From the above case study, Nissan was able to achieve success in part delivery due to its efforts at supporting its suppliers. Therefore, for FLSmidth to avoid delays of parts and machineries in executing its project, a supportive and protective framework for cooperation and development of suppliers have to be in place. This does not have to do with the manner or quantity of contracts awarded. Suppliers should not be dropped at the expense of a poor performance rather this should be used as an
opportunity to develop them. Though the process of decision making is decentralized in FLSmidth, there should be collaboration between each category management. An example of this, is the collaboration between Nissan purchasing department and its R&D to enforce supplier development. In addition, for FLSmidth to avoid the potential problems in emulating Kyoryoku kai supplier association, the following discussions and recommendations should be carefully examined.
The grouping of suppliers according to regions {already in place} and countries should be strengthened. This is a practise which will enable it to ascertain its spend based on the countries. This further has the advantage of checking for factors which has paid off one country over the other e.g.
the Logistics performance index or the risk of doing business with suppliers in that region. Reviewing and evaluating spends based on high and low cost countries are also possibilities. FLSmidth also have the opportunity of having virtual members in the association- considering the global nature of its business and the geographically disperse distribution of its suppliers. They could use videoconferencing sessions to have development programmes or conferences. Skype meeting could also be used to have meetings with these virtual suppliers in the association.
FLSmidth could also use shared workspace such as sharepoint to manage the contents of its activities, to coordinate and to develop its suppliers.
With this, FLSmidth has a privilege to collaborate effectively with other members of the association irrespective of time and geographical differences. This is also advantageous in sourcing local information from its association members in case FLSmidth is considering offshoring to their resident location or even to do business in other locations.
In addition, the supplier’s evaluation form used in FLSmidth together with the categorization of suppliers and equipment are important for rating suppliers and prioritizing them in order of their importance to the business goal. Importantly, the opportunity given to suppliers to rate themselves on the evaluation form is an effective feedback mechanism useful for benchmarking purposes. This is because the rating of FLSmidth about the suppliers and that of the suppliers themselves can be compared and used to set an acceptable performance level. Moreover, the division of the evaluation process into areas such as Planning, facilities/equipments, inspection, quality management system and financial/commercial issues are well formulated. This is because, with these categorization, reduced lead time, improved quality specifications, reduced cost and mutual learning opportunities will be easily visible and accessible.
Moreover, one of the activities in a kyoryoku kai is social events; which in essence encourages informal communication and information flow which
could enhance organizational objectives. Therefore, FLSmidth should always create avenue for social events and parties with its suppliers. In addition, to maintain best practices between inter companies: joint service agreements, global agreements {signed by CEO}, alliance and leverage agreements should be in place between FLSmidth and its suppliers. This could be used to monitor terms such as changed delivery time and warehouse storage spaces with attached penalty for defaulters. It should also monitor its supplier’s performance attributes such as reliability {within suppliers lead time}, responsiveness, flexibility, cost and assets in order to ascertain their commitment to the association objectives.
Moreover, the involvement of its supplier’s right from the brainstorming stage of a project design will give the advantage of sharing responsibilities and ensuring that all parties are aware of the process and the expected results. With these, the level of input and commitment will be great towards adding value to the planned project from the design stage.
Meanwhile, the use of quality control inspect army by FLSmidth to suppliers is a practice worth emulating. This has the advantage of spotting quality problems right at the suppliers’ workshop before delivery hence avoiding the dual cost of transportation in case of reject. Inter-organizational knowledge sharing should also be encouraged in FLSmidth along with expert development and training sessions with suppliers. Top management support should also be sought in FLSmidth for the implementation of the kyoryoku kai supplier association. This is necessary to create awareness within the organization and to have their commitment in the process rather than their financial estimation of how much the association has spent versus the value it has added within a short term. Suppliers’ willingness to the implementation of this association is also key in order to develop their own business and to create openness for competitiveness. They could be motivated as well towards increase in technological ability and by giving them performance award for excellent contribution to FLSmidth goals or for radical improvements shown. This could ensure they win further projects or increase their recognition among other suppliers. FLSmidth should also seek for expert skill which is necessary to avoid waste of resources in implementing the association.
Furthermore, to have a successful implementation process, its suppliers need to understand the business model and project details of FLSmidth so as to enhance their knowledge and increase their commitment to the process. The creation of milestones along the project and annual agreements on cost targets by both parties is needed to check and balance the excesses of the implementation programme. Meanwhile, efforts must be made by the suppliers to challenge FLSmidth for improvement. This could tend towards changing their mindset,
receptiveness to change or their attitude at sharing information. Other improvement philosophies being practised by FLSmidth should also be jointly coordinated to have coherence and envisioned results. In addition, an open negotiation approach should be encouraged with its suppliers, instead of beating and cheating them. The use of the electronic data interchange {EDI} or other means of electronic documentation should be encouraged as well. However, the typical arm’s length relationship with other companies practised in the West should be discouraged, and a partnership kind of relationship embraced in order to allow cross sharing of internal knowledge.
Suppliers’ performance need to be measured and benchmarked in order to ensure conformance to standards and to develop mechanisms for progress when performance is below set levels {18}. The system embraced in FLSmidth which involves delivery of equipments and accessories months before project commencement is worth emulating.
This delivery reliability {punctual and right on time} allows a sequential planning of activities before a project start. It also has the opportunity of smooth running a project once started. Notably, kyoryoku kai is a Japanese inspired mechanism therefore; a defensive attitude towards Japanese initiated programmes would limit the success of its implementation and this should be avoided in FLSmidth. However, membership of Kyoryoku kai and an intimate relationship with FLSmidth is not a limitation that suppliers cannot join other supplier association {18}.
Kyoryoku kai administration is undertaken by a secretariat office run by a volunteer or retiree from the customer company and sometimes a small administrative staff with engineers. Notably, the association should either be entirely financed by FLSmidth or nominal fees charged for members’
subscription and attendance at activities such as workshops, seminars and conferences {18}.
CHAPTER SEVEN
CONCLUSIONS AND FURTHER RESEARCH 7.1 Conclusions
This research is a study of the barriers, best practices and benefits of using a type of supplier association – kyoryoku kai - as a mechanism for competitive advantage. It elaborates on the reason why this type of supplier association has not been embraced in the West until recently with reference to FLSmidth, considering its many years of adoption in Japan.
Obviously, the barriers of adopting it in the West have to do with the different working culture and operating philosophy that exists between the West and Japan. The best practice of its adoption was considered with the Peter Hines’ generic model for a supplier association. This fits well for implementation by having the reflection of the seven point’s criteria for best practise as discussed in chapter four. FLSmidth is a project management and execution company in the cement and minerals industry and the potential benefits to be derived from this type of supplier association{as discussed in chapter five} is useful in evaluating and justifying the adoption of Kyoryoku kai supplier association in FLSmidth.
The report has concentrated on the qualitative approach based on the experience and response to questionnaire by the initiator of this research who is the Lean Project Manager in FLSmidth {Dr Rasmus Kaltoft}. This was helpful due to his wide and varied expertise owing to his involvement with suppliers. Examples were also drawn from journals, books and case studies to establish facts. Meanwhile, early research carried out in the automotive, electronics and capital equipments industry in Japan has demonstrated that the kyoryoku kai has been a powerful technique for suppliers’ development {19}. This tool has played a key role in the competitive positioning of final assemblers in Japan, most especially in the discrete industries. This is because these industries are characterized with very high levels of subcontracting, hence the importance of using this facilitator of supplier network through associations {19}.
Moreover, a wrong ideology and an inflexible organizational framework will hinder the implementation of the kyoryoku kai supplier association.
However, the localization of kyoryoku kai is needed in order to avoid this and to attain business and organizational objectives {26}. Meanwhile, this research while demonstrating efforts at adopting kyoryoku kai outside Japan; reflects the interest shown by FLSmidth in implementing it in the
West with emphasis on Europe. Considering learning from earlier work in Wales, significant departures from the Japanese approach are advisable.
However, the Canon example in France reveals that a considerable amount of success can be achieved with little or no modification in implementation {19}. It was evident that network sourcing which is encouraged by the formation of Kyoryoku kai supplier association can also survive in a severe recession {20}. Hence, FLSmidth can start its implementation without fear of the present economic recession. Moreover, Japanese firms that viewed and used supplier networks as a source of competitive advantage will continue to do so {20}. They will maintain and increase the use of this network sourcing system by integrating supplier association. Therefore, as FLSmidth considers implementing the Kyoryoku kai supplier association, it will be more beneficial to integrate it with its network sourcing system.
Furthermore, while outlining the various forces which have combined in the 1990s to influence the way in which companies have responded to uncertain consumer and supply market changes; the role of Kyoryoku kai as a collaborative management device was presented in the supply chain {13}. In addition, it supports supply partnerships, network sourcing model of collaboration and other sources of collaboration in exploiting competitive advantage. Owing to this, FLSmidth has the potential of gaining competitiveness through effective collaboration by adopting the Kyoryoku kai supplier association. It is also a most important tool for supplier coordination and development, though it is not the only tool used by the Japanese for competitiveness. Meanwhile, the high level of trust and mutuality it creates provides an atmosphere for other mechanisms to function effectively {18}. This friendly business environment it creates is another reason why FLSmidth should consider implementing the Kyoryoku kai as soon as possible.
By and large, kyoryoku kai supplier association, if well implemented and managed will encourage mutual learning, mutual improvements of skills, strategies and techniques by both FLSmidth and its suppliers. It will also create an opportunity for developing both FLSmidth and its suppliers towards achieving a common goal - to be highly competitive in the business world. It will also lead to reduced lead time, reduced cost and improved quality specifications through joint activities as discussed in earlier chapters of this report. This will undoubtedly enhance the organization’s efficiency and effectiveness in terms of world class performance. It should also be clear that it is a long term payback process, so companies seeking a short term reward should excuse themselves of its implementation or else their formula will fail them.