Toyota Way Fieldbook : A Practical Guide for Implementing Toyota's 4Ps

The goal is to eliminate waste not only in Toyota plants but in the supplier
plants and in the connecting processes in between (e.g., the logistics system).
Suppliers are extensions of the learning enterprise participating in kaizen. For key
components, Toyota selectively chooses two to three strategic partners for each
component and encourages competition between them. Each will typically get an
exclusive contract for that part for one car model but knows they can lose Toyota
market share in the future if they do not perform. There are many tools for manag-
ing cost and improving the product, process, and supplier’s capability. By investing
in the partnering characteristics in the supplier partnering hierarchy, Toyota over
the long term is getting the annual price reductions from suppliers that are neces-
sary to be globally competitive, but without sacrificing quality or innovation.

Chapter 12. Develop Suppliers and Partners 295

Figure 12-2. Traditional vendor management

Philosophy

Low piece price

Performance measures

Piece price, quality,

delivery

Principle

Suppliers must be

pressured to get

best price

Strategy

Evaluate best piece

price job by job

Reason

Lowest global material

cost

Effect

Short-term cost

reductions boost profit

Controls

Piece price, deliver to

schedule, quality

metrics

Unintended Results

Parts shortages, quality

problems, customer-

supplier conflict, no

innovation, increased

waste = higher total

system cost

Method

Open market bidding

& price downs

Tools

Bidding, Quality tools,

balanced scorecard

Buyers as

hunter-gathers