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    4 views8 pages

    Dyer SMR Supplier Networks 2004

    Uploaded by

    Kanchanit Bangthamai

    Copyright:

    © All Rights Reserved
    Download as PDF or read online from Scribd
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    of 8
    Using Supplier Networks to Learn Faster Other firms like Boeing, Harley-Davidson and Xilinx, a semi trey H. Dyer isthe Horace Beesley Professor of Global Strategy and Nile W. Hatch is assistant professor of strategy atthe Mario ‘School, Brigham Young Unwersiy, in Provo, Utah They can be reached at over yu.edu anc nie @eyu. ec Many companies keep their suppliers at arm's length. But partnering with vendors — sharing valuable knowledge with them through organized networks — can be a sustainable source of competitive advantage. Jeffrey H. Dyer and Nile W. Hatch conductor manufacturer headquartered in San Jose, California, have also realized the importance of knowledge sharing with partners, and they are looking at strengthening those processes As Xilinx vice president Evert Wolsheimer states, “I think our partnership relationships will evolve in a similar direction over time to look like what Toyota has done: Learning at Toyota So what exactly has Toyota done? Ta answer this, we performed an in-depth study of Toyota and its suppliers (see “About the Research’) and found that the company has developed an infra structure and variety of interorganizational processes that faci tate the transfer of both explicit and tact knowledge within is supplier network. (See “Two Types of Knowledge” p. 60.) The effort, headed by the company’s purchasing division and its oper ations management consulting division (OMCD), consists of three key processes: supplier associations, consulting groups and learn- ing teams. (See “How Toyota Facilitates Network Learning” p. 61.) Supplier Associations In 1989, Toyota started an association for its USS. suppliers. Named the Bluegrass Automotive Manufac- turers Association (BAMA), the group was modeled after Toy- URW) Toyota has long excelled at transferring productivity enhancing knowledge throughout its network of suppliers! From 1965 to 1992, for example, the company and its sup: pliers increased their labor productivity by roughly 70 In contrast, during the same time period US. automakers and their vendors achieved productivity Increases of 250% and less than 50%, respectively To examine the mechanisms that Toyota and its suppli: ers have successfully employed to share knowledge with each other, we conducted an extensive study, consisting of ‘more than 100 hours of interviews with more than 30 Toy: ota executives. We also surveyed more than 80 of Toyota's suppliers in both lapan and the United States, and we con: ducted interviews with dozens of their senior executives, The investigation looked not only at how Toyota trans ferred knowledge to its suppliers but also at how the com: pany was able to tap into the potential of knowledge located outside the organization. Further, we examined the ‘ways in which that system of knowledge sharing had cre ated superior competitive advantage and profits for both Toyota and its suppliers. |. Nishigch “Strategie Industral Sourcing New York: Oxon Unive ‘iy Press, 199), and M. Lieberman, “Te Dstuson o Lean Manlacu ing'n he Japanese and US, Automate Inusty” presented at he Now Imporatves lor Managing Revousonary Chango Conference Shizuoka, Japan, Aug 29, 1988, 58 Mrs ‘ta’s supplier association in Japan (called kyohokai). The initial objective was to provide a regular forum for Toyota to share information with and elicit feedback from suppliers. Member ship was voluntary, but word gradually spread about the value of joining the association. By 2000, BAMA had grown to 97 suppliers from an original membership of just 13. According to. Toyor 's Chris Nielsen, general manager for purchasing pla ning, “We really didn't know if this would work in the US, Before BAMA, it was not very natural for supplier executives to talk and share information. ... Over the years, that has changed as suppliers have built relationships at senior levels” Details of the kyohokai reveal the various mechanisms through which knowledge is shared, 1¢ supplier association holds both general-assembly meeting (bimonthly) and topic committee meetings (monthly or bimonthly). The former arding pro- ils and so on within the sup. enable high-level sharing of explicit knowledge 1 duction plans, policies, market tn ply network. The latter allow more frequent interactions on four specific subject areas — cost, quality, safety and social activities — which are generally of benefit to all members of the network The quality committee, for example, picks a theme for the year, such as “climinati supplier design defects.” and meets bimonthly to share knowledge with regard to that particular topic. The quality committee also sponsors various activities, including basic quality training for more than 100 engineers ‘each year, tours of “best practice” plants both inside and outside the automotive industry, and an annual conference on quality management that highlights in-depth supplier cases of quality improvement selected by a panel, Such efforts, in conjunction with those of the other committees, not only providea forum for sharing valuable knowledge, they also help develop relationships among the participating suppliers. Consulting/Problem-Salving Groups \s early as the mid-1960s Toyota began to provide expert consultants to assist its suppl crs in Japan, To that end, the company established the OMCD for acquiring, storing and diffusing valuable production knowl- edge residing within the Toy ia Group, The OMCD consists of six highly experienced senior executives (each of them has responsibility for two Toyota plants and approximately 10 sup- pliers) along with about 50 consultants, About 15 to 20 of those consultants are permanent members of the OMCD, while the rest are fast-track younger individuals who deepen their know!- edge of the Toyota Production System (PS) by spending a three: to five-year rotation at the OMCD. Toyota sends these i house experts to suppliers, sometimes for months at a time, to help those companies solve problems in implementing the TPS, Interestingly, Toyota does not charge for its consultants’ time, instead making the OMCD a resource available to all members of the Toyota Group. Our survey of 38 of Toyota's largest first POMC SC a Knowledge sharing with partners is the foundation of Dell Inc.'s efforts toward “virtual integration.” According to CEO Michael Dell, “Virtual integration’ means you basically stitch together a business with partners that are treated as if they/re inside the company." To achieve that, Dell has implemented a variety of First, Dell has taken minority equity stakes in a few key vendors. Second, it ‘encourages its top suppliers to locate their resources inside or near Del design centers and factories. Third, it has implemented a certification program that is unique among major PC manutac- turers. According to Scott Perry, senior director of global sales at Maxtor Corp. a manufacturer of computer hard drives, “Dell's certification process teaches our engineers the language, processes and metrics used by Dell. n short, it teaches them how to think like Dell, This is ert cal because Dell wants our engineers to ‘monitor processes both in our factories, and at Dell factories using the tools, processes and metrics preferred by Dell” Fourth, Dell engineers routinely visit sup- tier suppliers in Japan revealed that, on average, they received visits per year, each lasting 3.1 days. In 1992, Toyota established the US. version of the OMCD. plier plants to monitor performance, share process knowledge for improving {quality and yields, and encourage the better vendors to share their know-how with others. Fifth, Dell has worked on its ‘own internal operations to facilitate ‘greater and faster knowledge transfer For example, the company returns defec tive parts much more quickly than its competitors do, providing suppliers with valuable data earlier on. “Returned parts (on Dells products usually reach us in 30, days versus 90 days for competitors.” says Maxtor's Perry. "As a result, we can work together to fix problems quickly, which keeps warranty costs low.” Sixth, suppli- ers engineers visit Del plants to help ‘both Dell and the suppliers improve product quality and process capabilites. These engineers conduct failure analyses ‘at Dells factories, after which they trans: fer the resulting knowledge to their own {aclties for corrective and preventive ‘actions. Seventh, Dell coordinates its knowledge-sharing activities by meeting ‘weekly with key suppliers and by holding Quarterly business reviews with their top executives. Lastly, Dell is one of the frst less than eight months and most consume at least a year and a half. “It takes months, no project in the Un PC makers to establish a Web portal for ‘supplier collaboration, providing vendor partners with access to Dell systems and key information regarding product

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