Toyota's Extended Lean Enterprise
December 1, 2004
Many organizations are progressing in their Lean journey with the
goal of developing into a true Lean Enterprise. To build a strong
lean enterprise companies need to develop a world-class supplier
network. Toyota has spent decades investing in their extended
network of partners and suppliers, with the principle of challenging
and helping them to improve. Most companies seem to focus on new
information technologies and price squeezing with their suppliers
instead of following the extended lean enterprise model of enabling
and partnering with their supplier network.
Auto industry suppliers consistently report that Toyota is their
best customer but also their toughest. The US auto manufacturers
have a reputation for being tough; however, "tough" is defined as
unreasonable or hard to get along with. In Toyota's case, "tough" is
defined as having high standards of excellence, with the expectation
that their partners will rise to those standards. US companies and
Toyota have similar quality methods and procedures with extensive
standards, auditing procedures, and rules. What sets Toyota apart is
that suppliers view US manufacturers as coercive while Toyota is
viewed as enabling.
Over the last few decades Toyota created a strong supplier network
in Japan that has distinguished them from other automakers. As they
moved to build the same network in North America with US suppliers,
their demanding but fair partnership approach has received positive
reactions. The principal measure of supplier relations in the
American auto industry is the OEM benchmark Survey that is published
by John Henke of Oakland University. Suppliers rank auto
manufacturers using 17 measures from trust to perceived opportunity.
In the 2003 survey Toyota ranked first followed by Honda and Nissan,
while Chrysler, Ford and GM were fourth fifth and sixth. The survey
also showed that Toyota's scores had improved over 7% over 2002.
Another automotive supplier survey published annually comes from
J.D. Power. The 2003 survey found that Toyota, Nissan and BMW are
the best North American automakers in promoting innovation with
their suppliers. Chrysler, Ford and GM were all rated below average.
The rewards for Toyota's investment in building a network of highly
capable suppliers are obvious. Their quality that has distinguished
them as a leader in the industry is a direct result of their
excellence in innovation, engineering, manufacturing, and overall
supplier reliability. But the investment can also pay off in other
ways as seen in 1997 when a potential crisis threatened to halt
Toyota's production.
Aisin is one of Toyota's largest and closest suppliers. Toyota
usually dual sources most parts but was using Aisin as a sole
source. Aisin produces a part called a "p-valve" which is an
essential brake part used in all Toyota vehicles worldwide. In 1997
Aisin was producing around 32,500 parts a day, which was about 2
days of production inventory for Toyota. On February 1, 1997 a fire
destroyed their factory and threatened to leave Toyota without any
parts in 2 days. Two hundred of Toyota's suppliers self organized in
an attempt to get production of the valve started in two days.
Sixty-three companies pieced together engineering documentation,
used their own equipment, set-up temporary lines to make parts, and
as a result Toyota did not miss a day of production. A new
information technology system or a coercive environment did not keep
production running, but long-term relationships and an enabling
environment did. To reach the level of a true Lean Enterprise with
suppliers, an enabling environment needs to be created.
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About the Author
David McBride is co-founder of EMS Consulting Group, a Carlsbad, CA based engineering and management consulting firm. David has a BS in Mechanical Engineering from Ohio State University. He has a successful track record in the development and implementation of FMEA and Design for Manufacturability programs at several organizations and has greatly reduced Manufacturing costs through the utilization of Lean Manufacturing, Kaizen Events, and Manufacturing System Analysis. He has also been highly successful at developing and executing New Product Introduction processes, and Staffing and Capital Equipment Plans.
EMS Consulting Group helps companies implement lean strategies through lean training and lean consulting services. To learn more, read our lean manufacturing case studies or lean manufacturing articles.