Toyota Supply Chain

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H B R CAS E ST U D Y

Four commentators offer expert advice.

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This document is authorized for use only by Balaji M until August 2010. Copying or posting is an infringement of copyright. Permissions@hbsp.harvard.edu or 617.783.7860.

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by John Butman


Should Exceso maintain its aggressive promotion strategy?

A Pain in the (Supply) Chain

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www.hbr.org
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COMMENTARY

H B R CAS E ST U D Y

by John Butman

COPYRIGHT © 2002 HARVARD BUSINESS SCHOOL PUBLISHING CORPORATION. ALL RIGHTS RESERVED.

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Monday, 10:42 AM Manufacturing Facility 14, Exceso Corporation R. Foley Vinton, CEO of Exceso, shoves through the heavy plastic strips onto the factory floor, already wearing his hard hat and goggles, earplugs draped around his neck, and is relieved to hear the din of manufacturing. He turns and holds back the strips so his visitor, analyst Andrea Valdini—similarly prepared for the tour—can step through. “How many shifts are you running?” she shouts above the noise. “Three,” replies Foley, not smiling, all business. “We’re essentially running at full capacity.” Andrea makes a note on a folded index card with a tiny pen. “How long have you been doing that?” Foley grimaces and decides to distract her with a partial truth. “Well, we actually were down last week,” he reveals, pointing at a pass-

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harvard business review • may 2002 This document is authorized for use only by Balaji M until August 2010. Copying or posting is an infringement of copyright. Permissions@hbsp.harvard.edu or 617.783.7860.

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A Pain in the (Supply) Chain

HBR’s cases, which are fictional, present common managerial dilemmas and offer concrete solutions from experts.

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It’s that time again, the end of the quarter, and Exceso is scrambling to meet wildly ambitious sales goals. The company’s aggressive promotions are pulling in retailers, but does disaster loom?

ing automated material-delivery vehicle. “Installing some new robotics.” This is, in fact, what took place, but Foley’s description leaves out the cause. A massive, yet finicky, injection molder had once again developed a mysterious inability to create the key piece of Exceso’s flagship product, the ClickZipPlus. An image of a line of hiking Cub Scouts, backed up behind the den’s slowest member, flashes through Foley’s head; it is the metaphor that illustrates the effects of manufacturing bottlenecks, remembered from Eli Goldratt’s book The Goal. “So now we’re running flat out to fill orders.” Foley pauses before the molding machine, whose jaws open as if on cue, revealing 148 perfect plastic parts in the distinctive nickel and cobalt colors of the ClickZipPlus. He decides not to mention that the machine is producing a yield of 98%, because further questioning might lead to the admission that

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A Pain in the (Supply) Chain •• •HBR CA SE S TUDY

Tuesday, 1:38 PM Midwest Regional Headquarters, Flemings ValuMart

Alice Dias chuckles to herself as she swipes her employee ID through the card reader at the end of the fajita line. She is late for lunch and hungry because she’s been on the phone with the Exceso district sales manager for more than an hour, haggling over purchase terms for the ClickZipPlus. Alice is delighted to see that Wendell, her brainy intern from business school, is still there, engrossed in a worn copy of Competitive Strategy. “You want to know how to work the supply chain?” she says. “You should talk to me.” “Get a good deal?” Wendell asks. “I committed to 3,000 cases of the fourpack.” “What?” Wendell is aghast. “Correct me if I’m wrong, O great mentor, but I seem to recall that we sold only 1,800 cases in the last two quarters combined.” Alice nods. “Correct. But we’re buying at a 6% discount to our standing price.” She sinks her teeth into the fajita. “Exceso must be a little desperate.” “They’re also committing to an increase in co-op dollars for an FSI. And that’s...
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