Daily Archives: October 28, 2009

Dude! I got a Debt!

Forgive me for this bad play on words, but I just couldn’t help it after reading this story in a recent edition of eWeek on how N.C. Wants Dell to Repay Incentives for Closing Plant. It seems that Dell received over $300 Million in tax breaks and other incentives in exchange for opening its plant in Winston-Salem North Carolina 4 years ago and didn’t take that into account when they decided to close the plant. Now, North Carolina Governor Beverly Perdue is determined to ensure that the state gets “every red cent back that Dell has received”.

Just goes to show that you shouldn’t make any major supply chain decisions before you do a total cost model and consider all of the current, and future, implications of your decision.

Share This on Linked In

When Short-Term Gains Equal Long-Term Miseries

Editor’s Note: This post is from regular contributor Norman Katz, Sourcing Innovation’s resident expert on supply chain fraud and supply chain risk. Catch up on his column in the archive.

Dimitrios P. Biller, a former managing counsel for Toyota Motor Sales USA Inc., alleges in a recent lawsuit that Toyota forced him to withhold evidence from opposing counsel in lawsuits relating to vehicle rollover accidents. As some readers will remember when (small) sports utility vehicles (SUVs) were introduced there were a rash of rollover accidents that occurred. I recall that the reasons were generally centered on the vehicles being top-heavy and thus prone to rollover due to sudden steering wheel movements such as in accident-avoidance scenarios (see the physics of SUV Rollover Accidents).

Toyota paid Mr. Biller a $3.7M severance in 2007; the severance agreement forbade Mr. Biller from discussing company information such as what he is doing in his lawsuit against Toyota which accuses the automobile maker of concealing or destroying information in over 300 such rollover cases where vehicle passengers were injured or died as a result.

But this blog is not about the merits of the lawsuits Mr. Biller and Toyota are filing against each other. Those cases will be played out and decided in a court of law or through some mediation. Nor does this blog post look to accuse or absolve either party of their alleged sins. I merely needed a business example for the subject of this post: when short-term gains equal long-term miseries.

Too often the right thing is sacrificed for short-term gains but then found to lead to long-term miseries, and here is where I believe so much of the root-cause of what ails us lies. There may be early benefits to burying proverbial – and sometimes actual – skeletons but invariably they resurface to haunt us.

The telltale sign of trouble is when vision of short-term gains eclipses, blocks or otherwise obscures and obstructs our view of the long-term goals, and it is here that we can expect the long-term misery from our short-sightedness.

Enron, WorldCom, the real estate bubble, the dot-com bubble, (some) outsourced manufacturing … these are just some of the examples of how knee-jerk reactions to satisfy short-term fantasies created some miserable results in the not-too-distant future. The result is that markets, industries, and supply chains get whiplashed back-and-forth as more knee-jerk reactions are taken under the guise of “corrective actions”. In the fabled race between the tortoise and the hare, let’s not forget why the tortoise won and that there is an allegory to our personal lives and professional conduct.

What we see is that short-term huddling of resources, short-term planning, short-term damage-control, short-term gains to boost balance sheet numbers, etc. only leads to long-term misery. Chaos and confusion lie in wait ready to strike when we are probably least prepared to deal with them. The result is havoc that requires excessive resources to bring under control or at least attempt to damage-control.

Yet this advice seems counterintuitive to the competitive nature of business today, but I don’t think it needs to be. Would sound advice in a logical risk-management strategy be to blaze ahead or put all your eggs in one basket? Probably not or at least not for too long. Yet too often I think we forget that short-term gains do not equate to long-term success. A good risk management focus will recognize this.

So what is the point here? What are the lessons to be learned? (Blog posts need to lead to logical conclusions AND teach us something???) It’s better to clean up small messes early on when they happen than to keep sweeping things under the rug because eventually that big lump under the rug is going to get noticed. A good risk management strategy is one where supply chain frauds are caught early and before they infiltrate our organization and manifest themselves into disasters.

The proper perspective for a risk management strategy is one that looks both short-term and long-term and does not consider those viewpoints as distinct but rather as interrelated.

Norman Katz, Katzscan

Share This on Linked In