“The automotive community agrees that in a global industry one issue affects all and there is no competitive advantage in letting competitors have risk in their supply chain.”
Risks
One very serious drawback for car manufacturers today is RISK! As multinational companies become more globalized their supply chains become spread thorough out the world, and their exposure to problems increase. Once, perhaps only dealing with a few borders to cross and a few suppliers to engage, supply chains and parts makers are now spread between multiple countries, oceans and governments. Global business has become vulnerable as “just-in-time’ supply lines stretch, and become an Achilles heel.
Threat Assessment
Risks do not present themselves just at the border crossing. Across the world a number of factors can affect the global supply chain model. For instance Economic; variables such as financial crisis and bank defaults can affect distributors in any number of ways. Weather; recent increases in inclement weather, flooding and earthquakes can disrupt the supply chains and leave factories waiting for parts. Political; overthrown governments, or even government shutdowns, can leave parts stuck at border crossings, or not being made at all.
A few top car makers (Toyota, Jaguar, Aston Martin) have decided that cooperation, might just be the answer the industry needs to mitigate all this new risky global business.
“The automotive sector is truly globalized and by working collaboratively, these industry leaders are setting standards in gaining visibility of issues which could affect people,planet and profit.”
Enter Social Media!
These usually rival organizations have come together, along with their mutual suppliers, to form an online ‘automotive risk collaboration community’. A solution they hope will be adopted across the entire industry. Because supply chains are so inter-dependent, if any one part maker stopped production, it would quickly impact the other two manufacturers as well. So by joining forces, they spread their risk equally, but further still, they can share information, and react to situations faster and more efficiently.
Their solution comprises:
- An Online Portal : This gives manufacturers and parts makers a place to communicate
- Supply Chain Mapping : Potential risks are identified
and shared- Financial Analysis Modeling : One place to look at a suppliers financial stability, often a first sign of trouble to come
This unique and forward thinking approach, breaks down many of the barriers that are usually in place between companies, and creates and interdependent web of information and analysis, that helps to mitigate risk and improve performance of the whole supply chain.
Not just for big fish
An interesting component of this solution is that it works both ways. Not just to the manufacturers benefit, it has eased the relationship for the supplier as well. Instead of dealing with three separate companies, all requests, applications and concerns can be brought to one place.
Conclusions
The sharing of information has often been feared by businesses. Fear of losing a competitive advantage. This community solution is a good example of how online communication and collaboration can be used to increase productivity, mitigate risk and improve relationships with suppliers. Perhaps as we become more and more open through the use of social media, more businesses will adopt a model cooperation and trust.
It interesting to note that after this risk collaboration was formed, Toyota and Aston Martin actually collaborated on a compact city car model: The Toyota iQ / Aston Marin Cygnet.
When a car manufacturer known for exotic machines decided to dabble in small cars, it raised a few eyebrows. And now it appears that dabble in the compact car market is at an end. With Aston Martin cancelling the model, and rumors that Toyota will follow suit. Seems this collaboration might be a failure. Maybe moving forward, manufacturers should keep some barriers in place…
Lessons for Others:
- Information Sharing: By breaking down barriers and operating in an interdependent web, companies can spread out their risk exposure, while increasing efficiency.
- Incentive alignment: Instead of being competitive, companies can align their interest for mutual gain
- Collaborative communication: By coming together online, in a mutual trusted network, the important details can be shared and accessed easily
Web References:
- Aston Martin, Jaguar and Toyota’s cooperative recipe for managing risk : By Aristos Hatlastas
- Global Car Manufacturers Launch Shared Supply Chain Solution
- Supply Chain Risk
- Aston Martin says Cygnet discontinued because Toyota may axe iQ
Submitted by: Dave Mazur – SMBP Student, University of Waterloo.
If you have concerns as to the accuracy of anything posted on this site, please send your concerns to Peter Carr, Program Director, Social Media for Business Performance.