The Facts

The Takata Airbag recall is the equivalent of 9/11 for terrorist’s attacks, Deep Water Horizon for the oil drilling industry and Hurricane Katrina for natural disasters. At the time of this writing, over 16 people have been killed, over 150 injured. (http://blog.caranddriver.com/massive-takata-airbag-recall-everything-you-need-to-know-including-full-list-of-affected-vehicles/) Takata just pleaded guilty to destroying and falsifying data and settled for $1 billion in fines. The defect has prompted the nation’s largest automotive recall ever, affecting nearly 70 million airbags in 42 million vehicles. (https://www.nytimes.com/2017/02/27/business/takata-airbags-automakers-class-action.html?_r=0 ) (https://www.bloomberg.com/news/articles/2016-03-30/takata-said-to-put-worst-case-airbag-recall-costs-at-24-billion)

In a report written by H.R. Blomquist, a former industry chemist and propellant expert commissioned by NHTSA, Blomquist writes that faulty inflator design allows humid air to slowly enter the inflator, where moisture-sensitive propellant slowly degrades over time due to fluctuations in temperature. When airbags deploy in a crash, “the damaged propellant burns more rapidly than intended, and over-pressurizes the inflator’s steel housing causing fragmentation.” (http://www.autoblog.com/2016/05/04/federal-investigation-takata-airbags-recall-inflators/ ) As mentioned in several reports and news articles, a.k.a. “flying shrapnel.”

Check out this video:

http://money.cnn.com/video/news/2016/05/04/takata-airbag-explosion-recall.cnnmoney/

Lot and Serial Control Could Have Helped

But let’s go back and examine how lot/serial control as part of a Cloud ERP or MRP solutions could have prevented and or mitigated the impact of this disaster.

Lot and Serial number controlled items are consumed in the manufacturing process and a full level traceability tree is constructed and maintained. A serial code is a unique identifier assigned incrementally or sequentially to an item. A “lot” is a specific batch of an item that was received, is currently stored, or was shipped from your warehouse. The criterion that constitutes a lot can be determined at an organizational level by anything from the materials that went into a product to its expiration dates.

While it seems that all of Takata’s airbags were defective from 2004, had there been verified lot control in place the batches could have been tested and tracked as to the faulty components.

Cloud ERP Automation Could Have Helped

ERP manufacturing software automates all business operations, providing accurate, real-time information. ERP increases efficiency and productivity by helping users navigate complex processes, preventing data re-entry, and improving functions such as production, order completion and delivery.

Takata claims it used its’ own inflators and also inflators from the supplier Daicel Corp (http://www.autonews.com/article/20150821/OEM01/150829976/toyota-may-buy-replacement-airbag-inflators-from-three-takata-rivals) to meet the high demand for cost effective air bags from auto manufacturers. Air bags including inflators run about $200-700 a unit. (http://cars.costhelper.com/airbag-cost.html)

Driven by auto manufacturers’ demand and Takata’s solution which was as much as 30% cheaper that its competitors. (https://www.nytimes.com/2016/08/27/business/takata-airbag-recall-crisis.html?_r=0 ) If we divide the average (cost per bag 200 + 700=900 ÷2= 450) to come up with $450 per bag less 30%, that would be a cost of $315 per bag. With the proper ERP based system in place, Takata could have improved its processes, and captured that 30% cost reduction rather than continuing to sell air bags they knew to be defective.

MRP Could Have Helped

Material requirements planning (MRP) is a production planning, scheduling, and inventory control system used to manage manufacturing processes. Companies looking to move into cloud based MRP, including lot serial control weigh the costs of implementation versus “waiting out the decisions”, or “Band-Aiding” their current in-house system. But in addition to costs they should also weigh the risks. In this case, the risk was the costs to replace the 70 million airbags which runs into the billion. The cost of implementing a MRP with lot serial control could have provided savings well above the $135 per airbag as well possibly preventing and/or mitigating this catastrophic product recall.

The use of MRP Cloud software with improvements in manufacturing efficiencies could have also offset the costs for auto manufacturers so they wouldn’t have had to resort to using the “cheaper” Takata air bags. Also automotive manufacturers could have received verified safety data, versus relying on Takata’s falsified data (https://www.nytimes.com/2016/02/24/business/takata-faked-test-data-a-year-after-airbag-recalls-report-says.html).

So setting cultural pressures aside, a cloud based serial and batch control system could have helped Takata. Actually an integrated ERP, MRP and Lot Serial Control solution could have been the “golden ticket” for the entire industry resulting in improvement and lifesaving industry standards.