CRITICAL REVIEW

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    Business
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    Essay
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    Undergraduate
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CRITICAL REVIEW

Department

Matsuo, H., 2015. Implications of the Tohoku earthquake for Toyota׳ s coordination mechanism: supply chain disruption of automotive semiconductors. International Journal of Production Economics, 161, pp.217-227

Introduction

Observed supply chain disruptions and production line shutdowns are recognized as symbolic of weaknesses in industrial SCM and this article discuss the impacts of a supply chain disruption. Matsuo has emphasized on Toyota supply chain, which link supply of the semiconductors that was affected during the earthquake, that is, Rensas Electronics. The author has analyzed why how Toyota coordination mechanism of supply chain failed due to earthquake disruption because its production system consists of an integral architecture and customized components. However, all suppliers are expected to coordinate for Toyota to be productive. In other words, Toyota achieves the high quality, control and delivery performance through a flowing control mechanism. The authors present the argument of the necessity of having a direct control to crucial part of supply chain. Supply chain disruption has because a serious issue for many organizations (Sodhi andTang, 2012), as the supply chain is where an organization sustains a competitive advantage in the marketplace for their products and services through the integration and management of other organization (Tomlin 2006). In other words, if one of the crucial parts in the chain supply of parts that helps in the production processes to ensure customers need are met. This paper will review Matsuo argument and will evaluate the quality of Matsuo argument and focus on any areas of weakness within the argument.

The author has applied a case study of Toyota to give a clear picture of the impacts of supply chain disruptions. Matsuo has divided the paper into three sections. The first section describes the actions the companies took during supply chain management disruption and the reasons why it took Toyota about three months to recover production level before disruption ( Fujimoto 2011). The author has applied the supply chain management hierarchy to analyze the issue in three sections, that is, design, strategy, and sustainability. According to the case study, Toyota controls the whole of its supply chain using a multi-layered network. In others words, Toyota only interacts with the first layer suppliers, who have contacted the next layer suppliers to get materials to make sub-assembled components to Toyota. This means that high-level coordination is required for Toyota to work, however, it results in high performance in quality, cost, and delivery. This means that a disruption in the supply chain can lead to huge loss. This was the case during Tohoku earthquake, where Toyota depended on its first tier suppliers, Denso to purchase the semiconductors (Tokuda 2008). However, between its first tiers suppliers, there were several suppliers between Denso and the semiconductors manufacturing company. But, the MCU were a single source and the plant was affected by the earthquake, and this took about three months to recover.

The second part the author analyzed the missing functions the company’s mechanism of supply chain, where coordination starts from the company and move upstream to its first tier suppliers and so on. Due to Toyota multi-layered structure of suppliers’ network, the company was not able to know when the affected manufacturers will resume production. Furthermore, there was no enough information to help in handling supply chain disruption upstream of its supply chain to know whether the missing part can be substituted by another or whether another manufacturer could assemble the missing part. Matsuo proposed how Toyota should modify its coordination mechanisms for its automotive MCUs using risk management and secure supply of quality chips by adding direct control of key parts (Matsuo 2015).

The author stressed that direct functions are crucial to improving disruption risk to ensure that Toyota has a constant supply of essential parts and material. The author indicated that the required functions are to monitor the supply network, manage all the inventories in the supply chain, implement a sustainable way of securing key parts vendors, use standardized productions and key parts and materials. As noted in the case, all these functions are not present in the Toyota Production System of its supply chain ordination mechanism. However, to reduce such disruptions incorporating direct control of the functions is paramount.

The third part, the author noted the crucial features of a supply chain and the infrastructures that can be employed and strategies that should be used. The author argued that if a manufacturing company uses the just-in-time as a way of managing inventory, therefore, it is dependent on the structure and infrastructure of a supply chain. Consequently, if this supply chain uses a coordinated mechanism, the manufacturing company should adopt some mechanism to ensure that key parts and materials are available even during a supply chain disruption. These mechanisms include strategies of modularizing materials and production process, strategic way of getting resources, and flexibility to improving negative effects. These strategies are crucial for a company to enable it to understand how it can remain competitive and achieve resilience. Thus, a company requires a clear framework showing the essential structure and infrastructure in the chain and understands both the positive negative of its resilience strategies. The author was able to show the importance of having linkages in the management of supply chain disruption.

Evaluation

This section contains an evaluation of Matsuo article. Although the article presents a good argument of the implication of coordination mechanism in supply chain management, there are some weaknesses. At times, Matsuo appears to lack as a solid solution to coordination mechanism in case of a supply chain disruption.

Matsuo had indicated that one of the purposes of the research was presenting a detailed analysis of how the structure and infrastructure of a supply chain should be connected with resilience strategies adopted. However, the author just indicates that manufacturing companies should consider linkages during management of the supply chain disruption, yet fails to give a detailed analysis of these linkages in the literature. I believe the author omitted a significant part of the research as the reader does not understand particular linkages that can result in a reduction of a disruption to the supply chain. Though he notes that considering linkages are, he fails to offer suggestions on the examples of linkages that may be applied to manage supply chain disruption. In contrast, Hendricks, Singhal & Zhang (2009) suggested that various features should be included in the design of a supply chain such as monitoring and detection, performance measurement, assessment of recovery strategies, and ways of optimal supply of supply chain.

Another weakness of this article is the narrow subject focus. The author only emphasized on the resilient paradigm of supply chain management and failed to explain other approaches that could have been used in case of a supply chain disruption. Literature has discussed other approaches such lean, agile, and green approaches (Carvalho & Machado 2009). In some cases, it would be convenient to combine more than one approach to ensure a steady supply (Kleindorfer & Saad 2005). Furthermore, the author failed to indicate that resilience comes with additional costs, and thus the company should first perform a cost/ benefit analysis of the impacts of disruptions before employing a particular approach (Wakolbinger & Cruz 2011). Based on what the author has given, we can say that Matsuo concentrated one a single approach of supply chain disruption, which can be considered to be very narrow, and this may have triggered a biased conclusions about effective strategies of supply chain disruption management.

Additionally, the paper does not incorporate different opinions to support conclusions. One of the major failures of this paper is that the author relied on a single source of data. The author indicates that the data used are from a particular point of view that is, semiconductor manufacturers. However, failed to indicate the view which was the main focus of the study. Also, the author indicated that he was an author and advisor of The Renesas Technology, as well as the advisor of the semi-conductor manufacturer. This could have resulted in biases. The author also indicated that he conducted an interview with the manager of Renesas Technologies to cross-check the information. However, he failed to cross-check with Toyota which was the main contributor of the study; therefore, we can argue that the author lacks a solid argument of what he is portraying. Due to lack of supporting evidence from both sides, it was difficult for the reader to know reliability and validity of the authors conclusion, and I believe that this has seriously affected the proposed recommendations.

Conclusion

This critical review focuses on the implications of the coordination mechanism in a supply chain disruption. The author has proposed that supply chain to be closely connected with the resilience strategies that the company has opted in the case of disruption. While this article is well written, it has failed to offers the linkage than a company in case of disruption. However, I believe the paper has strongly argued that a coordinated mechanism may be catastrophic in case of a disruption in the supply chain.

References List

Carvalho, H & Machado, V 2009, Lean, agile, resilient and green supply chain: a review, In Third International Conference on Management Science and Engineering Management. Bangkok, Thailand: World Academic Press, World Academic Union.

Fujimoto, T 1999, The Evolution of a Manufacturing System at Toyota. Oxford University Press, New York, USA.

Hendricks, K, Singhal, V & Zhang, R 2009, ‘The effect of operational slack, diversification, and vertical relatedness on the stock market reaction to supply chain disruptions’, Journal of Operations Management, vol. 27, no3, p. 233

Kleindorfer, P & Saad, G 2005, ‘Managing Disruption Risks in Supply Chains’, Production and Operations Management, vol.14, no.1, p. 53-68.

Matsuo, H, 2015, ‘Implications of the Tohoku earthquake for Toyota׳ s coordination mechanism: supply chain disruption of automotive semiconductors’, International Journal of Production Economics, 161, pp.217-227

Sodhi, MS, Tang, CS 2012, Managing Supply Chain Risk, Springer, New York, USA.

Tokuda, A 2008, Automotive Electronics and its Standardization, Japan.

Tomlin, B 2006, ‘On the value of mitigation and contingency strategies for managing supply chain disruption risks’, Management Science, vol.52, no.5, pp. 639–657.

Wakolbinger, T & Cruz, J 2011, ‘Supply chain disruption risk management through strategic information acquisition and sharing and risk-sharing contracts’, International Journal of Production Research, vol. 49, no.13, p. 4063-4084.