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Supply chain lessons in Toyota nightmare: expert

Posted: August 1, 2014

TORONTO — Toyota’s recent woes serve as a cautionary tale for supply chain professionals, says a former company insider.

One of the biggest lessons, says Joel Sutherland, now the managing director of the Center for Value Chain Research in Bethlehem, Penn., is that nothing in the manufacturing and distribution process trumps safety or quality.

"You can’t take your eye off the ball when it comes to quality," he told todaystrucking.com’s sister publication, Logistics Magazine. "You can’t blink. And, unfortunately, I think that’s what happened here."

Sutherland teaches supply chain at Lehigh University but also runs a research centre to help companies improve their supply chain performance. He is uniquely qualified to discuss supply chain issues at Toyota, having once been the highest ranking American working for Denso, Toyota’s largest global supplier.

Ultimately, he says, the quality concerns now being blamed for scores of deaths worldwide may stem from complacency that set in well after Toyota earned a sterling reputation for quality.

Clutch Decisions: Toyota’s problems are
its supply chain’s problems too.

"In this case, it looks like somebody failed to ensure the quality was there throughout the process," he says. "They assumed it was there. They assumed that, because it was a Toyota-engineered product, the specs were right, and nothing would go wrong."

But things did go wrong. In the U.S. alone, some 34 deaths are being blamed on uncontrolled acceleration in various Toyota models.

Subsequent investigations have looked at the design of the floor mats, the configuration of the floor, and the engineering of the pedal itself. It’s a peeling of the onion skin, as Sutherland describes, that has revealed other concerns, halted production for weeks, and led to a recall of over 8 million vehicles for repairs.

It’s a massive blow for Toyota, who recently took GM’s position as the world’s largest automaker. And in its travails are a number of lessons for supply chain professionals, as well as transport providers, Sutherland believes.

First, choose your partners carefully, however difficult a process that may be.

"It was a rigorous process, and I would say a struggle, to find secondary suppliers, that could make components as well as we could because they didn’t have the culture, the Toyota Way they called it. They would try but they really didn’t have it." He says Denso and Toyota made regular site visits to make sure they had the quality processes in place.

Toyota’s growth in North America was carefully planned, says Sutherland, but the challenges of incrementally improving their global marketshare may have proven to be a distraction from their core competencies.

"It could be part of the problem," he says. "I don’t know that it was rapid expansion, so much as steady expansion … So they were not reckless in their expansion. But that’s not to say that someone didn’t blink.

"It could have been in the American management. It could have been in Japan. But someone took their eye off the ball just a little bit."

Sutherland points out the severe impact the situation is having on the global supply chain.

"Inventory is building up, employees are not working, companies are experiencing costs, national economies are being impacted. This situation will be measured in the billions of dollars," he says.

"Warehousing and transportation service providers are suffering too. They have facilities and assets that are idle right now. This is a complete supply chain problem, involving everyone right back to the raw materials."

Failures take on a new dimension when you consider the implications on other businesses and industries.

"Your supply chain is important, not just to your company but to many others," he says, "so you’ve got to get it right."

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