So if you can’t beat them, join them—right? Certainly for some commodity
parts and even high value parts and tools, that will be the inevitable conclusion.
But Toyota has not gone in that direction for their core components. They have
invested deeply in supplier partnerships over decades, and any new suppliers
added to the mix must pass stringent tests and prove they can earn their way
into the partnership network slowly over time. Existing suppliers doing a good
job aren’t fired because of cheaper alternatives, and they have job security sim-
ilar to Toyota’s own employees.
Short-Term Cost Savings vs. Long-Term Partnerships
Why does Toyota make these investments? Why sacrifice short-term cost reduc-
tions for longer term supplier partnerships? This is a complex issue and there
are multiple parts to the answer.
First, there’s quality. Quality is more than having start-of-the-art equipment
and ISO-9000 documented quality procedures. It starts with the people doing
the value-added work. As we saw in Chapters 8 and 11, training your people in
the specific steps required to do the job is only a small part of the equation.
Training them to see quality problems, to immediately alert the team leader, to
participate in root cause problem solving, and to find opportunities for improve-
ment regularly requires building a culture of quality. Hire a firm in China to
make your parts, check quality procedures, look at the equipment, and you still
know very little about the people who build in quality. Toyota wants its suppliers
to have a compatible culture of finding and eliminating problems through con-
tinuous improvement.
The quality movement of the 1980s, driven largely by the overwhelming
success of the Japanese model, purportedly marked the end of antagonistic
buyer-supplier relationships. Most big firms purchased a large portion of the
products they sold, and the final quality of their products were only as good as
each component part purchased from suppliers. Supplier quality became pur-
chasing’s chief marching orders. In fact, investing in quality would also pro-
duce the lowest costs, as repeated inspections, rework, and warranty costs went
by the wayside. Even more important, customers will come back if the product
is of the highest quality. The bottom line was that treating suppliers as partners
in the business was a key to long-term success. The Malcolm Baldridge Award,
the gold standard of quality companies, added “key supplier and customer
partnering and communication mechanisms” as a major criteria for the award.
Second, there is the engineering of products and processes. Toyota has made
a living on the overall quality of design and the precision, as well as the flexi-
bility, of its manufacturing processes. The integration of product and process in
the design and engineering stages has a huge impact over the life of a product.
Chapter 12. Develop Suppliers and Partners 271