Supply Chain Proactiveness

Toyota’s motto, “Let’s Go Places,” suits a company that specializes in reliably getting customers from point A to point B.

Thanks to a highly proactive approach to managing supply chain complexity, Toyota has arrived at an impressive place: The company recently surpassed General Motors as the top-selling car company in the U.S., thanks in large part to its early, highly effective response to the global computer-chip supply shortage that walloped its competitors.

“Toyota’s total U.S. sales of 2.3 million rose about 10% compared with 2020, the company said Tuesday,” according to the Wall Street Journal. “By contrast, GM reported a nearly 13% slide in results for a total of 2.2 million vehicles sold in 2021, as the semiconductor shortage took a bigger toll on the company’s manufacturing operations and left dealers with fewer vehicles to sell…Toyota has largely benefited from its decision to stockpile computer chips, which are used in an array of vehicle electronics.”

Toyota’s risk-savvy management of its vendors amid pandemic-triggered disruptions provides a vivid illustration of the proactive approach that John Bree, Gary Roboff, Mark Rudio describe in their recent Shared Assessments’ article, Proactive Governance in the Supply Chain. “Success in managing complex outsourcing and supply chains requires proactive governance of your TPRM program,” the authors note. “Boards and C-level managers should ask questions that reveal what your managers and practitioners know and do not know. What’s known needs to be assessed, challenged, and monitored. What are unknown needs to be identified and then subjected to the same correction protocols.”

Getting a third party risk management program to a more proactive place is difficult at a time when supply chains continue to become more complex and opaque. That said, there are practical steps that can help TPRM teams and the C-level executives who oversee those groups become more proactive from a supply chain risk management perspective. Bree, Roboff and Rudio conclude their article with three of these actions:

  1. Knowing, updating, and inventorying your complete supply chain;
  2. Understanding the level of cross-vertical exposures; and
  3. Identifying and implementing monitoring programs and related metrics that are appropriate to tracking changes in risk exposure across the chain.

“Aggressively managed TPRM programs lead to TPRM maturity, improved resilience, increased agility, and improved loss avoidance,” the authors conclude. Companies whose performance and supply chain risk management excellence places them at the very top of their industry would likely agree.

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