I came across an article entitled “A plan to fix the U.S. auto industry” that I found interesting in large part because it spoke to supply chain management’s role in solving the critical problems the industry faces.  I added a comment to the site and have copied it here as well.

## My Comment ##

I like the fact that you focus on some of the supply chain challenges.  Clearly, the first goal is building products consumers want – high quality, fuel efficient, the right styling, etc.  The Big Three have a long way to go there.  But, as you accurately pointed out, the supply chain is an integral part of the system that can’t be overlooked.

Toyota has revolutionized the automotive industry with their adoption of lean manufacturing practices that reverse the conventional flow and focuses on eliminating waste in the process.  Reversing the flow means that instead of “pushing” products out (you build them and push them out to dealers), you build based on customer “pull” (a customer buys a car and that sends a signal back up the supply chain to build another one, which signals to buy the parts, etc.). 

By “leaning out” their processes they can dramatically reduce inventory throughout the supply chain.  The other thing Toyota (and most Japanese/foreign automakers) has led in is its relationship with suppliers.  Like many industries, automotive manufacturing has become an exceptionally outsourced process with parts coming from many suppliers (years ago, Ford, for example, would make all the parts and do the final assembly.  This has changed radically) that span the globe.  Toyota treats their supply chain partners as just that, partners.  Toyota invests substantially in training their partners on their lean techniques and ensuring that they are fully aligned.  At the end of the day, Toyota knows that their supply chain is only as strong as the weakest link and that, despite heavily outsourcing the manufacturing of key components, it is the Toyota name on the end product and, thus, they are fully accountable for the end result.

The Detroit automakers, on the other hand, have taken a very different approach.  They generally treat suppliers as commodity providers of services and focus first and foremost on the supplier that can provide the part(s) at the lowest cost.  It’s not as much as a partnership as it is a “buyer-seller” relationship at arms length.  The resulting differences are profound.

As your article accurately points out, one aspect of reinvention that the Big Three need to face is how the supply chain fits into their overall strategy.

You can see more on this discussion here: “What’s your relationship with your suppliers?“

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Tags: Lean manufacturing, Supply chain management
Posted in Supply chain management
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