Costly Little Mistakes

This week a spokesman for Toyota announced it is inevitable that all thirteen of its American plants will be temporarily shut down, laying off 25,000 employees, probably at the end of April. The reason for the layoff is that Toyota has closed all of its plants in Japan due to the earthquake and tsunami. Some of the parts made at the Japanese plants are used in the American-manufactured cars.

Toyota is not the only car manufacturer which is affected by the disaster. Merck, a German company, is the sole source of the glossy paint pigment used on most motor vehicles. Where is Merck’s only paint pigment plant located? You guessed it, Japan. Merck’s plant has been closed due to the earthquake disaster and won’t reopen for four to eight weeks, depending upon repairs to infrastructure and utilities in Japan. The Merck plant is located thirty miles away from the damaged nuclear power plant, and, therefore, what happens at the nuclear plant also determines when the Merck plant reopens.

The closing of this one plant affects the color choices of vehicles from most car makers.

The closing of all the Toyota plants in Japan affects 15% of the parts needed for American-manufactured Toyotas.

Wow! The loss of a small number of parts, 15%, is crippling Toyota’s manufacturing process in the United States. The loss of one plant’s paint pigments is drastically limiting the color choices of all auto makers.

I am amazed at the poor planning of Toyota, Merck, and the auto makers. They are all multinational corporations. Why would Merck have only one location which produced a pigment? Why would Toyota not have plants in more than one location which produced all their parts? Why would the auto makers have only one supplier of paint pigments? Why would you locate a sole plant in an earthquake zone?

Where is the contingency planning? Where is the consideration of weaknesses in their marketing plans? Why didn’t anyone in management at these companies address this situation?

I asked this question of the students in my marketing class, and one suggested the management was arrogant. Perhaps. I don’t know the internal workings of the organizations well enough to answer the questions. I do know the results, however, and that is why I am bringing this to your attention.

We can all get caught up in the daily activities of our businesses and neglect planning. That neglect may seem a little mistake. However, that little mistake can be costly to a business. When you discover the mistake, it is too late to fix it. It is too late for Toyota or Merck to build or retool another plant as a backup. It is too late for them to plan for contingencies. It is too late for them to explore their weaknesses. It is too late for the auto makers to find a backup paint pigment supplier.

It is not too late for your business. When did you last update your marketing plan? When did you last review your business’s weaknesses? What weakness could cripple your business? What would you do if that weakness suddenly loomed large?

Think about this. List your weaknesses. Make your contingency plans. Most importantly, implement those plans.