How Deloitte Misrepresented Toyota’s Supermarkets to a Clients
Executive Summary
- How Deloitte’s strategy consultants make up false stories about what other companies do.
- What Lessons can be Taken from This?
How Deloitte Works
This comes out of Deloitte’s strategy consulting. Their approach is to make a change, change, and propose enormous cost savings with the result from it. One partner who works out of the Northeast recommends supplier rationalization, which means cutting down the number of vendors that the client works with and buys from. This is supposed to mean huge cost savings. It also reduces the flexibility of the customer and makes them more dependent on the suppliers that remain. There are also anti-trust issues at work here.
If only the biggest suppliers get business, it makes vendors want to merge to get business, which reduces the market’s overall efficiency.
Constant Lying from Deloitte’s Strategy Group
Whether the activity results in a benefit to the client is immaterial to Deloitte’s strategy consulting group, the fact is it is a change. Generally, it is understood that there is no perfect number of suppliers and that each company has to decide for itself the correct number for different parts based on their needs. What I find irritating about Deloitte is they seem to be so confident in areas that are genuinely “gray.” Being a strategy consultant is having an exaggerated sense of self-importance and an inflated sense of being right.
Their Tactics for Change
One of the common tactics used by Deloitte strategy consulting is to say that they know how some famous company does something and that the client should do the same thing as well. This simple advice leaves out whether the “best practice” is appropriate for the customer or if the customer can even attain the competency in the area that is being described. As an example, if copying Toyota were so simple, everyone would have done it by now. Similar trends like this run through society; however, replicating success in one place to other places often proves elusive. This is as true of sports teams as it is in business. (for those who know football, how many organizations have replicated the success the 49ers had with the “West Coast Offense” vs. how many said they were installing the system?). Deloitte’s lying merely is unending. There is nothing that it seems Deloitte consultants won’t lie about.
Deloitte Misrepresenting Toyota
At one account Deloitte recommended moving towards a “supermarket” concept for their inventory management within the factory. The idea is that the factory materials would be taken out of a central storage location and staged closer to the manufacturing lines.
Adverse outcomes from this change have been significant. Here is a synopsis of them.
- Adjusted for manufacturing volume, one of the factories where this has been rolled out has tripled its inventories.
- There are now manufacturing work stoppages because material unavailability is no longer kept in one place.
- The stocking decisions have become more complicated because now different stocking values must be determined for multiple locations instead of only keeping all inventory in one place.
- The company no longer benefits from the law of large numbers, as it is split its stocking.
Does Toyota Do This?
One of the main reasons that Deloitte gave for recommending this is that Toyota does this. For many years now, it has been extremely trendy to copy Toyota. I counted roughly 18 books on Toyota manufacturing or management strategies on Amazon.com.
The cult of Toyota. Everyone wanted to be like Toyota until their cars had acceleration problems. A mini-consulting industry exists around misapplying Toyota concepts to American and European companies.
(Strangely, Honda, a company with smaller sales but equal quality, has only two management books written about it.)
It turns out that what Deloitte told this client is what Toyota does, is not actually what they do. A manufacturing supermarket — a concept that Toyota perfected, however, is where multiple suppliers are within proximity to the Toyota factory and can replenish Toyota on a “supermarket model,” which means the vendor maintains the stock and is within geographic proximity to serve as an inventory replenishment location. Supermarkets have a daily replacement cycle, and this is where the term was taken from. As described by Wikipedia
“Market locations are appropriate where there is a desire to communicate customer pull up the supply chain. The aim of the ‘market’ is to send single unit consumption signals back up the supply chain so that a demand leveling effect occurs. Just as in a supermarket it is possible for someone to decide to cater for a party of 300 from the supermarket so it is possible to decide to suddenly fill ten trucks and send massively distorting signals up those same pathways. Thus the ‘market location’ can be used as a sort of an isolator between actual demand and how supply would like demand to be, an isolator between batch demand spikes and the up upstream supply process.
For example, if the market were positioned at the loading bay, then it will receive ‘spikes’ of demand whenever a truck comes in to be loaded. Since, in general, one knows in advance when trucks will arrive and what they will require to be loaded onto them, it is possible to spread that demand spike over a chosen period before the truck actually arrives. It is possible to do this by designating a location, say a marked floor area, to be the ‘virtual’ truck and moving items from the market to the ‘virtual truck’ smoothly over the chosen period prior to the load onto the actual truck commencing. Smoothly here means that for each item its ‘loading’ is evenly spread across the period. For regular shipments this period might start the moment the last shipment in that schedule departs the loading bay.” – https://en.wikipedia.org/wiki/Manufacturing_supermarket
What Deloitte recommended to this client was a decentralized stock storage system for manufacturing. This is not something Toyota does.
The Lesson
It is important to validate that a company that is said to be doing something is doing it. Secondly, not all business philosophies can be copied and brought in-house. That is a secondary issue, which is equally important, but the most important factor is to check whether the company is practicing what the consulting firm is preaching.
References
https://forums.industryweek.com/showthread.php?t=9491
https://en.wikipedia.org/wiki/Manufacturing_supermarket