Daily Archives: March 18, 2011

Interpreting Japanese Communication

Editor’s Note: Today’s post is from Dick Locke, Sourcing Innovation’s resident expert on International Sourcing and Procurement. (His previous guest posts are still archived.)

Note to readers of the Purchasing Certification Blog: most of this post appeared in this morning’s post on Japan’s Supply Chain Recovery: Interpreting The Estimates.

I’ve been watching and reading the various sources of information coming out of Japan and trying to interpret it after filtering it through the cultural differences that can impede communication and sometimes action. I see one apparent difference and am concerned about another potential difference.

One consistent complaint is that the various spokespeople in Japan seem to be understating the seriousness of the radiation hazards. It’s very likely that this is due to a cultural difference that strongly affects communication. The difference goes by various names, and I call it a “need for harmony”. It could also be called a “low score on a frankness scale”. A strong cultural need for harmony can make it difficult for people in that culture to deliver bad news directly. They will often resort to various expressions such as the Japanese “honto ni muzukashii“. That literally means “truly difficult” in English. However, people in Japan will correctly take it to be a very frank statement that something will not happen.

A classic example is in the Japanese Emperor’s speech to the nation announcing the surrender at the end of World War II. It included “the war situation has developed not necessarily to Japan’s advantage”. This was after two nuclear bombs and a total collapse of manufacturing and logistics.

While Japan is especially strong in this need for harmony, it’s a fairly widespread characteristic among Asian and some Latin American cultures. Keep in mind that Japanese may be perceiving the messages differently than Westerners.

The second difference is just a concern at this point. There’s a well known cultural difference called “Uncertainty Avoidance”. It influences the willingness of people to make decisions without being sure of the outcome. It makes people much more comfortable with routine situations and incremental improvements than they are with dealing with the unexpected. While Japan is extremely high on the “Uncertainty Avoidance” scale, I really haven’t seen any indication of lack of creativity in solving the problems.

Now, for those of you who are trying to gauge potential supply disruptions:

If you can manage face to face meetings that’s clearly the best way to handle it. You’ll have to judge the danger of traveling to a particular Japanese supplier of course. Second best is video conferencing, so you can watch facial expressions and body language. Third best is telephone. In all cases, send some questions ahead of time by email. In questioning, be sure to probe assurances of continuing supply more deeply than you would with people from a frank culture such as Germany or the US. It’s best to ask open ended questions such as “how are the roads to the airport” or “how are your suppliers in the affected area” than questions that can be answered with a simple yes or no such as “is everything OK”.

You should also keep in mind that Japanese communicators are usually not being dishonest when they seem overly reassuring. It’s just that their culture makes it difficult to say some things too directly and they are seeing themselves as courteous.

Dick Locke, Global Procurement Group.

ERP is NOT Always the Answer

Reading this recent article on Mitigating Risk and Exposure from Subsidiary Operations in Industry Week, one could get the impression that the only way to mitigate risk is to deploy one or more (connected) ERP systems to manage corporate data. Nothing could be further from the truth. While you do need consistent data and compatible systems, you don’t need an ERP. But I guess I should have expected such misleading advice given that the article was written by a VP at SAP, one of the biggest ERP vendors in the world.

According to the article, in order to mitigate risks to the company’s supplier, quality, liquidity, financial reporting, and unbudgeted spending, a company must streamline and automate mostly manual systems to:

  • enable the sourcing group to automatically provide information on preferred suppliers and negotiated terms to every subsidiary
  • enable headquarters to have ongoing visibility into cash-on-hand and receivables and payables across the organization
  • streamline the financial consolidation process
  • streamline inter-company purchasing transactions
  • implement collaborate processes such as forecasting and budgeting

Furthermore, according to the article, to accomplish this automation, a company needs to either:

  • deploy the same ERP system across the company,
  • deploy a two-tier ERP with simple data integration, or
  • deploy a two-tier ERP with process integration.

First of all:

  • A (cloud-based) SaaS e-Sourcing/e-Procurement platform with contract & supplier management can maintain preferred suppliers and terms and be accessible by every subsidiary.
  • A shared (cloud-based) SaaS accounting / finance system will allow headquarters to have a view into each subsidiary’s financials …
  • … and this shared system will streamline financial consolidation.
  • A (cloud-based) SaaS e-Procurement system will streamline inter-company purchasing, and
  • a cloud-based inventory / distribution / warehousing / logistics management system will allow for collaborative forecasting and budgeting.

So you don’t even need an ERP at all to accomplish the stated goals. Furthermore, while you do need integrated data, you can maintain this data with a simple relational database and integrate it using an off-the-shelf data analysis package with good ETL (extract-transform-load) tools that can merge flat-file data dumps from each system into one file/database for analytics purposes.

This isn’t to say that an ERP at headquarters to maintain master data isn’t worthwhile, just that you don’t need one, and that you certainly don’t need ERP deployments at all of your subsidiaries to accomplish the goals, which is important because enterprise ERPs generally cost seven figures and the cost is generally not justifiable for a small subsidiary.