Genchi Genbutsu How it helped Toyota win a multi-million dollar contract

Genchi Genbutsu Case Study: how it helped Toyota win a multi-million dollar contract

MONDAY, APRIL 21, 2014 LEAVE A COMMENT

Genchi Genbutsu (現地現物) is another pillar of the Toyota Way. Translated roughly into "go see for yourself", its a methodology which helps people to truly understand a situation, find the root causes and fix it appropriately.

Here we look at a case study in how genchi genbutsu helped Toyota Tsusho win a major government contract in Malaysia supplying noise absorbing walls for highways.

By Karn G. Bulsuk

Several years ago I was attended a series of training sessions with senior executives from Toyota Tsusho, the trading wing of the Toyota Group. We were formally taught the Toyota Way, which was something that had not been previously formalized within the company, as well as conducted case studies and shared our experiences.

The story below highlighted the importance of genchi genbutsu, and is the perfect case study to show how it was essential in helping Toyota Tsusho to win a multi-million dollar contract in Malaysia:

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We have a good relationship with the Malaysian government, and a few months ago we were told that they were looking for a new supplier of those noise absorbing walls you see used along side the highway. Besides protecting cars from flying off the side in an accident, they also help to reduce noise pollution being generated by the thousands of cars passing by every hour.

So naturally we got our team together, and threw together a proposal in record speed. The contract was lucrative, offering millions of ringgit.

We sent in the proposal and did the usual thing: waited. After a good deal of time later and several follow ups, a contact within the government had told us that our proposal had already been rejected in-committee. What we had proposed was simply too expensive.

The working team was rather surprised, as we offered the government the best, highest quality wall we had, and also provided them with a very competitive price. We conducted several five whys but none of them led to the root cause.

Our COO (Chief Operating Officer) was due to fly into Kuala Lumpur to see how we were doing, just a few days after we had found out that the proposal had been unofficially rejected. He too was interested in finding out the root cause in why we were no longer competitive in the bid, and whether anything could be done to help us win.

When he landed in KL that week, the driver asked him: “Shall I take you to the office?”

He replied: “No, its okay, let’s go in a bit later. Just take me around for a drive around the city.”

“Any place in particular boss?” asked the driver.

“Surprise me.”

A few hours later, he arrived at the office and asked to see the proposal, pouring over the writing in absolute detail.

“Here’s the problem”, he said, pointing to the model we offered to the government. “This is the best in the market and although we use this in Japan, Malaysia isn’t ready for it.”

He explained: “Have you noticed that the Malaysia highways all use a much older, but cheaper version of noise absorbing wall?”

Our team shook our heads.

“That’s the problem. They can’t afford this yet. It’s true that our offering is superior to what the Malaysians are using, but economic reality is the reality that we live with.”

“We have good quality and the people in the government know that. If you redo the proposal and offer them a cheaper version which matches what they’re using here, while emphasizing our service and quality, we stand a chance of winning.”

We revised and resubmitted the proposal, and a few weeks later we found out that we had been selected as the supplier of the walls.

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What this case study illustrates is the importance of understanding a situation through first-hand experience. By seeing the situation for himself, the COO was able to determine the true issue and solve the correct root cause.

By looking with your own eyes you will understand the reality, and from reality, you will know how to approach an issue.