Toyota Woes Highlight Importance of Supplier Quality Management

Article title
logo

Welcome to the 894,302nd and counting piece about Toyota’s fall from manufacturing grace.

We don’t need to devote a lot of space here to recounting Toyota’s problems. You probably know the story: After months of hemming and hawing, the once-proud carmaker finally acknowledged the obvious this month and said it was recalling a boatload of cars that have accelerator pedal problems.

But it gets worse: Yesterday (February 9, 2010) Toyota added that it was also recalling over 400,000 Prius, Lexus because of a brake problem as well as additional problems with the Camry and possibly the Corolla, too. For now, the jury is still out on exactly what went wrong (beyond how badly Toyota handled the PR side of this).

Yet we’re writing about this today because, even as Toyota’s massive problems are being probed, analyzed and dissected by experts from various industries, the issue of supplier quality management (SQM) doesn’t seem to be coming up much.

By enabling the capture, analysis, and assessment of quality related issues, Supplier Quality Management (SQM) creates total transparency and visibility into the supply chain. It provides instant traceability and real time monitoring across the supplier network.

By enabling the capture, analysis, and assessment of quality related issues, Supplier Quality Management (SQM) creates total transparency and visibility into the supply chain. It provides instant traceability and real time monitoring across the supplier network.

That’s too bad, because one of the few good things that could come out of all of this is reminding car manufacturers, medical device makers, pharmaceutical companies, food manufacturers and a host of other businesses that supplier quality management is key to being a profitable, effective company that only gets good headlines (See box below, Sal’s Tips).

“Gone are the days when manufacturers can say suppliers can’t have an impact on their success” or, perhaps in the case of Toyota, a spectacular failure, says Dun & Bradstreet analyst Jim Lawton. He also has a background working on medical device issues with Hewlett Packard.

Lawton’s first lesson gleaned from Toyota is that companies should strongly consider focusing on their core competencies and outsourcing other stuff. For example, companies should work hard with partners to understand risk and develop procedures and programs to mitigate it.

“Unfortunately, the medical device industry is not out in front when it comes to managing supplier quality,” worries Jim. “They are all about taking out costs,” he adds. For more of his excellent insights, check out his recent interview with Industry Week.

That can be a case of being penny wise and pound foolish, agrees Sal Lucido at AssurX. ‘Supplier quality management has not gotten the attention it should, because it’s complicated; involving the processes and politics of other companies. It’s hard enough to manage your own company’s issues let alone those of your global suppliers,” Sal says, adding that he believes lessons can be learned from Toyota’s missteps.

Sal’s Tips: Lessons Learned From The Toyota Fiasco

Toyota’s pain could be others gain, IF they learn from what happened to a once-lauded manufacturer. Sal lists some lessons:

  • The costs associated with the loss of your company’s reputation are incalculable.
  • Product quality includes both the actual and the PERCEIVED view customers hold of your product.
  • Ensure you have visibility to the data you need to detect problems early. Prevention is an order of magnitude less costly than late reaction.
  • Don’t rely solely on return on investment calculations to direct your process improvement efforts. Sal states as an example that, “ROI calculations are effective when it comes to making decisions such as purchasing automation equipment, but they can fall short when it comes to upstream process improvement investments such as SQM.”

SQM often also gets short shrift because it is harder to calculate in terms of the return on investment (ROI), Sal notes. “When supplier issues are addressed with band aids and tape, they can be hidden from view – for a while. But the day of reckoning always comes.” This is one of the lessons we all may be able to learn from Toyota’s predicament. “The further back in the supply chain, the less attention it gets,” says Sal.

But the Toyota case might make it easier for others to calculate their return on investment in supplier quality. “Decades of reputation building (not to mention billions of dollars) by Toyota has been washed away in a matter of days! It’s very sobering if you are a manufacturer,” Sal points out.

Some good can come out of Toyota’s very public problem if we use it as a wake up call to look at our own house and make sure the processes are sound throughout, starting with supplier quality.

Showing 6 comments
  • Reply

    I am so glad that you hit on “perceived view” of customers. The perception of your customer about your product or service is your reality, no matter what the data is telling you. If your customers say you have a problem, you have a problem. Thanks for your insights!

  • Reply

    Thank you for your comments, too. Yes, the perception is the reality these days. Especially when information, vetted or not, accurate or not, flies around the globe via blogs, Facebook and the like.

  • Reply

    Another great column, Michael. SQM is certainly something that all manufacturers need to pay close attention to. But I think your other examples — ” medical device makers, pharmaceutical companies, food manufacturers and a host of other businesses ” — are much more apt than your actual analog (Toyota). It looks like Toyota’s problems go straight back to Toyota. The accelerator part was apparently manufactured exactly to Toyota’s specs and it was likely a design flaw which would be Toyota’s fault.

    None of this negates your two good points: SQM is critical, and Toyota botched the PR effort (though how long they could continue to bury bodies is debatable).

    Thanx for you work!

  • Reply

    Thanks for the points you raise. I see your point, and I was hoping to stress that even if the problem is Toyota-based, I think you’d agree that if Toyota had had stronger Quality Management all-around, they would have identified these troubling trends earlier than they did. For all we know still, a vendor/supplier could have contributed to this problem. Sometimes vendors can alert suppliers to a quality control issue, too.

    Thanks again for your excellent points DJ.

  • Reply

    Engineering change management also plays a large role in the overall quality management arena. All of those issues, changes, supplier quality, defects, complaints, etc., should be tied into one closed-loop system for higher visibility. This is something our customers are doing on a daily basis especially with global suppliers. Unfortunately for many other manufacturers, having disparate systems throughout the company (whether it’s just one facility or several) is still commonplace.

    More on change management here.

  • Reply

    I agree. There should be a wholistic approach.
    SQM is mostly not tied to ECM. The group of people handling SQM are not likely the same with the ECM group. There is lack of visibility on both ends.

    One majpor contributing factor is that Organizations tend to implement Information Systems Bottom-Up. There is lack of envisioning and modelling with that method.

Leave a Reply

Quality Management Software
AssurX Quality + Compliance ManagementA single versatile system can improve quality, compliance and streamline workflow
Don't Miss A Post

Subscribe to our blog to receive an email when we publish new content.

Recent Posts
Categories
Quality and Compliance Systems for Every Enterprise
A single versatile system can improve quality, compliance and streamline workflow.