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http://www.bnet.com/blog/auto-industry/lean-production-another-casualty-of-the-japanese-quake/127?tag=content;feature-roto

Lean Production: Another Casualty of the Japanese Quake?

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If a plant supplying any of the Detroit 3 went into the tank, would GM send 300 engineers to the supplier to help with rebuilding (as Toyota was reported to have down with Riken) or have given priority for production parts to Chrysler and Ford, as Matthew May wrote in his comments about the Aisin fire? Maybe when pigs fly.

The Detroit 3 would have simply turned to the supplier(s) behind door #2 and door #3 and asked “who’s got the best price?” and would have starting building up inventories of unmatched parts and then not be able to understand why today’s production model differs in quality from next week’s, as more and more cars go off the assembly line into the rework area.

Meanwhile supplier #1 loses their #1 customer, the one who’s already forced them to cut prices so much that they can barely break even on the part and they end up folding, putting hundreds or thousands out of work, permanently.

That’s what Detroit would do, in the humble opinion of this former metro-Detroit resident and Tier 2 supplier who felt the trickle down effect of forced price reductions every year.

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This is the letter I actually wrote the WSJ (and should have cc-ed the reporter):

Dear Journal Editors:

After hearing news of the recent earthquake in Japan , I publicly predicted the coming “Is Just-In-Time Risky?” article and you delivered (“A Key Strategy of Japan’s Car Makers Backfires,” July 20). The writer blamed kanban and the “lean manufacturing” approach used by Toyota and many others, although you rightfully recognized that the philosophy “keeps inventory costs down and ensures quality.”

News stories reported that the Toyota supplier, Riken Corp., suffered damage to its factory and to its warehouse. It seems irresponsible to suggest that companies with supply chains that normally flow smoothly should hold “just in case” inventory stockpiles that can just as easily be damaged in an earthquake or other such rare disaster. Toyota suffered a similar shutdown in 1997 after the Aisin factory fire, another situation where parts were sourced from a single supplier and inventory levels were low. As the Journal itself wrote, again in 1997, “The fire and its aftermath have left Toyota executives convinced that they have the right balance of efficiency and risk.’

Should Toyota , and others, sacrifice cost and quality for a one or two week disruption that happens every ten years? Toyota is, by its nature, self-critical, so I would trust Toyota management, especially given their track record of sustained growth and profitability, to find the right balance more so than outside analysts or reporters.

Mark Graban
http://www.leanblog.org
Keller TX

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I knew you would be all over this. As I read the article, I started fuming.

I wanted to email the author and ask them “Say, how have the strategies of gm, ford and chrysler played out?” Or ask them “how do you suggest the companies hedge against random acts of nature in the future?”

Then, I recalled the words of Ambassador Londo Mollari from the TV series Babylon 5, which are most appropriate for the author of the article:

“Ah, arrogance and stupidity all in the same package. How efficient of you!”

Creating customer pull and driving improvement to those in gemba are my passion. This, along with the pending acquisition by Rupert Murdoch, have made me question my continued WSJ sub.

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You should get a crystal ball for your prognostication abilities. When I saw the WSJ article, I thought, “Mark called it!”

The journalist should have gone one step further and analyzed the costs of holding extra inventory of this part — and, of course, every other part Toyota needs to make their cars — versus the expected costs of the disruptions due to a 6.8 earthquake. My guess is that the costs of the former would *far* outweigh the expected costs of the latter. And while it’s not quantifiable, tolerating waste (in terms of excess inventory) would probably have negative effects on other aspects of the company.

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