toyota supplier relations case study

• Toyota's Supplier Relationship Management: Building Long-Term Partnerships

Toyota, a name that resonates quality and reliability in the automotive industry, owes a significant portion of its success to its meticulous Supplier Relationship Management (SRM). SRM is paramount not only in the auto industry but across various sectors. Let’s delve deeper into how Toyota has leveraged SRM to establish enduring partnerships and ensure consistent quality in its products.

1. Historical Perspective

From its inception, Toyota has believed in the philosophy of mutual trust and long-term commitment. Their "Toyota Way" reflects the importance of respect and teamwork, and this translates directly into how they work with their suppliers.

2. Establishing Trust

For Toyota, establishing trust is not just a one-time effort but a continuous process. They don’t view suppliers as mere vendors but as crucial partners. This belief is materialized by:

• Open Communication : Toyota maintains an open channel of communication, encouraging suppliers to voice out their concerns, provide suggestions, and share innovations.
• Long-Term Contracts : Instead of hopping from one supplier to another for marginal cost benefits, Toyota believes in building long-term contracts. This not only assures the supplier but also provides Toyota with a consistent quality of components.

3. Collaborative Approach

Toyota promotes a collaborative atmosphere by:

• Joint Problem Solving : When a problem arises, instead of playing the blame game, Toyota collaborates with its suppliers to identify the root cause and devise a solution.
• Shared Growth Vision : Toyota actively involves its suppliers in its growth vision, ensuring that they're aligned in terms of goals and expectations.

4. Skill Development & Continuous Improvement

Toyota introduced the concept of Kaizen (Continuous Improvement). This philosophy is not just restricted to Toyota’s internal processes but is also extended to suppliers:

• Training Workshops : Toyota regularly organizes training sessions for its suppliers, ensuring they are up-to-date with the latest technologies and methodologies.
• Feedback Loop : Post every project or periodically, feedback is shared with suppliers, ensuring they know the areas of improvement.

5. Mutual Benefits & Win-Win Situations

Toyota believes that squeezing suppliers for the last penny is a short-sighted strategy. Instead, they work on creating situations where both parties benefit:

• Cost Savings : If a supplier suggests a method that leads to cost savings without compromising quality, Toyota ensures that a portion of the savings is passed back to the supplier as an incentive.
• Technology Sharing : At times, Toyota shares its technology insights with its suppliers, ensuring they grow together in capability and capacity.

6. Risk Management

In an uncertain global economy, risks like supply chain disruption, geopolitical issues, and natural calamities are always looming. Toyota ensures:

• Backup Plans : They always have backup suppliers to ensure there's no disruption in production.
• Geographical Diversification : Instead of relying on suppliers from a particular region, they diversify their supplier base to mitigate regional risks.

7. Ethical Standards & Sustainability

With growing importance on sustainability and ethical production, Toyota ensures:

• Ethical Audits : Regular audits are carried out to ensure suppliers adhere to the ethical standards set by Toyota.
• Sustainability Push : Suppliers are encouraged to adopt sustainable methods of production. Those who show a commitment to sustainability often find themselves in a favorable position during contract renewals.

8. Key Supplier Initiatives

Over the years, Toyota has launched various initiatives to strengthen supplier relationships:

• Supplier Awards : Recognizing outstanding supplier performance, which encourages suppliers to continuously excel in their deliverables.
• Supplier Conventions : Annual gatherings where Toyota and its suppliers discuss new industry trends, challenges, and future strategies.

9. Challenges in Supplier Management

While Toyota has a robust system, they too face challenges:

• Global Supply Chain Issues : With a vast network of suppliers, managing them in the face of global disruptions can be daunting.
• Cultural Differences : Dealing with suppliers from various cultural backgrounds requires understanding and adaptability.

10. The Future of SRM at Toyota

As the auto industry is evolving with electric vehicles and AI-driven cars, Toyota's SRM strategies are also adapting:

• EV Component Suppliers : With the shift to electric vehicles, Toyota is actively seeking and nurturing relationships with suppliers specializing in EV components.
• AI & Tech Collaborations : Collaborating with tech companies and integrating them into the SRM ecosystem to leverage AI and other emerging technologies.

By continually evolving its SRM strategies, Toyota ensures it remains at the forefront of the automotive industry.

Toyota's Supplier Relationship Management is a testament to how businesses can thrive when they view suppliers as partners rather than just vendors. This intricate blend of trust, collaboration, and continuous improvement ensures that Toyota not only receives the best components but also fosters an environment where suppliers are equally committed to Toyota's vision of quality and reliability.

By fostering such enduring relationships, Toyota has positioned itself as a leader in the automotive world, proving that success in the industry isn't just about producing great cars but also about cultivating great relationships.

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Toyota tops 2021 OEM-supplier relations study

For a record eleventh-straight year, Toyota outperformed six major U.S. and Japanese automakers in a benchmark annual study of automotive OEM-supplier working relations as viewed by suppliers. “Toyota has made supplier relations the center of design, engineering and manufacturing decision-making,” said Dave Andrea, Principal in Plante Moran’s Strategy and Automotive & Mobility Consulting practice, about his firm’s 2021 North American Automotive OEM - Supplier Working Relations Index (WRI) Study.

That decision-making strategy, according to Andrea, means suppliers are involved upfront when designs and specifications are determined. “Being supplier-centric allows opportunities to engineer costs out and quality in,” he told SAE International.

Based on online responses collected from mid-February to mid-April from 841 salespersons at 503 Tier 1 companies, the survey addresses suppliers’ working relations with Stellantis (formerly Fiat Chrysler Automobiles US), Ford Motor Co., General Motors, Honda, Nissan, and Toyota. Those six OEMs account for approximately 60% of the annual buy from the Tier 1 suppliers.

Now in its 21st year, the WRI study was founded by Dr. John Henke of Planning Perspectives Inc. Plante Moran acquired it in 2019. In the 2021 study, Toyota ranked best overall for having the fewest late engineering changes. “Toyota improved on on-time product timing and cost targets, but slipped related to late changes affecting quality targets,” Andrea explained.

Toyota, Honda, GM and Nissan each gained points overall in this year’s study, while Ford and FCA US/Stellantis saw their scores drop versus the 2020 study. GM and Nissan had the largest overall point gains year-over-year.

“Fewer engineering late changes and better alignment between engineering and purchasing during sourcing decisions were components of Nissan’s and GM’s higher WRI ratings,” Andrea said. FCA US/Stellantis scored the lowest overall points, and recorded the lowest points relating to timely communication, effective product development involvement and five other variables that impact overall OEM purchasing organization effectiveness.

The COVID-19 pandemic pushed a positive outcome for communicators. “Without a doubt, OEMs’ additional resources committed to communication and information-sharing showed up in improved trust, a vital driver of the WRI study,” Andrea said, noting that virtual meetings had many participants. “Rather than only the supplier’s account representative coming back with information from a meeting, engineering, manufacturing, quality and other functions required to optimize a solution were simultaneously represented,” he said.

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Few companies have as solid a reputation for supplier relationship management as Toyota does. The world’s biggest auto maker has developed longterm, collaborative and close partnerships with its key Japanese suppliers over a period of several decades. In its European operations, like those of North America, supplier relationship management (SRM) is also a major focus area, albeit one with a shorter history.

We asked Jean-Christophe Deville, general manager, purchasing, at Toyota Motor Europe about its approach.

How do you define srm at toyota and how do srm specific activities with strategic suppliers differ from the way you manage supplier relations in general, what impact, if any, has the economic downturn and toyota’s recent quality issues had on your srm activities, what challenges do you face internally from an srm perspective, what other roles does purchasing, and the supplier relationship managers within the function, play in srm, innovation is a key driver of srm at toyota. how do you manage the process of capturing, assessing and either progressing or rejecting supplier ideas and proposals, to date, the financial benefits you’ve achieved from srm activity are relatively small (0-2% of annual spend with each supplier), but you expect these to grow significantly in future. how will you achieve that, toyota generally shares savings with suppliers, typically on a 50:50 basis. why do you consider this important, what do you see as the most important ingredients for success in srm and what should you avoid doing, reports and publications, case studies, newsletter sign-up, stay connected on linkedin, lang: en_us, enjoy customer of choice benefits.

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• Material Detail: Toyota Supplier Relations: Fixing the Suprima Chassis: Case Study

Material Detail

Toyota Supplier Relations: Fixing the Suprima Chassis: Case Study

In late 2004, Walt Bernstein, the director of production control for Toyota Motor Manufacturing’s Macon, Georgia operation, was notably frustrated with the plant manager for ChassisCo, a Toyota supplier. There were quality and conformance issues with the rear suspension cradle that ChassisCo was manufacturing for Toyota’s new Suprima crossover. ChassisCo had made a number of operational improvements since production started 14 months earlier,...

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In late 2004, Walt Bernstein, the director of production control for Toyota Motor Manufacturing’s Macon, Georgia operation, was notably frustrated with the plant manager for ChassisCo, a Toyota supplier. There were quality and conformance issues with the rear suspension cradle that ChassisCo was manufacturing for Toyota’s new Suprima crossover. ChassisCo had made a number of operational improvements since production started 14 months earlier, but problems continued to surface. Bernstein, an expert in Toyota’s production principles, needed to figure out what to do.

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Building Deep Supplier Relationships

• Jeffrey Liker
• Thomas Y. Choi

Two Japanese automakers have had stunning success building relationships with North American suppliers—often the same companies that have had contentious dealings with Detroit’s Big Three. What are Toyota and Honda doing right?

Reprint: R0412G

More and more businesses are counting on their suppliers to lower costs, improve quality, and develop innovations faster than their competitors’ suppliers can. To this end, many experts agree that American firms, like their Japanese rivals, should build supplier keiretsu: networks of vendors that learn, improve, and prosper in sync with their parent companies.

As history has shown, however, that’s easier said than done. Some U.S. corporations created supply chains that superficially resembled those of their Japanese competitors, but they didn’t alter the nature of their relationships with suppliers. As a result, relations between U.S. manufacturers and their suppliers have sunk to the lowest levels in decades.

But reports of keiretsu’s demise are overblown. The Japanese supplier-partnering model is alive and well—in North America as well as Japan. During the past ten years, automakers Toyota and Honda have struck successful partnerships with some of the same suppliers that are at odds with the Big Three and created effective keiretsu across Canada, the United States, and Mexico.

So how do Toyota and Honda do it? The authors, who have studied the American and Japanese automobile industries for more than 20 years, found that Toyota and Honda have built great supplier relationships by following six steps. First, they understand how their suppliers work. Second, they turn supplier rivalry into opportunity. Third, they monitor vendors closely. Fourth, they develop those vendors’ capabilities. Fifth, they share information intensively but selectively. And sixth, they help their vendors continually improve their processes.

Toyota and Honda succeed because they consistently follow all six directives. Thus, the automakers have not only stayed in the game with the Big Three but have also redefined the playing field.

No corporation needs to be convinced that in today’s scale-driven, technology-intensive global economy, partnerships are the supply chain’s lifeblood. Companies, especially in developed economies, buy more components and services from suppliers than they used to. The 100 biggest U.S. manufacturers spent 48 cents out of every dollar of sales in 2002 to buy materials, compared with 43 cents in 1996, according to Purchasing magazine’s estimates. Businesses are increasingly relying on their suppliers to reduce costs, improve quality, and develop new processes and products faster than their rivals’ vendors can. In fact, some organizations have started to evaluate whether they must continue to assemble products themselves or whether they can outsource production entirely. The issue isn’t whether companies should turn their arms-length relationships with suppliers into close partnerships, but how. Happily, the advice on that score is quite consistent: Experts agree that American corporations, like their Japanese rivals, should build supplier keiretsu: close-knit networks of vendors that continuously learn, improve, and prosper along with their parent companies. (Incidentally, we don’t mean that companies should create complex cross holdings of shares between themselves and their suppliers, the way Japanese firms do.)

• Jeffrey K. Liker is a professor of industrial and operations engineering at the University of Michigan and is author, with Timothy N. Ogden, of Toyota Under Fire .
• Thomas Y. Choi is professor of supply chain management at Arizona State University’s W. P. Carey School of Business. He is co-director of Complex Adaptive Supply Networks Research Accelerator (CASN-RA). His most recent book is The Nature of Supply Networks (Oxford University Press, 2023).

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Toyota Supplier Relations: A Case Study

What Are the Main Contributors (causes) of The Crisis at Chassis Co’s Athens Plant in Late 2004 (14 Months After Sop)?

T here were four main contributors that resulted in the 2004 crisis at ChassisCo’s Athens plant , some of which were the responsibility of Toyota and some of which were the responsibility of ChassisCo.

The first contributory cause is that Toyota conducted untimely audits. Since Toyota delegated near complete responsibility of the project to ChassisCo, they also failed to conduct follow-ups regularly and effectively on the status of the project. Consequently, small problems continually arise which can lead to delays in the project, thereby inhibiting efficiency of the overall project. By the time Walt Bernstein arrived to visit the supplier and realized they were very far behind, it was ultimately too late. All of this could have easily been rectified if Toyota had decided to conduct regular check-ins.

On that note, deciding to delegate complete responsibility of the project management to ChassisCo was another error. Since ChassisCo successfully launched the Toyota 1997 Suprima, they demanded full responsibility of this project. This resulted in ChassisCo erroneously believing they had complete understanding of Toyota’s model and could run the project without problem. This was problematic because Toyota’s independent model for manufacturing requires considerable diligence, planning, inspection, and supervision.

A critical error was committed when they opted to issue contracts to low-bid suppliers that had either never made auto parts before or had minimal experience. This was a poor decision namely because Toyota had established long-lasting relationships with reputable suppliers for their products. By committing this error, ChassisCo potentially jeopardized the relationship Toyota has with their long-lasting suppliers in addition to creating inferior vehicles with potentially poorer quality products. Overall, this was a grave misjudgment in the selection of the supplier.

It was also somewhat confusing why the project did not have sufficient, knowledge experts involved with the project. The decision to relocate their expert employees elsewhere, particularly due to the widening customer base, was an error. This is because it lowered the productivity, knowledge, and overall sense of team spirit at the Athens branch.

What Are Chassisco’s Options Resolving the Crisis? What Would You Do if You Were in Charge?

Chassisco has a couple of options to resolve the crisis. First, it would be recommended that Chassisco eat the lost costs associated with this crisis, even if the likely outcome means that they start the project over from scratch. Once this occurs, Chassisco ought to proactively resolve the issue by seeking support from experienced vendors and individuals in the field. By using the most experienced staff, you can use their expertise and resources to tackle any problems that may arise. Moreover, Chassisco should shift their culture towards one that is more conducive and compatible with that of Toyota. In doing so, this should resolve any risks rather quicker and prevent any further stalling of operations.

It would also be important for Chassisco to carefully evaluate any new suppliers. This would increase the quality and compatibility of the manufacturing process with the Toyota vehicles. Of course, using the established vendors Toyota built long-lasting relationships with would be an idea course of action here.

If I were in charge, I think the most prudent think for me to do would be to ensure that any potential problems are identified as early as possible. This would allow time for the problems to be rectified before they create further, and more significant problems that delay production. Following a systematic procedure in the production of the vehicles would also be a good idea, such as developing a checklist for the plant to work on so that everyone knows the proper procedure. Along the same lines, having a standardized procedure for overseeing the process would be prudent.

What Are Toyota’s Options Resolving the Crisis? What Would You Do if You Were in Charge?

First, Toyota should probably increase the relationship with Chassisco and ensure they are subjected to much more regular check-ins to ensure the process is operating smoothly. Toyota would also be wise to not presume that any supplier would be perfectly fit to produce their vehicles, especially if they are being produced in countries that are not overly familiar with the product and the standards. To mitigate their risk, Toyota might also consider getting new suppliers that would increase both the quality and compatibility of the manufacturing.

If I were in charge, I would first set up regular check-ins with Chassisco to oversee the production and address any possible problems. Random check-ins might also be a good idea. I would also not make the presumption that suppliers are going to be able to complete a significant undertaking such as this and handle the significant increase in responsibility. This is especially true in this instance since Chassisco did not seem fully knowledgeable of the Toyota way and standard of manufacturing vehicles. Order An Essay .

• Tags Toyota Supplier Relations: A Case Study

By Hanna Robinson

Hanna has won numerous writing awards. She specializes in academic writing, copywriting, business plans and resumes. After graduating from the Comosun College's journalism program, she went on to work at community newspapers throughout Atlantic Canada, before embarking on her freelancing journey.

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