Supply "Net" Management

Supply chain.

The impression behind the word 'chain' feels outdated in today’s setting. In a fast-changing environment, the chain isn't flexible enough.

In Japan, we use the net or the web instead of a chain. 【網】 This is because, when something happens, we have alternatives to handle the situation.

Simply changing the name from 'chain' to 'net' isn't sufficient. Many in Japan refer to supply chains, not the web. Here are some structural differences between the two.

1️⃣ Multiple sourcing

Instead of relying on a single supplier, work with multiple vendors. This provides a backup in case issues arise. It also encourages competition for lower prices and technological advancements.

This term can refer to factories, companies, and regions. We should assess based on risk levels. For example, even if we source from multiple factories, if they all belong to the same company, our exposure to business risks remains unchanged. Similarly, sourcing from many businesses does not reduce risk if they are all located in the same region. What complicates matters is that even if your direct suppliers are diverse, their second- or third-tier suppliers may be the same, effectively making it the same as sourcing from a single supplier.

2️⃣ Multiple logistics

In addition to multiple sourcing, we need backup options for logistics. Typically, we choose the one with the lowest cost and shortest lead time. However, when issues occur, the “best” route can become problematic. To manage such risks, we need alternative routes. Even with these options, we must remain cautious, especially in sourcing. For example, even if you switch to a different port, if the operating company remains the same, the risk persists; therefore, we must not only keep options open but also work to mitigate the risk.

3️⃣ Levelization and Standardization

Even if we have multiple sourcing and logistics options, we choose them randomly each day, which can result in higher costs. To prevent this, we need to implement levelization and standardization for normal conditions. Without these, the cost of the supply chain or network will stay high. Levelize and standardize for normal operations, but remain flexible for emergencies.

4️⃣ Problem-solving

A problem I noticed during a supply chain crisis is that organizations that don't address daily issues through problem-solving will face greater difficulties. Factories that fail to resolve problems, such as quality issues or late deliveries, will face greater challenges when the crisis strikes. Usually, instead of fixing problems, factories try to manage them by increasing costs—adding more inspections, repairs, inventories, and building warehouses. This causes a crisis for a good reason, as many problems have accumulated.

The relationship between supply “net” management and the Toyota Production System (TPS) is closely connected. The true value of TPS becomes clear during a crisis. Continuous improvement should free up resources to handle problems. Standardized processes should be easier to reassign. Trained personnel are the most crucial resource for recovery. A standardized, daily problem-solving approach will help people concentrate on the actual supply issues.