Media Automotive

This article was originally published in the August 1999 issue of Midrange ERP magazine. It appears on the AGI Website with the permission of Midrange ERP.

TOC Case Study: Media Automotive

Before Media Automotive came along, anyone who needed a replacement automobile brake hose assembly in South Africa was faced with a difficult choice: order a high-quality replacement from a franchise dealership, wait at least two to three days, and pay a high price - or take your chances with a low-quality hose assembly put together from used hose. The market badly needed a reasonably priced, high-quality alternative.

The people who founded Media Automotive recognized the opportunity and put together what they call a mafia offer, a "deal you can't refuse," with CEF, an major manufacturer of high-quality hose assemblies based in Italy. The unrefusable deal consisted of CEF placing 750,000 SAR (South African Rand) worth of hose assemblies in a bonded storage facility in South Africa, selling the hoses to Media as needed and accepting payment 90 days after withdrawal from inventory, trading in SAR to insulate Media from currency exchange risks, and granting Media exclusive rights for all of South Africa.

Sound like a great deal? It certainly was for Media Automotive. But one has to wonder why CEF found this so attractive. After all, it seems that Media had all the advantages. From CEF's viewpoint, it was attractive because, prior to this time, it was doing almost no business in South Africa (24,000 SAR per year). Media promised CEF 2 million SAR annual sales volume within a year, and convinced the firm that it could deliver.

How did they do that? By using the TOC Thinking Method, of course.

The key was to identify all the Undesirable Effects (UDEs) in the situation, and then identify the underlying conflict that was its root cause. The usual approach is to start addressing the effects themselves, trying to cure the symptoms while failing to recognize the real problem. Using the current reality tree and evaporating clouds methodology as taught by Dr. Goldratt's Theory of Constraints, the base conflict is uncovered and resolved. Once the people at CEF understood the situation, they couldn't help but agree that this was a fabulous opportunity. But, it had to be a win-win situation - beneficial for both CEF and Media Automotive. And it certainly was.

Media delivered as promised, moving more than 2 million SAR of brake hose assemblies in South Africa. They completely shook up the replacement hose market. Understandably, the existing dealers reacted. They reduced lead times, cut their prices dramatically, and some unscrupulous dealers began marketing counterfeit CEF hose assemblies produced cheaply in the Far East and South America.

The folks at Media Automotive are the first to admit that they failed to anticipate and deal with these problems through their own fault. Having gotten overconfident, they neglected to identify all of the negative branches, the inevitable reactions and aftereffects of their new approach. And, as Dr. Goldratt warns, if you don't find them all, then nature will surely reveal them all to you.

Media Automotive has been wildly successful, completely changing the rules and turning their market place upside-down. They credit the Thinking Methods for helping them find a true "win-win" situation, putting together a very favorable arrangement for themselves combined with an offer that CEF simply could not refuse.

Copyright © 1999 Midrange ERP