2/11/2010 ANALYSIS: Supply chain management …

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ANALYSIS: Supply chain management and the crisis at Toyota Login Join now My cart

By: Supplie rBusine ss.com | 2 Fe bruary 2010

Is Toyota's m uch vaunted supply chain m anagem ent system on

the verge of m eltdown in the m idst of the unfolding quality crisis
centred on faulty accelerator pedals? SupplierBusiness reports

The global quality crisis now hammering Toyota has launched a

debate about w hether the blame should be placed squarely on the company’s
renowned system of supplier relations. At the very least, supplier executives say Toyota
may be ready to reevaluate its method of early involvement and close, long-term
MOST VIEWED MOST SHA RED MOST BOUGHT
partnerships with individual suppliers, as well as single-sourcing, in the w ake of plans to
modify or replace millions of faulty accelerator pedals around the w orld.
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Toyota's deeply integrated ties with its parts makers actually permitted the problems
THE W EEK THAT W AS: If it's Monday I m ust have got
with the pedal modules to occur. How? The automaker has remained lean while its Se oul
volume has increased dramatically since the days when the company's principles and
methods were established. Thus, Toyota can no longer maintain sufficient support
and quality control, especially as it adds new suppliers around the world. Yet it still
governs the design of key components.
Toyota's streamlined supply base is at fault. By relying so heavily on sole suppliers
and using parts across multiple platforms and vehicles, the automaker increases its
risks.
Toyota's methods have minimised the damage - enabling a relatively quick fix to the
sticky pedal problem because of the automaker's inherent ability to work closely with
suppliers on engineering solutions.

But the consensus among analysts is that Toyota's rapid expansion is at the core of the
problem. They say the company can no longer maintain the same level of quality control
and engineering rigor. And they say Toyota has rushed into relationships w ith suppliers
it has not adequately vetted, shifting aw ay from trusted Japanese-based companies in
favor of new parts makers located around the world.

The automaker has also been forced to slash costs as part of its growing orientation
towards stock market performance that followed its listing on the New York exchange in
the late 1990s. Also, Toyota's recalls have involved fantastically large numbers of
vehicles, which some critics say is the result of reliance on single suppliers that provide
common components for many platforms and vehicles. The lack of a second supplier
means it can’t easily sw itch sources.

For CTS, it has been a sharp learning curve. Last w eek, the executives who run the half-
billion dollar company might have been rethinking the wisdom of diversifying into the
auto business five years ago. It has been exposed to the terrors of manufacturing high-
profile products that are sold to millions of consumers.

CTS might have felt secure in the fact that its first automotive customer w as Toyota. The
components w ere engineered to Toyota's design. Toyota spokesman said, "Our position
on suppliers has always been that Toyota is responsible for the cars."

The recall has increased CTS production, as it grinds out the replacement parts it has
already begun shipping to Toyota assembly plants. CTS will also benefit from the Toyota
manufacturing experts now entrenched in the supplier’s three factories to help speed
production. That ought to yield long-term efficiency benefits to CTS. And the deep ties
now being forged to Toyota could help assure future business.

Toyota looks to be doing the right thing by not turning CTS into an adversary in the
crisis, as happened in the infamous Ford-Firestone recall in 2000. But CTS initially took
issue w ith Toyota's claim that its pedals could be a source of unintended acceleration.

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2/11/2010 ANALYSIS: Supply chain management …
CTS said that w hile reports of runaway Toyota vehicles w ent back as far as 1999, it did
not begin making pedals for the company until the 2005 model year.

CTS executives seem to wonder why their component is being connected w ith Toyota's
overall unintended acceleration crisis at all. They say there are not aw are of any crashes
or injuries caused by one of its pedals becoming stuck.

So the question arises: Despite the apparent cooperation between automaker and
supplier has CTS been left to twist in the wind?

Toyota's recent problems certainly underscore how certain elements of its approach,
including the cost-saving practice of using common parts and designs across multiple
product lines, and reducing the number of suppliers to procure parts in greater scale can
backfire w hen quality-control issues arise.

W hatever happens next, life has changed to one degree or another for Toyota suppliers
in the past year. Production is dow n, Toyota has asked for price reductions and a new
supplier quality offensive is sure to emerge from within the company. The next crop of
supplier surveys that grade relations w ith the OEMs should be fascinating.

This article was supplied to just-auto by SupplierBusiness, an IHS Global Insight

company.

BELGIUM: Toyota to repair up to 1.8m European gas pedals

Sectors: C om pone nts, Se rvice supplie rs/supply chain, Ve hicle m anufacture rs, Ve hicle
m anufacturing

Companies: Toyota, Ford, Fire stone

View next/previous articles

2 Feb 2010 - EMERGING MARKETS ANALYSIS: Connected thinking from the
Blue Oval

2 Feb 2010 - BELGIUM: Toyota to repair up to 1.8m European gas pedals

Currently reading - ANALY SIS: Supply chain management and the crisis at
Toyota

2 Feb 2010 - JAPAN: Toyota quality chief apologises for recall

2 Feb 2010 - GERMANY: Government seeks greater GM contribution for Opel

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