Industry Week's David Blanchard offers an analysis of Just In Time (JIT) manufacturing's dangers, from Boeing's delayed Dreamliner to Motown's supplier woes ("woes" as in torpedoes aimed straight the mothership's hull). Blanchard says JIT is fine in theory. "Some Japanese automakers have done quite well with that type of win-win relationship, often symbolized by the idea of the keiretsu, or joint partnership. The Detroit Three automakers, on the other hand, apparently see greater promise in pursuing lose-lose relationships… Look at the relationship (if you want to call it that) between Chrysler and one of its Tier One suppliers, Plastech, who had fallen on hard times. Rather than offering assistance to a key supplier, Chrysler canceled its contract with Plastech, which not only led Chrysler to temporarily shut down production at four assembly plants, but also caused Plastech to file for bankruptcy protection." While that's not the way it went down– Chrysler bailed and bailed until it bailed– Blanchard's wider point is valid. "The key word in supply chain management is management, and when relationships aren't managed properly (or at all), then there really isn't much of a supply chain. What you've got instead is a mad free-for-all, and ultimately, a lot of unhappy customers." And, we might add, employees, shareholders and dealers.
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To Detroit supply chain management translates into screw over the other guy, strangely enough, employee relations management as well as customer relations management also translate into the same phrase.
Kizmet (aka karma) is a biatch, isn’t it?
For the past 10 years Detroit’s cost cutting measures to decrease their bottom line was one folded – get parts cheaper and beat up suppliers. Look at supplier ratings for MFGRs over the past 2 decades – including those parts supplier spun off from the Big 2.8 – the lowest ranked MFGRs are Big 2.8 b/c they have little concern for their well being. Executive Pay – UAW/CAW payouts and status quo prescription viagra campaigns (many ended up sold on black market) remained unabated to keep everyone satisfied – and this was only sustainable b/c poorly built tough looking SUVs were flying out the door b/c the outdoorsman look was so cool at the time.
Whereas the transplants slowly built up their factories hired a nonunion workforce (at that point the union was beyond it’s good intentions when it first started and was greedy – sorry but that’s the truth), and worked with their suppliers such as helping them evolve to be more competitive and making profit to remain sustainable. What happened? Well the transplants got the pick of the litter in best parts and talent working on their items (i.e. the failure specs on parts made for Toyondassan was much more strict and often parts that failed were then accepted for the Big 2.8 b/c failure specs were a more grey area as price was the big concern).
Another good example is a tooling die company that was struggling and left for dead by GM and Ford – they were a sole supplier for them and couldn’t make a profit and invest back in their business. Honda met with them and invested in their company on how to compete not just in the US but on a global basis. This attitude created a very strong and competitive US tooling company – stable and reliable for Honda’s supply chain yet profitable so that the company can further invest in their future.
I think the CEO’s of the big 2.8 each need to pick up a copy of ‘The Toyota Way’.
jaje :
Another good example is a tooling die company that was struggling and left for dead by GM and Ford – they were a sole supplier for them and couldn’t make a profit and invest back in their business. Honda met with them and invested in their company on how to compete not just in the US but on a global basis. This attitude created a very strong and competitive US tooling company – stable and reliable for Honda’s supply chain yet profitable so that the company can further invest in their future.
From the article:
Or take the story of Excello, a supplier to Ford, Honda and Toyota that used to be based here in my neck of the woods in northeast Ohio. I say “used to be” because Excello recently closed up shop for good, causing nearly 130 workers to lose their jobs. As reported by the hometown Cleveland Plain Dealer, Honda and Toyota stepped forward and agreed they would contribute to a fund for the displaced workers; Ford, on the other hand, declined to contribute.
I’m reminded of one of the key principles cited in Jeffrey Liker’s book, The Toyota Way: “Respect your extended network of partners and suppliers by challenging them and helping them improve.” Based on Ford’s relationship with Excello, the Ford Way apparently is: “Sorry, can’t help you.”
Mr Farago,
is that true? If so, then all I can say is “Wow”.
I really liked Ford and I was tempted to buy the Ford Focus Cabriolet, but when I hear stories like this, I’m reminded why I stick with the Japanese.
“Doing the right thing moves us forward” Al Gore.
Please Katie—don’t pollute our little kingdom with the likes of Ozone Al
Nothing wrong with Al Gore! I like the guy.
Pick up a copy of Gore’s “The Assault on Reason” and see if you don’t think he’s right.
If you prefer an author with less politcal baggage pick up Susan Jacoby’s “The Age of American Unreason” and see if you disagree with her points.
@# Subifreak :
May 14th, 2008 at 7:47 am
I think the CEO’s of the big 2.8 each need to pick up a copy of ‘The Toyota Way’.
===
Mulally wore his copy to shreds back when he was heading Boeing.
Try MLK if you don’t like Al:
“It’s always the right time to do the right thing”
Somehow I don’t think the top people at Toyota or Honda ever had to pick up a book on how to figure out that doing the right thing is the right way to both run your life as well as to run your business. No book is ever gong to save GM because their leaders obviously don’t know what the rest of us were taught as small children
GM's (and the other D1.8) attitude towards it's suppliers is the single biggest issue I have with them. There is nothing wrong with JIT supply chain management systems per se, but with a corporation so totally devoid of business ethics like GM even the best of best practices will end up as a sham. I have been at GM supplier quality meetings in the 'war' room more often than enough. To say that these meeting typify all that is wrong with GM is an understatment. If you want to see arrogance, childishness and ruthlessness mixed with stupidity, total disrespect in an atmosphere of tension where you can visably see people's nervousness as they wait their turn at the guillotine, that's where you will find it. I have witnessed our plant manager berated in the most obscene way possible. I have seen people rush out of the room in tears. I saw one or our QA engineers quit his jobs on the spot because of the abuse he experienced at the hands of GM people. I heard one GM 'engineer' I know who can barely write his own name (he is not a real engineer BTW)scream abuse and obscenities at a young female engineering intern on OUR own plant flour during a visit to the total shock and surprise of our CAW workers who were within hearing. The workers filed a complaint with the Union to force this man to apologise. We were one of their better suppliers from a quality standpoint so I would hate to experience what their no-so-good suppliers get. Even if GM's vehicles were world class (they're not), even if their dealer network was up to scratch with all that it entails (they'e not) I will never buy a product from this company just because of the way it treats suppliers, ever. I really feel empathy for GM's vast number of workers and their families but when GM goes under I will shed no tears for it. My hope is that a better GM will arise from the wreckage. GM is dying in a bed of it's own making.
@ShermanLin: I recall that at the US management level, Toyota sends you to their in Japan school for several weeks when you sign up to get indoctrinated. I don’t know what Honda does to for their initiation – MotoGP races sound good to me.
James Surowecki (The Tipping Point) had a brief article in the New Yorker last week about Toyota Production System.
Closing quote: “Corporations hope that the right concept will turn things around overnight. This is what you might call the crash-diet approach: starve yourself for a few days and you’ll be thin for life. The Toyota approach is more like a regular, sustained diet—less immediately dramatic but, as everyone knows, much harder to sustain. In the nineteen-nineties, a McKinsey study of companies that had put quality-improvement programs in place found that two-thirds abandoned them as failures. Toyota’s innovative methods may seem mundane, but their sheer relentlessness defeats many companies. That’s why Toyota can afford to hide in plain sight: it knows the system is easy to understand but hard to follow. “
Management tips for us Western types: Robert Sutton’s “The No A*****e Rule” – haven’t read the book, but he has a blog about implementing these no-nonsense management principles.
Was talking to a friend of mine who is Director of Sales for a supplier I used to work for. The new Chrysler LLC will no longer purchase this specific commodity if it in manufactured in North America – this includes Mexico.
In short – if you’re not making it in Asia don’t talk to us. This is beyond disruptive for suppliers who have invested heavily in NA, including Mexico. Insane.
P.S. Just happened to glance over at the right side of the screen – there’s a Chrysler ad commanding me to “Gain Stability” ($2.99/gallon promotion.) Gee – no thanks Chrysler……
Paul N. & Sherman L.:
Couldn’t agree more about the reasons for doing the right thing.
Unless someone had ever worked in Automotive for the Big 3 you wouldn’t understand how little value is placed on doing the right thing as oppossed to making it look like you did the right thing. Lying, cheating coniving and back stabbing are rewarded. I knew I had know future with Ford when my annual appraisal said I had a good future with Ford if I could do something about my honesty problem. There was no room for that in Quality at Ford.
daro31:
I knew I had know future with Ford when my annual appraisal said I had a good future with Ford if I could do something about my honesty problem. There was no room for that in Quality at Ford.
In the early 90’s I thought Ford was really pointed in the right direction – as opposed to say – GM. But they gulped the SUV kool-aid and let too many products languish.
Did things go wrong quickly? Or did things go right for a bit and then revert to normal???
I have worked for Suzuki motorcycles and had the opportunity to see what real teamwork is between the manufactures and suppliers. They both realize the value of the relationship. Suzuki designs it, the supplier gives their imput for improvements and the final part design is produced. The supplier knows if they supply quality parts on time, they will make their buyer sucessful. The manufacure knows if they use quality parts their products will be better and they have a good chance of selling more of those products. They realize both entities must be sucessful to work. Win, win.