In 1984, Toyota and General Motors (GM) created New United Motor Manufacturing, Inc. (NUMMI)¹, a joint venture automobile manufacturing facility. NUMMI gave GM the opportunity to learn about lean manufacturing and was Toyota’s first manufacturing plant in North America. In order to be successful, NUMMI implemented the Toyota Production System and made continuous improvements to its processes. If a defective part was received, all departments in the company worked collaboratively with suppliers to fix the problem. As a result, NUMMI was immediately producing cars with as few defects as the best factories.
A few years later, the same system used at NUMMI, Toyota Production System, was implemented at GM’s Van Nuys Assembly with the goal of reducing defects. However, the same success was not achieved and quality at Van Nuys remained poor. Van Nuys was an isolated plant that did not benefit from the same open attitude and supplier relationships as NUMMI. When issues arose, Van Nuys remained compartmentalized and was not able to collaborate with suppliers to fix the issue. Ultimately, GM closed the plant in 1992 due to the lack of success.
What led NUMMI and Van Nuys to different outcomes when both implemented the Toyota Production System? One major component was NUMMI’s ability to interact with the rest of the supply chain. One of the first steps in supply chain management is to look across silos within a company (for example purchasing, manufacturing, and marketing) for opportunities to improve. By leveraging its relationship with external suppliers, NUMMI was able to succeed by looking both within and beyond its own four walls.
In today’s global economy, the level of complexity for supply chains is ever increasing. As companies join ecosystems full of partners, there is greater imperative to de-compartmentalize in order to collaborate up and down stream. The globalization of business has created a global supply network that requires alignment, agility, and adaptability in order to meet the needs of customers.
As global companies increasingly need to work together to plan, source, make, and deliver goods, technology can provide better relationships in the value chain, which lowers risk, by increasing visibility and control across the supply network. Strategic initiatives, such as sales and operations planning (S&OP), are enabling the sharing of data among stakeholders across the network (suppliers, manufacturers, distributors, and retailers). S&OP enables joint planning which can reduce lead time by allowing flexibility to meet demand. Using technology, companies are able to integrate and connect all the different supply chain functions in real time.
Like the example of NUMMI’s success, the increasing intricacy of supply chains require companies to look beyond themselves and truly collaborate in order to create world class supply networks.
(After many years of success, NUMMI closed in 2010 and is now the Tesla Factory.)
¹Glass, Ira. “NUMMI 2015.” The American Life. 17 July 2015. WBEZ. Web. 10 December 2015.