Life as a Toyota supplier is rewarding but Japan’s biggest carmaker is still reluctant to outsource modules or replace its traditional partners, according to the latest SupplierBusiness.com supplier satisfaction survey.
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The results reinforced some familiar ideas about the world’s No. 3 carmaker – and threw up one or two surprises, too.
“You can knock on the door, but until they want a quote from you, you can’t open that door,” said an executive at a North American top 10 supplier. “Conversely, once they ask you to quote for one thing, they’ll probably ask you to quote across the [product] portfolio.”
Respondents say the level of supplier support from Toyota has increased more than other OEM customers in the last two years. “Toyota doesn’t just pressure suppliers, its also helps us improve,” said one Japanese company.
Survey respondents say Toyota is highly active in training suppliers in its production system, and in establishing organisations to improve cost reduction efforts.
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By GlobalDataEven from a high level, supplier respondents said that Toyota’s level of respect for what suppliers can offer has increased the most among OEMs surveyed.
But pressure to reduce prices has been high, probably as a result of the CCC21 (construction of cost competitiveness for the 21st century) cost reduction programme initiated in 2000.
Toyota aims to achieve double-digit costs savings for a new generation of a model over the outgoing vehicle.
Toyota looks to get savings from “all the parts” in a new vehicle, says Seiya Nakao, chief engineer, product planning for Toyota Europe. “Whenever we start a new programme, cost planning is very important to us.”
But suppliers are far less critical of Toyota’s ways of holding down prices that companies such as General Motors, Ford and Volkswagen. The difference in supplier perception seems to be that Toyota has systems in place to help suppliers get costs down, and that the carmaker is realistic about what can be achieved.
It is also very unusual for Toyota to dismiss suppliers. It considers this to be a drastic last step.
Suppliers say technical competence has also increased considerably in the past two years.
Toyota is the highest profile holdout against supplier designed and assembled modules. The company’s engineers believe the company would lose too much critical expertise.
Japan’s biggest car firm also considers it unlikely that suppliers can assemble components more efficiently than it can.
Toyota renegotiates
Among the few negative comments in the survey was that Toyota can be susceptible to re-negotiating costs mid-contract just like the industry’s less supplier-friendly OEMs.
And despite evidence that it is sourcing a higher percentage from local suppliers, survey respondents say it’s inconceivable that partners such as Aisin, Koyo, or Denso would be shifted from their positions.
Critical development programmes are still sealed off to outside competition. Kyohokai group companies still tend to have responsibility for the bigger products and systems.
Furthermore, Toyota’s cost reduction program CCC21 may have made trusted partners and subsidiaries even more competitive globally, rather than providing opportunities for North Americans and Europeans.
Still, Bosch supplies the complete brake system for Toyota’s European Avensis and Corolla, despite competition from Advic’s brake systems operation.
Toyota can be accused of a conservative purchasing policy. But in the nine months to 31 December 2003, it made a net profit of ¥810.9 billion ($US7.6billion) and its market capitalisation of $US30 billion is by far the largest of any carmaker.
The adage “if it ain’t broke, don’t fix it” seems appropriate.
SupplierBusiness.com
