Toyota is to overhaul its supply chain logistics following the disruption caused by last year’s earthquake and tsunami in Japan.
The disaster showed just how vulnerable carmakers’ supply chain systems are and Toyota has taken on board the harsh lessons it learned when rebuilding its supply chain system with a focus on diversifying procurement sources, boosting overseas purchasing and standardising parts designs across the world.
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Shinichi Sasaki, executive vice president in charge of procurement, told the Nikkei newspaper that Toyota has some 200 primary suppliers.
“At the end of last year, we asked them to disclose detailed information on their supply chains and created a database of 1,500 factories and production items deemed essential for our procurement.
“We also asked them whether they could find alternative sources of production should the factories in their supply chains be damaged by disasters, and have categorised as ‘risk’ products parts that cannot be produced in other locations due to the special processes involved.”
Sasaki added that the carmaker is asking suppliers to produce parts in at least two locations and, for some irreplaceable electronic devices, it is making it a rule to stock an inventory big enough to last until production is resumed. Stockpiling of almost all electronic parts will be completed by the end of this month.
“Our top priority is to standardise parts,” he said. “For example, producing a total of just 10,000 parts a year in several locations and stockpiling them can be a heavy burden. But if we standardise 50,000 parts and produce 25,000 each at two locations, we can hedge our risks.
“We estimate it will take about three years to change the designs and specifications of all the parts we use. We are asking for our suppliers’ cooperation in producing in multiple locations during that transitional period.”
Larger inventory increases costs although Sasaki said that standardisation will eventually help reduce these.
“We have placed too much emphasis on optimisation by region which led to producing a diverse array of parts. We are promoting the new initiative, Toyota New Global Architecture, or TNGA, to encourage the standardisation of parts design worldwide to hedge against risk.”
Of the 4,000 to 5,000 parts that Toyota directly sources, it plans to standardise the designs of about half. It will also optimise such features as interior designs and seats.
Sasaki also said that the company wants to reduce costs for parts development and material sourcing by at least 30-40% to cut capital outlays on parts production by at least 50%.
There will also be a reduction in the amount of materials and subcomponents shipped from Japan and Toyota’s foreign plants will instead procure them locally.
