about the symbolism.  For the rest of us, it raises the caution that, as the government continues to transform its relationship with the nation’s economy, there is a new gorilla in the mix and it is a lot bigger than the proverbial 600 pounder of which we usually speak. Let’s look at a few more examples. <p>

I also recently commented on the risk posed by China’s central government and its ability and willingness to manipulate the Chinese economy. Who would have thought that we need to add that risk to the mix when looking at domestic suppliers?  Not sure that’s right?  I’m not wholly convinced either but…who’s to say.  Given the push for the government to take an ever bigger role in a seemingly endless list of industries (banking, hedge funds, automobiles, real estate, etc.) there is a real risk that your assumptions about the US economy need to be reevaluated.  Is this really a free market anymore?  Or, will we have to constantly be on the alert for the possibility that people seeking reelection will replace the rational man of classical economic theory? <p>

One other thought before I close.  Who, other than the government, could own the lion’s share of two of the three major domestic players in an industry and NOT have to justify its holdings to the Department of Justice’s Anti-Trust Division?  And, who among the watchdogs will be willing to bite it’s master should the government undertake actions (like hiking import duties on cars) “in restraint of trade”?  The bottom line: Keep an eye on developments in this arena.  There may be a huge, new category of risk to help keep you focused as you work with you Supply Chain partners. <p>

To answer the question I posed in the title, if a 600 lb gorilla sits on you, I don’t think you’ll worry about what country it’s from.


Posted in News U can Use, Sourcing/Supply Chain - Lessons Learned | Tagged: , , , | 3 Comments »

Do You Have a Uniform Problem In Your Supply Chain?

Posted by lowellyarusso on April 9, 2010

I ran across an interesting bit of news from the sports pages the other day. Seems that a player for the S.F. Giants trotted onto the field with a uniform that proudly proclaimed that he played for “San Francicso”. The writer also informed us that, last year, two players for Washington, D.C.’s Major League team took the field on Opening Day with uniforms emblazoned with their team’s nickname, the “Natinals”. (Honolulu Advertiser)

That got me to thinking and looking around a bit. Turns out that MLB has an exclusive contract with a company that makes all the uniforms for Major Leaguers. Without getting into the risk management / due diligence (or lack thereof) that went into the sourcing uniforms and the selection of that supplier, a couple of lessons can be learned from the uniform errors noted above.

First, the only explanation for those mix-ups would seem to be that the lettering on the uniforms is hand sewn. If the process were mechanized, the errors would have affected more than one or two uniforms. The lesson here is that the more you have to rely on human intervention in the Supply Chain, the more your open yourself up to human errors. The second point is that quality should be everyone’s responsibility and not just “what the Quality Department does”. Beyond the obvious point that the players in question MIGHT have noticed the problem as they dressed for the game, what about the 40 to 50 others who must have seen the misspelled monikers on those uniforms? I suppose it’s easy to see what you expect to see but still, someone should have seen the real vs. the imagined spelling.

Let’ take those two points and apply them to your Strategic Sourcing / Supply Chain processes. If you agree that the more human intervention there is in the manufacturing process, the more opportunities there are for error, the implications are obvious. The more you change what you are asking for through redesign, ECNs, and other tweaks to the specs, the more you are asking your supplier to “hand stitch” the product. That, of course, doesn’t mean that, for example, when Toyota notices that a part might be a tad under-engineered, they shouldn’t change the specs. However, by making the equivalent of “glad to happy” changes in specification, you are adding risk that you don’t need.

With regards to the second point, how often have companies been burned by quality issues that were known by individuals but were totally transparent to the organization? I’ve seen a lot of examples of obvious errors (obvious to ME, and I didn’t really know what I was looking for!) that “matched the invoice”, “passed Q/A so it must be OK”, “won’t really matter; we take stuff like that all the time”, and so on. I’d really like to know how much a blasé’ attitude toward personal responsibility for quality results costs companies across the nation. Again, I recognize that, when everyone is accountable, no one is accountable. And yet, in the case of the baseball uniforms, there are only two ways to avoid a misspelling on a jersey: 100% of incoming goods are inspected or 100% of the people who touch the goods are alert for and rewarded for raising quality questions. Which does your company want to hang its hat on for quality?

A final comment. One of the underlying issues re: misspellings on uniforms is the extent to which MLB cares that these errors are made. Arguably, things have gotten better. There were two errors noted last Opening Day and only one this year. Was that in response to a solid Supplier Relationship Management effort on the part of MLB or was it happenstance? The real key to success, for baseball uniforms and for accelerator pedals, is to get the design right, avoid tweaking with that design; and work with the supplier to ensure that they have the processes in place that will deliver a quality product on time, every time. It will be interesting to see if someone takes the field next year playing for the “Bravos” or the “Twims”.

Posted in News U can Use, Sourcing/Supply Chain - Lessons Learned | Tagged: | 3 Comments »

Spirit Airlines . . . First Class price, Worst Class for total value

Posted by annekohler on April 8, 2010

The Mpower Group has been talking a lot lately about the need for Strategic Sourcing organizations to move away from a cost focused (savings) mentality and more toward a value focused approach. We believe that this “change in the conversation” will shift the focus to what is really important for their customers (usually an internal business unit) – total value – of which low price may be only a small component or not of value at all.

This concept comes to mind as I think about the recent news about Spirit Airlines’ decision to charge customers $45 for carry-on luggage. To me, this is not only ludicrous but just confirms my opinion that this so called “low price” airline is operating on a completely different plane (pun intended) than both their customers and competitors.

I am a frequent business traveler and decided this year to use Spirit Airlines for my family vacation to Florida. I had been told by many that Spirit was one of the best “LOW PRICE” airlines and that I should consider giving them a try. My only other experience in this sector of the airline industry was with USA3000 and I must admit that I was very satisfied with them.

My experience with Spirit started out poor and just escalated from there. I booked my reservations with them in early January from Chicago O’Hare to Fort Meyers, Florida for travel in late March at a rate that was OK for that peak time of year but would be considered expensive at any other time. They were actually one of the only airlines that had a significant number of flights available – now I know why. The fun began about a week after I booked when I started receiving weekly emails noting that the flight times had changed. I literally received an email every week; by the departure week I was holding my breath to see the latest changes.

When we arrived at the airport to leave, the flight was oversold and because we did not pay for seat assignments (I refused), we were going to be bumped to another airline – if only. They did find us seats (be careful what you wish for) and we left three hours late – to be fair there were weather problems in Chicago. The legroom was non-existent, there were no blankets or pillows (you could pay for them) and NO food or beverage, not even water without a charge.

If you factor in luggage charges, the charge for a seat assignment, the charge for food / beverage (even water) you end up paying full service airline prices with the “low price / no value” airline experience. Don’t waste your time!!! Now, when they pile on the charges for carry-on luggage, I can’t imagine ANY consumer using their services.

As I sit back and think about my experience, I realize that I should have taken a value focused approach when choosing airline services. As airlines continue to nickel and dime us to death, I hope someone takes the time to listen to the “voice of customer” in determining the services that are offered and at what price. Unfortunately for my family, I fell victim to the “lowest cost” mentality and realized too late that this bargain was really no bargain at all.

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