Readers
of this blog know how I feel about the Black
Swan by Nassim Nicholas Taleb. Those
of you who are new should know that Amazon’s blurb explains the idea well in
just a few words:
“A black swan is an
event, positive or negative, that is deemed improbable yet causes massive
consequences.”
The classic example is an earthquake or tidal
wave. If you build your plant to survive
a 500-year tsunami, then GREAT! Except that
the next tsunami might be a 10,000-year tsunami. Then you have trouble.
This brings us to this
article in Automotive News. I hate
long quotes in a blog, but I cannot resist:
To protect itself
from production bottlenecks caused by unforeseen disasters, Toyota Motor Corp.
has asked 400 North American suppliers to identify any key parts that are
produced by just one factory.
The automaker has
also asked the 400 to develop backup production plans in case a single-source
factory shuts down unexpectedly.
Bob Young, Toyota's
North American purchasing chief, says he wants to identify all "pinch
points" that could occur if a key plant is disabled by fire, flood,
earthquake or other disasters.
"We're assuming
they'll be able to salvage the tooling" from the stricken plant, Young
said during an interview at the Toyota Technical Center here, near Ann Arbor.
"We're asking suppliers what they would do and how much time would they
need" to re-launch production.
Some suppliers might
maintain reserve stocks of components. Others might obtain certification to
produce parts in a second factory, if necessary.
But there are limits
to Toyota's disaster planning. The automaker will not ask suppliers to reserve
production capacity for emergency use. "We are not willing to pay them for
that capacity," Young said. "It would be very expensive."
I give Toyota’s Bob Young full marks for
candor and straight talk. I like him
already, and I have never even met him. None
of this changes the fact that long-supply chains pose inherent risks.
I visited a fellow who bought large
quantities of large steel castings from Asia for many years without ever having
experienced a scrap issue or a late shipment.
I told him his achievements were indeed impressive, and that he doesn’t
need me with such a smooth-operating supply base. He continued his story, explaining that he
wanted to locate a domestic source in case of “civil unrest” in the source
country. He didn’t want to actually BUY
from a domestic source … he just wanted the source teed up and ready to take
the phone call. Egad.
So here are the takeaways for a casting salesperson:
1. You should have a ready answer when your customer challenges you on what will happen you have a fire or a natural disaster.
2. Hopefully you have two plants with similar equipment (Like AP! Yay!).
3. If not, you should be ready to explain why you have never had an interruption in “x” years.
4. This line of questioning means that asking about your foreign competitor’s plans is fair game.
5. This also means that your domestic location and short supply chain are opportunities to emphasize real and quantifiable value.
Thanks for reading!!!