Toyota Wants Better Communication in Supply Chain

TRAVERSE CITY, MI – Citing lessons learned after recent natural disasters, Toyota is looking to reduce inefficiencies in its supply chain by improving two-way communication.

“The key is transparency and communication,” Robert Young, vice president-purchasing for Toyota North America, tells the Center for Automotive Research’s Management Briefing Seminars.

“If you have issues, if you have concerns, please bring them to your customers,” he tells suppliers. “If we don’t know, we can’t help you.”

Young says Toyota returned to full production “much quicker than originally anticipated” after a Japanese earthquake and floods in Thailand in 2011. The auto maker also was hampered by a nylon shortage this year and an explosion at a Dow Chemical plant in Germany.

“All supply chains are at risk,” Young notes, adding Toyota now is surveying its global suppliers to better understand its entire supply chain. “Moving forward, we plan to collaborate to create contingency plans (so) we are prepared the next time there is a major disaster in the world.

“I would like to encourage all of our suppliers to continue the frank and open dialogue.”

Already under way is a push to globalize Toyota’s supply chain by eliminating dual-sourcing of components in favor of having multiple sourcing options from a single supplier. That’s an effort Young admits has its risks.

“Capacity management is critical today due to the strength of the North American market,” he says. “Our desire is to strive to be globally competitive here in North America…clearly by collaborating with suppliers.”

Like all OEMs, Toyota wants to maximize cost savings in the supply chain. “(But) we improve by focusing on cost reduction over time. It’s not something we try to negotiate at any (one) time with our suppliers,” Young says.

At the same time, Toyota wants to improve relations with minority suppliers. “External and internal diversity is important to Toyota. At the Tier 1 level, 10% of that is spending (with minority companies),” the executive says.

Young alludes to, but is cautious about dwelling on, Toyota’s recent quality issues that ultimately led to a high-profile defects investigation over alleged sudden-acceleration incidents.

“As we develop a global standard, we’ll be able to fully utilize our design resources and work with our suppliers to ensure up front to safeguard any future quality issues and warranty issues.” But, Young adds, “because we still have not developed a contingency plans, there’s still a major risk.”

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