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Toyota recall: As firms go global, so do their glitches

Toyota's mounting recall woes show the downside of worldwide supply chains.

(Page 3 of 3)

When problems slip into a global system

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Although many industries, including auto manu-facturers, have invested heavily in tracking their disparate parts, problems can be harder to dig out when they do slip into the production process.

"The quality assurance maybe isn't there upstream to look at this stuff – so when you have a problem, you have a real problem," says Dave Anderson, managing director of Supply Chain Ventures, a venture capital firm that invests in early-stage supply chain management companies. "That's inherent, that's a systematic problem, and one we haven't done a very good job addressing."

Component sharing can exacerbate the problem. The custom is common practice in the auto industry, where high levels of competition and cost-consciousness push manufacturers to install common components in multiple vehicles.

When a part is to be used in many different vehicles, you put "all your engineering behind one thing and make it work really well," says Jake Fisher, senior automotive engineer at Consumer Reports. "But on the flip side, if you have one problem, it's going to be everywhere."

There's also variation among suppliers. For example, Toyota says the version of the CTS accelerator mechanism made by its Denso supplier poses no problem.

"Even though you've got standardized parts, that doesn't mean they're manufactured in the same place with the same process. It may be the same specifications, it may be the same company, but manufactured in different locations," says Joel Sutherland, managing director of the Center for Value Chain Research at Lehigh University in Bethlehem, Pa., who worked for 11 years with major Toyota supplier Denso's US unit. "You may have different raw materials, different labor standards, different training, and all those have to be taken into comparison."

Fighting these problems takes a cultural shift more than a technological one, he adds. A company can't decide to adopt high-quality standards for just one project. "You have to make a commitment that is really long term," he says.

Sometimes, globalization can help companies find problems. With more people on different continents using a product, companies have a broader population to detect problems early on. In 2009, a driving fatality in South Africa spurred Honda to investigate its Fit models. It discovered that a master window switch was prone to overheating after being exposed to large amounts of liquid, posing a potential fire hazard.

After seven incidents and no injuries in the US, Honda recalled the cars a week after Toyota's recall.

Monitor correspondent Husna Haq contributed to this story.