These are major questions confronting the world’s third largest economy and while the outcome is very much uncertain, for Japan and for the rest of the world, the Japanese people perhaps don’t have to look very far for guidance. The principles of collaboration, cross-functional teamwork and lean, flexible production embodied in the Toyota Production System can serve as a model for Japan’s rebuilding strategy. Process simplification, patience and efficiency built Toyota into the company that it is today and those ideas can help restore Japan.

I say this because coincidentally enough I’ve been reading Jeffrey K. Liker’s excellent book, “The Toyota Way: 14 Management Principles from the Word’s Greatest Manufacturer” (McGraw-Hill, 2004).

Some of the business principles of the Toyota Way are extremely resonant with the Vested Outsourcing business model. For example, Principle 1 focuses on basing management decisions on having a long-term philosophy, “even at the expense of short-term financial goals.” In other words, it’s okay to leave money on the table with a greater prize in sight. The second principle says to “create continuous process flow to bring problems to the surface.” While many of the other principles are directly related to mass production and manufacturing processes, the Vested approach really identifies with those that center on adding value by developing people and partners and continuously solving root problems through organizational learning and continuous improvement.

In a section that discusses new product development, specifically the Prius, Liker refers to an article he co-wrote back in 1995 that presents the apparently paradoxical idea of delaying decisions to “make better cars faster.” He terms this “set-based concurrent engineering,” in which sets of alternatives are broadly considered rather than initially focusing on only one solution. Unlike other automakers in Japan and in the US, “Toyota designers think about sets of design alternatives, rather than pursuing one alternative iteratively,” Liker and his colleagues wrote. “They gradually narrow the sets until they come to a final solution.” They concluded that “this apparently inefficient system has made Toyota the fastest and most efficient developer of autos.”

Focusing first on exactly what is in front of you rather than getting bogged down in the often overwhelming how of it is good advice in life, business and disaster recovery. It’s also Vested’s Rule #2.

Some food for thought as we watch Japan consider and then deal with the myriad alternatives and possible solutions ahead.

For instance, I’ve questioned whether negotiation is really the right word to use when talking about creating a vested relationship. In a recent post I advised that parties shouldn’t negotiate, they should collaborate for the win-win. For me, terms like ‘negotiate’ and ‘bargain’ – at least as they are commonly and currently understood – just don’t fit into the framework of Vested Outsourcing and the Five Rules.

But until a kinder, gentler substitute becomes more widespread, along with the Vested Outsourcing mindset – believe me when I say stay tuned, there’s more to come on that score! – we’re kind of stuck with grudgingly using negotiation.

An article “Negotiating for Value,” in the May/June issue of Supply & Demand Chain Executive by Martin P. Finkle, CEO of Scotwork, NA Inc., based in Glasgow, Scotland and Parsippany, NJ, is a case in point. It says that learning the total cost of the ownership process “can place you in a better position to negotiate for value.” Scotwork is a negotiation, consulting and training company for individuals and organizations.

“Negotiation is far more than getting the best price,” Finkle writes. “Many procurement specialists, especially in the medical device industry, focus too narrowly on dollars and cents when dealing with suppliers. Whether you’re buying stents, joints or replacement parts or need to fulfill contracts, you need to include the critical variable for any negotiation — value.”

He derives eight lessons from his experience working in that industry that he says also apply across many industries.

Some of the lessons, such as using a “total cost of ownership” (TCO) approach/analysis and getting involved in the procurement process from the beginning are valid. But others make me a bit uncomfortable because they are straight from the muscular, “old-school” playbook of negotiating tactics. It also seems ‘value’ in this instance primarily means the lowest cost or best deal terms possible for the benefit one side only.

For example, the third lesson directs a company to “see who’s got more power.” This is done through a “power balance analysis” that compares a company’s strengths and weaknesses to that of the supplier while listing what “you believe each side wants.” Ouch!

Instead of working together to achieve mutual benefits and desired outcomes, the company is advised to ask the right questions, determine early on which information should be revealed to the supplier, and to use the TCO approach to negotiate more favorable terms.

“Overcome suppliers who say they’ve been stripped to the bone,” Finkle writes. “When you believe the supplier has more power (discovered in the power balance analysis), enter the negotiation armed with a series of proposals. Then drive the process by putting proposals on the table without spending unnecessary time in dialogue. Be ready to ask what needs to be done to a proposal that’s first rejected to make it acceptable. This will keep you on the offensive and stick to the agenda.” For me, that’s another ouch that gives ‘negotiation’ a bad taste.

Working together to create trust and flexibility over the long term, to increase the size of the pie, getting to the win-win and ‘What’s in in it for We,’ and collaborating to create mutual value are conspicuously absent concepts from this particular lesson plan.

I’m not saying you should look at the world and your suppliers through rose-colored glasses, or join hands and sing “Kumbayah” with them. It’s tough and highly competitive out there.

But instead of “negotiating for value,” it’s better to collaborate for value.

Are they no longer trends? Do they go to the trend graveyard? Maybe they remain trends and just get canceled out, recycled or pushed to the back burner. Pretty soon everything, every idea, is labeled a trend because we need to have them around on a regular basis to talk and write about. But if everything is a trend, like everyone’s five minutes of fame or this year’s must-have fashion, then what’s the real deal?

Perhaps a distinction needs to be made between what is trendy and what is a true, real and long-lasting trend that becomes something more than a buzz word or a paragraph in an annual list, something that actually changes thinking and behavior. Sort of like the distinction between a wanna-be and the real thing.

Vested Outsourcing, I submit, is more than just this year’s trendy flavor. Judging from the way the media is paying attention to its win-win, collaborative approach to credible outsourcing, its transformative power is gaining recognition and momentum. Dare I say the trendy phrase ‘paradigm shift?’ Maybe so.

This enthusiasm is also prompted by an article in Supply & Demand Chain Executive magazine this month on the “Six Keys to the Sustainable Supply Chain Advantage,” by Dr. Lowell Yarusso and Ronald J. Sanderson. They examine how to “build an atmosphere of constant improvement in the search for supply chain excellence.” A supply chain, they say, “needs to be viewed as a ‘value chain’ in which all participants are truly integrated and share a common vision of goals, processes and information.” Need I say that’s preaching to the Vested Outsourcing and Five Rules choir, with its special refrains of “What’s in it for We?”

The first key they cite is to “collaborate, don’t compete,” and next one is “remember the goal.”

Just as business processes and people need to be aligned in terms of goals and strategies and operations, “your supply chain partners should be aligned to collaborate and develop ideas for mutual competitive advantage. Suppliers can often be the best source for new ideas on technology, process streamlining, inventory reduction and product design improvements.”

Making this work, they continue, requires different methods of developing incentives and monitoring performance for partners. “Fortunately, there are approaches to joint risk/reward sharing available that can be incorporated into supplier agreements.”

Like agreeing on clearly defined and measurable outcomes, perchance?

Their other four keys also resonate with the vested approach:

• Recognize the complex, manage the simple. (Insight over oversight, anyone?)
• Treat the issue, not the symptom. (Focus on the what)
• Focus on cost drivers and business impacts (Optimize pricing model incentives)
• Don’t waste an at-bat. (Focus on outcomes)

“At the end of the day, the hardest part of achieving a competitive advantage is sustaining it,” they conclude.

I’d say those are wise words and some interesting correlations from Yarusso and Sanderson. Vested Outsourcing is trending up and setting the pace as the tool to help build an “atmosphere of constant improvement” and collaboration with your outsource partners.

It’s quite another when the mainstream business press picks up on the vested message! But that’s what has happened this week, with props and coverage coming from The Economist and Forbes Magazine.

This week started with the publication of an excellent article from the Economist Intelligence Unit on “Resilient supply chains in a time of adversity.” The 15-page piece is a briefing paper done by the unit on behalf of Oracle that talks about how “nurturing the resilient supply chain is vital for survival.”

“Nurturing” is an interesting choice of words, it occurs to me: Is there a kinder, gentler trend in supply chain relationships developing? Perhaps so, I submit, especially if the vested approach and the Five Rules are used.

The article goes on to say that companies have tried to balance cost-cutting as they emerge from the recession with “strategic objectives” that include “ensuring sufficient resilience for a given level of efficiency;” rethinking and strengthening supplier relationships; and improving forecasts and planning. Those concepts actually embody several of Vested Outsourcing rules, including the shift to a win-win, ‘What’s in it for We’ mindset, and focusing on outcomes (Rule 1) while agreeing together on clearly defined and measurable outcomes (Rule 3).

The article concludes that it is time for companies to “foster mutually beneficial partnerships” and to make “better use of data.”

There’s a short blub about Vested Outsourcing at page 8 of the article, where I briefly comment on the idea of rethinking supplier relationships to achieve mutually beneficial partnerships.

The Forbes article, “A New Way to Outsource,” was published Tuesday (June 1) on the Forbes.com site, and (I hope) explains the vested approach to a wider audience.

Or at least a wider online audience.

Getting the message for any new endeavor out and understood is hard work. In the case of Vested Outsourcing, it occurs to me that this message is becoming very resonant in a time of economic change and uncertainty, where new thinking is needed.

The Economist and Forbes seem to think so.

In the world of transportation logistics, supply chains and shipper-carrier relationships it’s a long-running story of irrational and often toxic rate and service level relationships. Carriers and shippers are prime exemplars of Vested Outsourcing’s 10 Ailments.

It should be different: Shippers and freight forwarders depend on ocean carriers to get goods to market, and carriers need shippers to fill containers and cargo holds with merchandise. Since they need each other to prosper one would think it would be in their best interests to cooperate more fully and even trust each other, at least a little bit.

But unless you’re a Wal-Mart or a Target and can negotiate with carrier consortia on an equal footing that almost never happens. Trust? Don’t be silly!

For a look at how not to do it, look no further than to the dysfunction of trade and logistics on Asia-Pacific trade lanes. Trans-Pacific liner operators lost at least $15 billion last year, and 2008 wasn’t very good either as trade and financial markets headed south. Some damage was self-inflicted: They desperately scrambled to preserve market share by slashing rates while an influx of huge new containerships they purchased, perhaps unwisely, during the boom times of the economic bubble entered their fleets. Of course when the Great Recession hit, these carriers found themselves high and dry – chasing too little cargo with too much available capacity at non-compensatory rates.

Today the carriers, desperate to recoup those losses as quickly as possible, have embarked on a highly muscular, unilateral strategy: Raise rates dramatically, cut vessel capacity sharply and also steam across the ocean at much slower speeds to save on fuel consumption (which cuts available capacity even further). Shippers and freight forwarders, especially in the small-to-medium size range, are in effect being held hostage by the carriers: They must pay more for less space and poorer, i.e. slower, service.

This kind of behavior is typical of the way ocean carriers and shippers operate, with or without contracts in place. It’s a long-standing tradition. Some years the carriers have the power, at other times the shippers do – a ping-pong match of who can outsmart and whipsaw the other player.

They demonstrate textbook examples of What’s in it for Me thinking, instead of What’s in it for We by focusing on immediate returns, on the what not the how, based on who has the upper hand at any given moment. Old hands in this industry merely shake their heads, smile knowingly and comment that it’s just the “boom and bust” nature of shipping and trade.

I believe there’s a better, and as Dr. Oliver Williamson might say, a more rational way. Collaborate on mutually beneficial rate and service outcomes; move from the cutthroat me-first “win” mentality to the “win-win” by vesting in each other’s success through earned trust and loyalty with credible, vested rate and service contracts.

There are some who see the light, or at least talk that way. Jean Louis Cambon, who recently took over as chairman of the European Shippers’ Council Maritime Transport Council, said recently: “Carriers must understand that by restraining capacity below trade demand and creating cargo roll-overs, they will encourage the increasing number of shippers who want to shorten their supply-chains to shift sourcing of their products to origins closer to consumption markets, which eventually will reduce the ton/miles transported and the fleet necessary to carry them.”

In other words the carriers are cutting their own throats, as usual, for the quick buck. Cambon talks further about the serious impact of the carriers’ unilateral actions on supply chains, including longer lead-times and higher inventory costs.

“It is time move beyond the old cycle of boom and bust, rate volatility and instability in the liner shipping market; we all have a vested interest in the long term stability of the liner shipping sector; equally the liner shipping sector has a vested interest in the sustainable economic growth of their customers.”

Just words? Are carriers listening? They could start by studying Vested Outsourcing; it’s time for a new tradition.