plants. Toyota will work most closely with these suppliers and expect them in
turn to manage lower-tier suppliers. On the other hand, Toyota will also directly
manage critical lower-tier suppliers of major raw materials and components or
common parts. For example, Toyota has very exacting specifications for steel
and so will direct its suppliers to work with specific steel suppliers it has
worked closely with to develop.
If you’re starting out down this journey and still in the process of getting
lean internally, you need to start small and selectively. Your internal lean experts
should first get busy fixing your own underperforming systems. You might
start on selected projects with a few of your most important suppliers. Do not
be surprised if they are as advanced in lean as you are and that you can in fact
learn a thing or two from them.
- Use Control Systems for Continuous Improvement
Strip down your bureaucratic systems and procedures to a critical minimum
required to manage the supplier relationship.
We saw that Toyota is focused on control of the supply base, more than onemight
think. They use ownership in joint ventures, separate divisions dedicated to
their business, meticulously kept metrics, and demanding quality expectations
to keep suppliers on track. A supplier hiccup can lead to a small army of Toyota
engineers swarming the supplier to find and fix the problem.
While suppliers view Big Three procedures as highly bureaucratic and coer-
cive, Toyota, which uses equally stringent quality methods and procedures, is
viewed as enabling. An American automotive interior supplier described working
with Toyota in this way:
When it comes to fixing problems, Toyota does not come in and run detailed process
capability studies 15 times like the Big Three. They just say, ‘‘Take a bit of material
off here and there and that will be okay—let’s go.” In 11 years I have never built a
prototype tool for Toyota. Knee bolsters, floor panels, IPs, etc., are so similar to the
last one, it’s not necessary to build a prototype. When there is a problem, they look
at it and come up with a solution—focus on making it better, not placing blame.
On the other hand, Toyota has a far more elaborate system for cost man-
agement than most of their competitors. Cost models, as discussed in the Delphi
case at the end of the chapter, can be used to estimate what supplier cost should
be and to design the product to a target cost. These cost models are very sophis-
ticated and depend upon high-quality data from suppliers. Suppliers must
believe that this data will not be misused against them.
- Favor an Incremental Approach
Start small with selective outsourcing for a new supplier.
Giving a large chunk of business to a new, untested supplier is risky and makes
it difficult for your company and supplier to learn how to work together. Once