A wake-up call…

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For  much of the past 20 years (at least), the focus of supply chain professionals has been on squeezing every last penny of cost out of operations.

Consolidation, reducing the number of suppliers, moving production to low-wage economies have become central to the development of supply chain strategies.

However, the past couple of years have seen a series of natural disasters causing  severe disruption to supply chains. There are two ways of looking at this. One is to say that these events are so rare that it is not worth trying to plan for them – it is better to focus on minimising costs and simply accept that disruption will occur occasionally.

The other is to look for ways to increase supply chain resilience. There are a number of possibilities – holding more stock, for example, or increasing the number of suppliers.

Of course, the clever thing is to find ways of improving resilience without a major increase in costs.

And, according to a recent Reuters report from Tokyo, this is the approach that Toyota is adopting. Following the earthquake and tsunami of last March, it has been identifying the suppliers that are most at risk coming up with a list of some 300 locations that were single sources for parts.

Options include ensuring that components are produced at more than one location, increasing stock holdings, or purchasing from additional suppliers.

At the same time, Toyota is looking to increase the number of common parts across its product range and so offering economies of scale to its suppliers.

Toyota has strong reputation for the quality of its supply chain management. The fact that it sees a need to make such wide-ranging changes should be a wake-up call to rest of us.



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