Interlocking Structures
Putting out a product to bid conveys an image of a bunch of commodity sup-
pliers who can all equally well make the product the customer wants. As home-
owners, we aren’t going to develop an intimate relationship with the producer
of lightbulbs we buy for our house. The best the lightbulb manufacturer can do
is become part of a large purchasing and retailing organization like Costco. But
we might want to get to know the carpenter who will build our new addition
or house. The dynamics involved in purchasing custom parts for a complex
product like an automobile include an array of products, from a lightbulb to the
complexity of a customized assembly like a chassis or seat.
When Toyota first decided to make cars in Georgetown, Kentucky, they
needed a nearby source for seats. Seats in automobiles are big and very com-
plex; there are a huge number of variations. So building an inventory of all pos-
sible seat combinations is not cost effective and would leave auto assemblers walk-
ing up and down the line picking the right seat. Instead, Toyota wanted seats to
arrive from the supplier in the sequence needed as cars come down the assembly
line. One possible way to do that is to push a ton of inventory onto the seat sup-
plier, but if that approach were adopted, the Toyota seat supplier would not be
able to meet its cost objectives. And quality problems would be hidden in moun-
tains of inventory. Therefore, Toyota asked its supplier to actually build the
seats in the sequence needed on the assembly line based on seat-by-seat orders
from Toyota.
Toyota wanted to source this expensive component to an American company.
After extensive discussions with many companies, they picked JohnsonControls
(JCI), whose plant later became an extensively studied model for Toyota-style
just-in-time production. But it is important to remember that this did not just
happen without effort. It required a lot of hard work.
When Toyota first started working with the Johnson Control plant in
Georgetown, JCI not only agreed to work with Toyota, but also was prepared to
expand the plant to accommodate Toyota’s demand. Much to JCI’s surprise,
Toyota said they would give them the business only if they did notexpand the
plant. They challenged JCI to reduce inventory and fit the additional volume
into the existing building, which seemed impossible within JCI’s mass produc-
tion paradigm at the time. But with Toyota’s help they accomplished it and
began to understand the Toyota philosophy. From Toyota’s perspective, it was
not enough for Johnson Controls to deliver seats in sequence, just-in-time. JCI
needed a compatible system to Toyota’s—the ability to build and deliver just-
in-time and continually improve their system to drive out waste over time.
Only then could Toyota and the plant mutually prosper.
This became even more evident when Toyota brought on a second source of
seats for Georgetown. Toyota had worked very hard to develop the Johnson