Thursday, 11 October 2012

Recalling PRM woes

No, I am not pursuing an interest in cars.  It's just that the automotive industry seems determined to usurp public sector procurement as 'could do better on Supply Risk Management' and SRM has been a recurring theme of recent blogs.  Toyota, you will recall were the birthplace of Systems Thinking and Lean Supply, yet are recalling vehicles once again. One recall by a manufacturer is perhaps to be expected,  but Toyota appear to becoming masters of it.

The lessons for procurement are: think about the risks of prolific standardisation of parts, processes and specifications.  Why? Well as Toyota now know to its cost, if you are following a 'globalised standardisation approach', and it goes wrong - it is multiplied globally.  That's a big risk and not necessarily cost reduction!

It's also very difficult to make a switch to an alternative source, particularly if you are reliant on the intellectual property or patients of your suppliers.

But 'recalls' have other adverse impacts: customers who experience repeated 'recalls' become less tolerant, brand loyalty evaporates, and stock market value deteriorates.

Were these basic risks considered, and if so what were the mitigation plans?

All this provides yet more justification of the need to ensure procurement risk management at the board room.

I hope that our friends in central government procurement, who appear to be aiming to put in place bigger and bigger, standardised contracts, give some thought to these potential risks too.   I hope they also recognise that the 'kings of lean thinking' don't always get it right.

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