Toyota is one of the leading manufacturers of vehicles in the United States and across the globe. Toyota is ranked #55 in Forbes, World’s Biggest Public Companies, and capturing sales of 202.8 billion and a market cap of 137.8 billion as of March 2011 (Forbes.com, 2011).” Founded in 1937 in Japan, Toyota now employs 320,590 with operations all over the world (Forbes.com, 2011).
“Recognizing a growing market in the United States, in 1957 Toyota established its first sales, marketing and distribution subsidiary in the U.S. called Toyota Motor Sales Inc. (Gretto, M., Schotter, A., & Teagarden, M. 2009, p.2).” Over the years Toyota has manufactured and sold vehicles all over the world and is a leader in innovation and technology. However, in recent years Toyota has faced many setbacks that have consumers concerned about their safety and have Toyota looking for a way to get back their credibility.
The current situation Toyota faces is the recall of millions of vehicles due to sudden acceleration causing the death of a few consumers. The delayed reaction from Toyota has them scrambling to make things right in the eyes of the customers and law makers. Robert Cole (2011) states “there appears to be two root causes for Toyota’s quality problems: the first is an outgrowth of management’s ambitions for rapid growth; and second is the result of the increasing complexity of the company’s products.” Challenges
Toyota implemented an ”aggressive globalization strategy by building factories in the U.S., Europe, and other markets, effectively doubling the number of overseas manufacturing facilities to more than 100 (Gretto, M., Schotter, A., & Teagarden, M. 2009, p.4).” Many industry insiders, including Takaki Nakanishi, an auto analyst at JPMorgan Securities in Tokyo, expressed reservations about Toyota’s rapid growth.
“Toyota is growing more quickly than the company’s ability to transplant its culture to foreign markets,” Nakanishi said (Gretto, M., Schotter, A., & Teagarden, M. 2009, p.5).” Due to the rapid expansion into foreign markets Toyota faced even more controversy because of the use of suppliers with no relationships established. Toyota struggled to effectively leverage its TPS standards due to the complexity of its far-reaching and complex global supplier and partner network compounded by its headquarter-centric decision-making processes (Gretto, M., Schotter, A., & Teagarden, M. 2009, p.9).”
If Toyota continues to rely on these partnerships the quality and safety of their products will continue to decline and their reputation will be that much harder to restore. Furthermore, Toyota must develop a strategy to understand the foreign markets they have entered and invest in known suppliers and foster working relationships with all parties involved including engineers, managers, distribution centers, and finance. Fishbone Diagram
The fishbone diagram identifies causes that may be contributing factors in the way Toyota communicates with it suppliers that could affect their production and performance.
Product Management Methods
Not enough suppliers
Ambitious goals Innovation
Low cost Safety
Growth too fast
Accountability Poor Planning
Improved communication with suppliers to provide quality products with a customer focus
Technology Lack customer focus
Responsibility Production/Service Production/Services Training
Customer focus Communication Communication
Accountability Location/Delivery Low cost
Communication Qualifications Quality
People Suppliers Process
Suppliers People Process
If suppliers are unaware of what is expected, Toyota suffers the consequences of poor quality and high costs associated with this type of negligence. Communication is the most important aspect of conducting business. Toyota must improve their means of communication and it must start at the beginning of the customer/supplier relationship. The Process Flow chart will identify the communication process between Toyota and supplier is further updated to show improved processes.
Expectations should be established to ensure that suppliers are providing the quality products that represent the Toyota brand. Currently, Toyota has sacrificed quality and safety to meet the demands of the customers. Toyota must take into consideration the market they enter and the major players that exist to provide the support necessary. Toyota uses the Annual Purchasing Policy process to communicate their expectations to suppliers.
“The purpose of supplier expectations is to highlight key priority activities and emphasize broader, more philosophical issues universal to all suppliers (ToyotaSupplier.com, 2012).” In addition, “individual expectations, on the other hand, are developed uniquely for each supplier and include specific targets in the key areas of quality, delivery, value improvement and minority sourcing (ToyotaSupplier.com, 2012).”
To increase the communication necessary Toyota needs to implement more efficient ways of communicating goals and obligations. Toyota offers a supplier support system that “dispatches experts to work with suppliers who ask for assistance in devising and implementing necessary improvements (ToyotaSupplier.com, 2012).” Toyota must be committed to investing in their suppliers and providing the support necessary for them to contribute to the success of Toyota and themselves.
Process Flow Chart Before
Process Flow Chart After
Method of Evaluation SCOR Model “The Supply Chain Reference model is a supply chain diagnostic tool that provides a cross-industry standard for supply chain management (Russell, R. & Taylor, B. 2009, p. 424).” There are five categories of primary management processes- “plan, source, make, deliver, and return (Russell, R. & Taylor, B. 2009, p. 424).”
The SCOR model approach is aligned with the academic and professional work that promotes supply chain architectural design, performance measurement using reliable and consistent data models, and communication of process blueprints (Gulledge, T., Cavusoglu, T., & Kessler, T. nd). ”A primary feature of the SCOR model is the use of a set of performance indicators or “metrics” to measure supply chain performance (Russell, R. & Taylor, B. 2009, p. 424).”
The metrics of the SCOR model are categorized as “customer-facing” or “internal-facing” (Russell, R. & Taylor, B. 2009, p. 424).” The SCOR model “measures both a company’s current supply chain performance for different processes and its competitor’s metrics (Russell, R. & Taylor, B. 2009, p. 425).” The SCOR provides a framework not only for measuring performance but for diagnosing problems and identifying practices and solutions that will enable a company to achieve its performance objectives (Russell, R. & Taylor, B. 2009, p. 425).” The SCOR Performance Metrics Scorecard
Recommendations Toyota should organize weekly meetings with management and suppliers to assess issues of quality, safety, cost, delivery, lead time and many other factors associated with the product. The idea is to build a relationship with suppliers in effort to create trust, establish communication, needs, wants, and to work collaboratively. “Strategically managed long-term relationships with key suppliers have a positive impact on the firm’s financial performance (Rippa, P. nd).”
Toyota can utilize Customer Relationship Management software that allows management and suppliers to work collaboratively and share information across multiple devices. The initial cost associated with implementing CRM will benefit the organization by bringing together key people and identifying weaknesses in the processes or products of the supplier. Management, key employees and suppliers should all be able to access information across businesses to improve communication and improve the quality of the product through continuous processes obtained through information.
Conclusion Toyota has a great opportunity to increase the value once created in their vehicles by enhancing the relationships that are built with their suppliers. Communication is the most important aspect of conducting business and being able to provide communication across multiple devices and programs will help to build trust and long-lasting relationships. Toyota must invest in their suppliers as well as themselves by using CRM.
Suppliers will be able to better serve Toyota because expectations are understood and communication is clearly conveyed in a way that is supportive to both organizations. Suppliers and key management will be able to utilize reports generated by the software to provide an analysis of where the strengths and weaknesses are concerning all areas of business.
Monthly meetings should be held to discuss the findings and suggestions on how to improve weaknesses and implement a strategy quickly to improve those processes. Suppliers will also be able to remain competitive based on the analysis of the reports generated with real-time information. Managers and suppliers will be able to communicate discrepancies through a variety of devices, reduce the amount of time it takes to receive information to make changes, and reduce costs.
References Cole, R. (2011). What Really Happened to Toyota? MIT Sloan Management Review. Forbes. (2011). Forbes global 2000 leading companies. Retrieved on January 12, 2012 from http://www.forbes.com/companies/toyota-motor/#. Greto, M., Schotter, A., & Teagarden, M. (2010). Toyota: The accelerator crisis. Thunderbird School of Global Management Gulledge, T., Cavusoglu, T., & Kessler, T. (nd.) Aligning the Supply Chain Operations Reference Model with Enterprise Applications: Real Time Value Chain Intelligence. Retrieved on February 9, 2012 from http://www.google.com/search?sourceid=navclient&ie=UTF-8&rlz=1T4TSNA_enUS413US414&q=how+to+implement+the+SCOR+perfomance+model
Rippa, P. (nd). Information Sharing in Buyer-Supplier Relationships. Retrieved on February 4, 2012 from http://www.iimm.org/knowledge_bank/IFPSM/Pierluigi%20Rippa.pdf Russell, R. & Taylor, B.W. (2009). Operations Management: Creating Value along the Supply Chain. 6th ed. Hoboken, New Jersey: John Wiley & Sons, Inc. Toyotasupplier.com (2012). Relationship Between Tier II Sourcing Program and the APP Process. Retrieved on January 29, 2012 from toyotasupplier.com/sup_diversity/tier_II_sourcing_program_05_20_2009.pdf Toyotasupplier.com (2012). Helping Suppliers Compete. Retrieved on January 29, 2012 from http://toyotasupplier.com/sup_guide/sup_compete.asp