How Toyota Works with its Suppliers

February 2, 2010 - Tags:

Interview on August 21, 2008, with Gene Tabor, General Manager, Purchasing-Supplier Relations, Supplier Diversity, and Risk Management

The purpose of the interview was to discuss how Toyota works with its suppliers and to better understand Toyota’s working relationship with suppliers.

Gene Tabor believes that Toyota starts with a foundation that assumes that supplier relationships focus on the long term. Toyota also focuses on clarity of expectations with written annual expectations and mechanisms to measure, provide feedback, monitor, and improve. The goal is predictability so that the behavior of the supplier and Toyota, when an issue arises, can be forecasted by both parties. Communications with suppliers happen at the two annual supplier meetings as well as at ongoing meetings to enhance communications, expectations, and implementation.

Gene tells suppliers, “No surprises are preferred. Call even if it is 5 p.m. on a Friday afternoon instead of waiting until Monday and try to resolve it over the weekend.” He reiterated that the preferred mode at Toyota is “bad news first” so that the supplier and Toyota can solve the problem. The supplier may seek help by contacting Toyota directly, a Toyota manager visiting the supplier may see a problem, or the supplier may seek help after a problem is discovered. Supplier support is not limited to purchasing. Several possible groups may talk to the supplier. They include procurement, quality control, supply chain, and others. The relationship is in the form of a matrix with several possible contacts with Toyota interacting across the organization. The matrix has to “tighten up” to prevent problems from falling through the gaps. The most difficult issue is finding the most efficient and effective approach for sorting, sifting, directing, and coordinating help to the suppliers; Toyota considers the process to be a work in progress.

Gene says that “every supplier will have a problem of some type; the question is not if, but when it happens, how is it handled?” There are no extra resources to help suppliers; everyone, from purchasing to the line team members, may be used to solve a problem. If a supplier has a financial issue and is winding down, a team from Toyota will go to the supplier location and help to wind things down by working with the customer group to ensure a fair share of product. Many times the subsuppliers may continue to work with another supplier to ship to Toyota.

How does Toyota ensure that supplier assistance is separated from purchasing negotiations? Toyota starts with “respect for people,” so that even if the supplier and Toyota do not agree, the supplier understands that the buyer is ready to listen and has the data to support a given case.