Presentation for Oct 6 Saltillo, Mexico manufactureres conference

1. Supplier Development A company’s undertaking to improve its supplier capability.

2. Two Concerns Companies’ organizational capabilities to develop their suppliers Organizational capability as a subject taught to suppliers

3. Key questions What factors facilitate and a constrain a company’s attempt to replicate its organizational capabilities at suppliers? How to prevent leakage to competitors?

4. 3 Levels of Capability Maintenance Improvement capability Evolutionary capability

5. Scope of activity Model-specific components Whole factory Whole company

6. Evolutionary Key suppliers Consistent set of incentives to learn Suppliers benefit Relational Obligational Trust-based Voice-based

7. Long term relationship Joint problem-solving in developing “Black Box” Clear rule for sharing gains between customer and supplier Customer requirements Resources Organizational support structure

8. Obstacles 3 obstacles to the replication of organizational capability by suppliers Tacit nature of knowledge Class room training Expensive “We know more than we can tell.” It may take other groups than Supplier Development Supplier corporate governance

9. Toyota Case Study Toyota’s Production System and Toyota Quality Control are taught by two groups Capability for capability building Lower level of capability Jishuken (Self study groups) Lateral learning between suppliers

10. Origen of Supplier Development Toyota 1939 Purchasing rules “once nominated as Toyota suppliers, they should be treated as part of Toyota (as branch plants); Toyota shall carry out business with these suppliers without switching to others and shall make every effort to raise the performance of these suppliers.”

11. Keiretsu Shindan Post WWII Suppliers evaluated by: Existence of management policy Productivity improvement Quality Improvement Fulfillment of production plans

13. Management Kaizen plan

16. TQC Quality control techniques HoshinKanri (policy deployment) Links shopfloorprocesses to policies of higher level management Evolutionary capability

17. Operations Management Consulting Division (OMCD) Charged to implement TPS Within Toyota Core suppliers Same training Same procedures Same engineers

18. KojoJishuken Autonomous study group Culmination of education and training Middle Managers First-Line Supervisors Most important repository of Kaizen

19. Jishuken Groups Helping suppliers improve their shopfloors Refining applications of TPS 56 factories apart of 52 enterprises 80% of Toyota’s spend Suppliers are cascading TPS to their sub tiers Annual supplier selection 2 month critical focus

20. If and When Necessary Individual assistance given Quick results Drivers Suppliers profits plummet rapidly Not meeting launch targets

21. TQC Purchasing depart diffuses Responsible for Kyuohokai (Supplier Association) Forum for sharing information Regular seminars Study group meetings Training courses Exhibitions Member achievement Cost, quality, delivery and development

22. Toyota QC Award Motivate suppliers to adopt TQC Purchasing Dept. offers hands-on quidance HoshinKanri Quality Assurance Cost Control Genbakanri Delivery management

23. TaishitsuKyuoka “Strengthening of one’s constitution” Long-term Marketing Cost and investment planning Cost control Process improvements Quality improvements

24. Kaizen To address major suppliers declining revenues and profits. Major task to help suppliers secure profits in the short term Short term recovery of loss making suppliers Longer term capability enhancement

25. Removing fear OMCD does share with Purchasing Planning Department All productivity gains between OMCD and Suppliers is kept confidential Suppliers would not participate in Kaizen Suppliers keep all gains Toyota expect benefits from improved supplier performance

26. Summary OMCD separate existence from Purchasing Facilitate know-how between internal factories and supplier factories Suppliers have incentive to enhance their evolutionary capability Short term fixing of problem and long term capability enhancement Suppliers taught TPS & TQC at the same time.