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Toyota Recalls: Revealing the Value of Secure Supply Chain

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Toyota Recalls: Revealing the Value of Secure Supply Chain Toyota Recalls: Revealing the Value of Secure Supply Chain by Xiaoyuan Gu Submitted to the System Design and Management Program in Partial Fulfillment of the Requirements for the Degree of Master of Science in Engineering and Management at the ARCHNIES MASSACHUSETTS INSTITUTE OF TECHNOLOGY MASSACHUSETT-JS INS E OF TECHNOLOGY April 2010 v 7 e i o j JUN 16 2010 @ 2010 Massachusetts Institute of Technology All rights reserved LIBRARIES "-7 Signature of Author Xiaoyuan Gu System Design & Management Program April 2010 Certified by Professor Sanjay Sarma ipqerisor Auto-ID Cefter aa AThesisg& kdu Jivty Certified by Patrick Hale Director System Design & Management Program To my wife Hye-kyung Jung and son Andrew Gu ACKNOWLEDGEMENTS This work is funded by Global Standards One within the GS 1 Next Generation Auto-ID Project under contract No. 6895760. In addition, FileMaker Inc. has provided FileMaker Pro and FileMaker Server Advanced licenses which are used as part of database solutions for this project. I would like to express my sincere thanks to Professor Sanjay Sarma, co-founder of MIT Auto-ID Center, and Dr. Christian Floerkemeier, Associate Director of MIT Auto-ID Labs. They identified this interesting and challenging area of research and provided insightful guidance and numerous comments. They have been also given me much freedom to choose and investigate the topics of my interest. Cintia Castro and David Rodriguera at MIT Lab for Manufacturing and Productivity have been very supportive in handling administrations and logistics for hardware and software used in this project. This work benefited from collaborations with Stephan Karpischek at ETH Zurich, Mark Harrison at University of Cambridge, Kenneth R. Traub at Ken Traub Consulting LLC, as well as Bernie Hogan, Gay Whitney and Kevin Dean from GS 1. Edmund Schuster at MIT Field Intelligence Lab generously provided the book he co-authored "Global RFID: The Value of the EPCglobal Network for Supply Chain Management", and I must admit it is a truly inspiring and eye-opening read. In addition, he, together with Andrew Freese from Accenture and Cameron Fisher from IBM served as my reviewers, and provided many invaluable feedbacks. I also would like to thank my wife, pianist Hye-kyung Jung, for her music, patience and continuous support. Her persistent questioning of "When are you going to finish your thesis?" has made this work appear ahead of time. My thanks also go to my three-year-old cutie Andy, whose voice and smiles often remind me to finish this work quickly and with quality that requires no rework, so that I may spend some more time with him. Last but not least, I thank my beloved car, the Infiniti EX35 Journey AWD, for help- ing me to ignore New England snow and rain, and for providing speedy, fun, safe and non-autonomous rides, time and time again, in the late nights and early mornings of my commute. TABLE OF CONTENTS DEDICATION ........ ..................................... ii ACKNOWLEDGEMENTS ....... .............................. i LIST OF TABLES .......................................... viii LIST OF FIGURES ........ .................................. ix LIST OF SYMBOLS OR ABBREVIATIONS .... ................... xi G LO SSARY ... ... .. .. ... .. .. .. ... .. ... .. ... ... xii SUM M ARY ...................................... xiii I INTRODUCTION ................................ 1 1.1 Problem Formulation ............................ 1 1.2 The Need for Secure Supply Chain and Product Attribute Service ..... 3 1.3 Research Questions, Contributions and Structure .................. 5 II THE RISE AND FALL OF TOYOTA .......................... 7 2.1 Toyota: A Brief History ................................ 7 2.2 Toyota Production System and Lean Manufacturing ............... 9 2.3 The Rise of Toyota: Uncover the Secret ....................... 11 2.4 Toyota Recall Incidents ...... ........................... 13 2.5 Demystify the Crisis ................................... 16 2.6 Lessons Learned .............................. 19 III BUSINESS STRATEGY AND COMPETITIVE ADVANTAGE ....... 22 3.1 Business Strategy .............................. 22 3.1.1 Defining Business Strategy .......................... 22 3.1.2 Strategic Management ....................... 23 3.2 Competitive Advantage ................................. 25 3.3 Value Chain ....... ................................. 28 IV THE VALUE OF SECURE SUPPLY CHAIN .................... 31 4.1 Supply Chain and Management ..... ....................... 31 4.1.1 Defining Supply Chain ...................... 31 4.1.2 Supply Chain Management ..................... 33 4.2 Relating Supply Chain to Business Strategy .... ................ 35 4.3 Secure Supply Chain .. .. .. .. ... .. .. ... .. .. ... .. .. 36 4.3.1 Definition and Significance .. .. .. ... .. ... .. .. ... 36 4.3.2 Supply Chain Risks . .. .. .. .. .. .. .. .. .. .. .. .. 38 4.3.3 Benefits of Secure Supply Chain .. .. .. .. .. .. .. .. .. 39 4.3.4 Enabling Technologies for Secure Supply Chain . .. .. ... .. 40 4.3.5 Value Proposition and Value Delivery . .. .. ... .. .. ... 41 V AUTHORITATIVE PRODUCT ATTRIBUTE SERVICE . .. .. ... .. 46 5.1 Related Work .. .. .. .. .. .. .. .. .. .. .. ... .. .. .. 46 5.1.1 Global Data Synchronization Network .. ... .. .. ... .. 46 5.1.2 EPCglobal Network .. .. .. .. .. .. .. .. .. .. .. 48 5.2 The Missing Link - Authoritative Product Attribute Service . .. .. ... 56 5.2.1 Use Cases of APAS .. .. .. .. .. .. ... .. .. .. .. .. 57 5.3 Strategic Considerations . .. ... .. .. .. ... .. .. ... .. .. 58 5.3.1 Competitive Forces and Competitive Advantages . .. .. .. .. 58 5.3.2 Fit into the Value Chain .. .. .. .. .. .. .. .. .. .. .. 61 5.3.3 Strategic Options .. .. .. .. .. .. .. .. .. .. .. .. .. 63 VI ARCHITECTING AUTHORITATIVE PRODUCT ATTRIBUTE SERVICE 65 6.1 System Architecture: The Basics . .. .. .. .. .. .. .. .. .. .. 65 6.2 Stakeholders and Their Goals . .. .. .. .. .. .. .. .. .. .. .. 66 6.2.1 The Eco-system .. .. .. .. .. .. .. .. .. .. .. .. .. 66 6.2.2 The Goals of the System . .. .. .. .. .. .. .. .. .. .. 69 6.2.3 Testing Goals for Completeness, Consistency, and Attainability .. 71 6.3 Context of the Service System .. .. .. .. .. .. .. .. .. .. .. .. 72 6.4 System Goal Statement, Intent and Concept .. .. ... .. ... .. .. 6.5 Example Decomposition and Interfacing ... .. .. ... .. ... .. VII PROTOTYPING AUTHORITATIVE PRODUCT ATTRIBUTE SERVICE 7.1 Development Environment . ..... 81 7.1.1 Hardware Platforms ................. .. ... .. 81 7.1.2 Agile Software Development Method .. .. .. .. 81 7.1.3 Ruby on Rails Development Framework . .. .. ... 82 7.1.4 Eclipse Integrated Development Environment .. ..... 83 7.1.5 Android Software Development Kit . ... ... .. .. 84 7.1.6 Configuration Management with Subversion . .. ... .. 86 7.2 The APAS Frontend . .. .. .. .. .. .. ... 88 7.2.1 PC Frontend . .. .. .. .. .. ... 88 7.2.2 Mobile Frontend .. .. .. .. ..... 89 7.3 The APAS Backend . .. ... .. .. .. ..... 93 VIIICONCLUSIONS AND FUTURE WORK . ... 97 8.1 Concluding Remarks .. .. .. .. .. .. ... 97 8.2 Directions for Future Research . ... .. .. 98 APPENDIX A - SAMPLE CODE LISTINGS . .. .. ... .. ... .. .. 101 REFERENCES......................... .. .. .. .. .. .. .. 117 IN D E X .. .. ... .. ... .. ... ... .. ... .. 123 VITA ...... ............................. .. .. 124 LIST OF TABLES 1 Michael Porter's Value Chain ..... ...... ....... ...... 28 2 Select Risks to Supply Chain and Their Entry Points ..... ...... 39 3 Countermeasures to Select Supply Chain Risks ...... ....... .. 40 4 Security Countermeasure to EPC System Components Mapping .. .... 42 5 Positioning of APAS in the Value Chain of Brand Owner ... ....... 62 6 APAS LevelO System Arhitecture .. ...... ....... ...... 78 7 APAS Level 1 System Arhitecture . ......... ........ .... 80 viii LIST OF FIGURES Seizures of Counterfeits in 2008 (Source: Counterfeit Intelligence Bureau) Overall Trend of Product Recalls (Source: WeMakeItSafe.com) .... ... Causal Loop Analysis: The Rise of Toyota .................. Causal Loop Analysis: The Fall of Toyota .................. Complaints of unintended acceleration/100k vehicles (Source: Wikipedia) . Five Forces That Shape Industry Competition ...... ....... ... Diamond Model of Understanding Competitive Advantage ........ Value System and the Zooming of Value Chain .. ............ The Supply Chain Network .. ........ ....... ........ Seven Supply Chain Imperatives (Source: Accenture) .. ....... ... Supply Chain as a Value Delivery System (Source: Accenture) ... .... GDSN System Components and Interactions (Source: GS 1) . ... EPCglobal Network Illustrated (Source: Verisign) ...... ........ Architecture of EPC Information System (Source: Mark Harrision) ..... Layering of Standard Specifications of EPCIS (Source: EPCglobal) ... Core Services of EPCIS (Source: EPCglobal) ..... ... ...... 55 Competitive Forces for Product Attribute Service ...... ... ... 59 Virtual Diamond Model of PAS Competitive Advantages ... ... 60 Stakeholders and Their Needs in Product Attribute Service ...... 67 Prioritizing Stakeholders ................... ...... 68 Workflow of Goal Testing ................... ... ... 71 Service System and Its Context ................ ... ... 73 Formation of The Concept .................. ...... 74 APAS-backed Mobile Application: System Concept ..... .. .... 76 APAS: Need, Intent, and Function to Form Mapping . ... ...... 77 Model-View-Controller Structure (Source: Pragmatic) ... ... ... 82 Eclipse Integrated Development Environment .......
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