Toyota Cultivating Supplier Philosophy for 65 Years

TRAVERSE CITY, MI – When it comes to dealing with their suppliers, some auto makers act like hunters and some act like farmers, Toyota Motor Mfg. Corp.'s Osamu “Simon” Nagata, pointed out last year at the Management Briefing Seminars.

This year, Toyota's vice president of purchasing for North America, expands on the theme: Toyota clearly is a “farmer” that wants to nurture and support its suppliers so they can flourish.

“We need to sustain our supply base, otherwise we can't build vehicles,” he says.

What goes unsaid is that most North American auto makers still act more like “hunters,” treating suppliers as if they are disposable and easily replaced – an increasingly bitter pill for much of the beleaguered domestic auto supply base.

Toyota's
Simon Nagata

However, the concept of developing long-term, mutually beneficial supplier relations is not some new, feel-good philosophy; It goes back 65 years, Nagata tells conference attendees here.

“Our relationship goes deeper than just telling suppliers what to do or sharing expectations,” he says, adding that Toyota has formalized a method for receiving feedback from suppliers so they can voice their concerns without fear and make Toyota a better customer.

Suppliers already have come up with some helpful suggestions, such as pointing out problems with the way Toyota returns shipping containers and with inconsistencies from plant to plant in measuring defective parts. (See related story: Toyota Seeks Supplier Feedback)

“We are experiencing growing pains, so it is more critical than ever that we have strong suppliers,” Nagata says. “We are working with our suppliers on these concerns to be a better customer. We realize our suppliers face the same challenges of increasing competition, and we can meet these challenges as a team.”

He points out that having formalized supplier relations makes sense, because most companies already devote extensive resources to areas such as public relations, employee relations and investor relations.

Toyota purchasing's role is “helping our suppliers become stronger. In other words, purchasing should be proactive in strengthening our suppliers,” he says.

Nagata cites a local example in which the auto maker worked with a unit of bankrupt Tower Automotive Inc. in Traverse City to solve a production problem.

“Tower recognized that their response time to shop floor problems was not adequate to support additional business,” he says. “They needed a method to clearly identify when something was not right on the floor that allowed the group leader to pinpoint the location of the problem immediately, but they didn't want to spend hundreds (or thousands) on implementation.”

The problem was solved by creating what Nagata calls a “support activation board.” The board designated specific workers to serve as monitors for each shift. A 2-way radio was mounted to a column, allowing workers to call immediately for support, turn on a flashing light and place a flag on the machine that needed attention.

“They found an inexpensive way to accomplish their goal, a $15 flashing light and $5 bike flags,” Nagata says.

Nevertheless, he admits Toyota's purchasing chain may not be as bulletproof as numerous recent independent surveys suggest.

“Between OEMs and the suppliers, we have been losing confidence in each other,”

Nagata says of the industry as a whole and not characterizing the state of Toyota's supplier pacts.

“Confidence is different than trust,” he says. He refers to confidence as a 2-way street and says Toyota and its suppliers have, at times, fallen short, despite Toyota's oft-lauded procurement philosophy.

Nagata says Toyota's more than 400 North American suppliers have supported the company in most cases, helping to boost productivity and quality while adhering to the auto maker's production system.

He says dropping a supplier is the “last option” in resolving confidence issues, and he characterizes Toyota as “patient” in confronting suppliers that can't cut the mustard.

Nagata also dispels another notion that Toyota is not a team player in helping to resolve supplier issues that affect the larger OEM community in North America, especially the raft of recent supplier Chapter 11 filings.

“Whenever we have (a) supplier bankruptcy,” he says, “We usually join a customer group to find the best way to resolve this issue.”

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