Supply Chain Expertise and Technology Blog by TMC, a division of C.H. Robinson

Deciding What’s Best

Supply chain risk management

Toyota’s product recall agony is providing rich pickings for industry and media pundits, who are mining the saga for insights into the causes of the automaker’s predicament. We will no doubt be regaled with what-went-wrong stories for some time to come, but there is one important lesson that has more to do with the culture of excellence that can affect any company than specific failings at Toyota. The lesson can be summed up in two words: best practices.

As a society, we love to find and celebrate winners, and in a supply chain context, best practices are often associated with corporate champions. These leaders have developed processes and methods that deliver superior supply chain results. By distilling best practices from these advances and adopting them, companies hope to stay ahead of the competitive curve and achieve the success enjoyed by the top performers.

Up until fairly recently, Toyota was a paragon of supply chain virtue, and countless enterprises emulated the automaker’s prowess as a master of lean manufacturing. Now that the company’s crown has slipped, where does that leave the best practices that used to set it apart from mere mortal manufacturers?

The tenets of lean are still intact of course, and Toyota’s achievements cannot simply be written off just because the enterprise has made some mistakes, albeit serious ones. Still, its spectacular fall from grace underscores how best practices are not immutable laws of excellence that magically propel a supply chain to best-in-class and keep it there. We can learn a great deal from the winning ways of top players, but the practices that underpin their success can degrade quickly when these leaders lose focus or markets change.

According to Toyota’s CEO, the company began to lose its way when it became obsessed with growth. The fixation shifted attention away from many of the best practices – particularly in the product quality area – that had won Toyota so many plaudits.

Sometimes it is not the focus that changes but the environment in which the company competes. A few years ago, consumer electronics company Dell was lauded as a world-beater thanks to its preeminent make-to-order distribution model. However, as competitors mimicked the Dell model and customer demands shifted the company’2013-05-22 19:24:31’s market share went into decline and its reputation as a top dog suffered.

Not only must best practices keep pace with the changing competitive landscape, they must also complement the supply chains they are meant to drive. There is no such thing as a universal best practice; one that is a perfect fit for company A might be a square peg in a round hole when applied in company B. Perhaps company B’s business model is unsuited to the best practice or its supply chain is not ready to change direction in the way prescribed by the new processes.

A decade or so ago Boeing decided to move away from centralized manufacturing and towards a distributed model. The manufacturer devolved responsibility for the supply of sub-assemblies and key components to an international network of suppliers. The approach promised to bring down costs and make the organization more responsive. Unfortunately, Boeing’s supply chain was ill-prepared for such a distributed regime. The strategy was disastrous initially and the supply chain disruptions that resulted caused production delays and revenue losses.

Toyota’s recall debacle could well spawn a fresh set of best practices as industry experts pore over the automaker’s flawed supply chain. Before subscribing to the new thinking companies should ask whether these methods and processes will make the organization more competitive and support its business strategy. Will operational performance be improved, and what can be done to ensure that the best practices stay attuned to market conditions and the organizations’ corporate goals? Hopefully, Toyota will be asking some of these questions.