William Roseberry
Matthew Haines
Taylor Badonsky
Joe Aquila
Toyota Company Background
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 Native Name:
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 Products:
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トヨタ自動車株式会社
1937
Toyota, Aichi, Japan
International
Automobiles, engines, motorcycles
Banking, financing, leasing
$18.58 trillion
$283.55 billion
Lexus & Scion
Measured Performance Differences
for Toyota and Suppliers
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 The Working Relations Index (WRI) ranks the
Original Equipment Manufacturer (OEM) based on
17 Criteria:
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Supplier trust of the OEM
Open and honest communication
Timely information
Degree of help to decrease costs
Extent of late engineering changes
Early involvement in the product development process
Flexibility to recover from canceled or delayed
engineering programs
Measured Performance Differences
for Toyota and Suppliers
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 The scores are high for Toyota, Honda, & Nissan
 They have priorities for quality versus cost focus
 The scores are poor for Chrysler, Ford, & GM
 They have priorities for cost versus quality focus
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Links to Toyota’s Processes
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 Key feature of selling strategy is to build in schemes that prevent
unilateral (one-sided) actions to change volumes or commitments.
 Toyota strives to reduce variability to ensure stable operations by
systematic mix planning, careful sales and operations planning, and
sensitivity to the impact of product changes throughout the supply
chain.
 Toyota must collaborate with suppliers to create value for customers.
 Suppliers attain productivity improvements to a level that makes the
supply chain competitive.
 Toyota suppliers must be flexible so they can respond to daily order
changes.
Choosing Suppliers
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 Choosing a supplier is a long, drawn-out process that
involves verifying whether the supplier will mesh with the
supply network.
 Both new and existing suppliers are expected to share their
innovations with other suppliers that supply similar
products.
 The goal of the supplier is to maintain delivery performance,
high quality, productivity improvements, and so one, over
the life of the model.
Choosing Suppliers
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 Asanuma studied the Japanese industry and found key
features in managing suppliers included independent
but closely linked suppliers, long-term relationships,
frequent collaboration, exchange of employees between
companies over long periods, and cross-linked
shareholding.
 Published reports show that Japanese auto suppliers
won renewal of their contracts 90 percent of the time
versus 71 percent for suppliers to U.S. auto OEMs.
Toyota Supplier Selection
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 Toyota opened up a plant in England in 1991.
 Toyota started with a list of 2,000 initial suppliers.
 They evaluated using criteria such as “assessment of
management attitudes, production facilities, quality
levels, and research-and-development capability.”
 They ended their list with a total of 150 suppliers
using this criteria.
Tiered Supplier Organization and
Managing Relationships
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 Auto OEMs, suppliers are organized into tiers, with tier 1
suppliers being assemblers of systems, who manage all
relationships with tier 2 suppliers, and so on.
 The bottom of the pyramid consists of tier 4 suppliers who
form, perhaps, about 40,000 entrepreneurs who own a lot of the
intellectual capital that is required to produce excellent
components.
 Working with these lower-tier suppliers was the key to making
the necessary changes in a timely and efficient manner.
 Toyota chooses suppliers across multiple tiers so as to
guarantee availability of innovative solutions across the supply
chain.
Pressure on Suppliers to Perform
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 The pressure on a supplier is maintained by using a
staggered system of model changes, which in turn
entails a staggered system of negotiations.
 The usual price commitment by Toyota to a supplier is
for a one-year period, and prices are reviewed every
six months, but the contract award is kept in place
over the model life.
Depth to Supplier Relations
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 Drawings from manufacturer to supplier are
handled in various ways:
 Drawings detail manufacturing product
 Supplier designs manufacturing process
 Manufacturer learns details about manufacturing
process.
 Specifications are given to supplier and they design
the process.
Monitoring Suppliers
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 Japanese manufacturers keep detailed data about
supplier process.
 Require information on raw materials and delivery
times.
 Manufacturer absorbs some of risk of supplier to
better control process.
Success to Supplier Relationships
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 Collaborative tools that have common standards all
compatible.
 Trust and share of intellectual property.
 Modular views of processes and planning serving
consumer needs.
 Teams specified to solve problems.
The CCC21 System
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 Construction of Cost Competitiveness in the 21st Century
 The CCC21 initiative focused on cutting the purchasing cost
of 170 major components.
Toyota Checklist for Supplier Audits
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 The Comprehensive Assessment Tool rates the
supplier of a scale of 0 to 5 on a set of specific
performance measures:
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Mission
Reporting structure
Involvement of top management
Localization and self-reliance
Open mind to operation procedures
Organization with respect to Toyota interactions
v4L Approach in Managing
Suppliers at Toyota
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 “Variety of components produced by suppliers is
consistent with their flexibility.”
 “Velocity of the parts flow is matched between the
assembly line and suppliers … In short, the supplier
velocity is matched to the assembly plant production
rate.”
 “Variability of orders to suppliers is stabilized through
communication through planned volumes in advance.”
 “Visibility of supplier operations and of Toyota plants is
encouraged by the approach at Toyota to discuss
problems first.”
ERP with Toyota Supply Chains
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 Implementing an ERP system for Toyota will
streamline data in collaboration with suppliers more
efficiently.
 Currently, Toyota already utilizes SAP and Oracle
depending on what region they’re in.
 Australia uses Oracle.
 Parts of North America uses SAP.
 Toyota keeps all IT in house for enterprise architecture.