Working with Suppliers for Mutual Learning of TPS

April 14, 2009 - Tags:

One way that Toyota has honed its skills in applying TPS is by working on projects with suppliers. Toyota needs its suppliers to be as capable as its own plants at building and delivering high-quality components just in time. Moreover, Toyota cannot cut costs unless suppliers cut costs, lest Toyota simply push cost reductions onto suppliers, which is not the Toyota Way. Since Toyota does not view parts as commodities to be sourced on the market through open bidding, it is critical that it works with highly capable suppliers that are following TPS or an equivalent system. There are many methods Toyota uses to learn with its suppliers and, in the Toyota Way style, these are all “learning by doing” processes, keeping classroom training to a minimum. The important learning happens through real projects on the shop floor.

First, all key suppliers are part of Toyota’s supplier association. These are core Toyota suppliers that meet throughout the year sharing practices, information, and concerns. There are committees that work on specific things, including joint projects. In the U.S., BAMA (Bluegrass Automotive Manufacturers Association) was created in the Kentucky area, since Toyota suppliers started there. This has now expanded to a national association. Members of BAMA can participate in many activities, including study groups that meet to develop greater skills in TPS. These are called jishuken or voluntary study groups.

The jishuken was started in 1977 in Japan by the Operations Management Consulting Division (OMCD). OMCD is the elite corps of TPS experts started by Ohno in the mid-1960s to improve operations in Toyota and its suppliers. This included about six senior TPS gurus and about 50 consultants—some of these are fast-track, young production engineers on a three-year rotation who are being groomed to be manufacturing leaders. Only the best TPS experts have directed OMCD. About 55-60 of Toyota’s key suppliers (representing 80% of parts in value) were organized into groups of four to seven suppliers by geography and type of part. They rotate across companies, working on three- to four-month projects in each company one by one. They choose a theme and go to work. Representatives of the other suppliers visit regularly and make recommendations. The OMCD TPS expert visits the plant every week or so to give advice. OMCD uses an annual conference to share learnings. The projects involve radical transformation, not incremental improvement, often tearing up the floor and creating once-piece flow, leveling the schedule, and the like, to create huge improvements in cost, quality, and delivery. Strict targets are set and achieved.

Kiyoshi Imaizumi, an executive with Araco Corporation, which is one of Toyota’s most sophisticated suppliers in Japan, was assigned to the U.S. to lead Trim Masters, Inc., a Toyota/Araco/Johnson Controls joint venture. Imaizumi explained that jishuken in Japan can be very “severe.” It is teaching TPS in the spirit of the harsh approaches originally used by Taiichi Ohno.

Toyota’s suppliers’ Jishuken in Japan is completely different from that in the U.S. It is compulsory. You cannot say no. Toyota picks suppliers to participate. From each supplier they pick three to five members. Toyota sends their own TPS expert to the target plant and they review this plant’s activity and give a theme, e.g., this line must reduce 10 people from the plant. The supplier’s member has one month to come up with a solution. The TPS expert comes back to check to see if the supplier has met the target. Then the Toyota TPS expert verbally abuses the supplier participants. In the past some of the participants had a nervous breakdown and quit work. Toyota has a gentler version of TPS in the U.S. Once you clear Toyota’s jishuken in Japan, you can feel so much more confidence in yourself. One of the former Trim Masters presidents went through this and became so confident he never compromised anything with anybody.

Toyota has gradually changed its style to one that is more supportive and less punitive, particularly in the U.S., when they learned from experience that the punitive approach does not work. They have set up similar jishuken activities with American suppliers (called “plant development activities”), trying various configurations. They found they had to group suppliers by skill level with TPS, since there was such a wide range.

The closest thing in America to OMCD is what occurs at the Toyota Supplier Support Center (TSSC) run by Hajime Ohba, a former member of OMCD. A variation on the theme of OMCD was created to fit the American culture, with the focus still on projects. Suppliers, and even companies outside of the auto industry, like Viking Range and Herman Miller, had to petition to be accepted as clients. The service was originally free, but then became a pay-for-service consulting firm. The TSSC identifies a business need and then picks a product line to do a project. The project consists of developing a “model line.” A typical model line includes component assembly and a manufacturing process that makes parts that go to the assembly line. A full TPS implementation is done with all the elements of JIT, jidoka, standardized work, Total Productive Maintenance, etc.

The TSSC results have been spectacular. As of 1997 the TSSC had completed 31 projects, getting impressive results in every single case. They had reduced inventory an average of 75% and improved productivity an average of 124%. Space was reduced, quality improved, and emergency freight shipments eliminated (Dyer, 2000). But there were compromises along the way.

As he did in Japan, Ohba tried the OMCD approach of giving vague instructions and then expecting the plants to leap into action. Only after this would he provide guidance with pointed questions and challenges. What he discovered with U.S. companies is that they wanted more guidance and needed more visits to keep the projects going. Projects that might take two to three months in Japan were dragging on for four or six months and complete implementation could take nine months or more. Some of the companies did a good job of propagating TPS to other parts of the plant, but most did not. And few companies spread TPS across plants. Even the “star” suppliers that the TSSC worked with closely fell back to a lower level of TPS unless Ohba’s group made continued visits, pumping them up and doing more projects. Unfortunately, while TPS experts could force installation of TPS principles with extraordinary results on selected lines, they could not inoculate the suppliers with Toyota Way genes. The explanation by Ohba was quite simple. Companies that failed to continue implementing TPS after seeing dramatic improvements were led by executives who were not serious and committed. It was not shop-floor resistance but top management that was responsible.