Toyota Motor Corporation was founded in 1937 and is a multinational automotive manufacturer based in Toyota, Japan. Toyota has since grown into the worlds second largest automotive manufacturer with over 364,445 employees worldwide (Toyota, 2018)
Toyota has been operating in Australia since 1958 and has since become a dominant force in the Australian market with an 18.2% share of the national new-vehicle market in 2018. (The only brand in double figures.) (Toyota, 2018). Toyota places a great importance on sustainable practices and environmentally friendly operations, leading the global market in environmentally friendly vehicle technologies and sales of hybrid electrical vehicles and hydrogen fuel cell vehicles.
Toyota is a multinational automotive manufacturer with factories manufacturing or assembling vehicles in 27 countries across the globe.
Toyota manufacture a range of different vehicles, with boats, buses, SUVs, utes and luxury vehicles all being produced by the company. Toyota is one of the most recognisable brands in the world, listed as the fifth largest company by revenue in the world in 2017. (Fortune 500, 2017.)
Toyota was the worlds first automobile manufacturer to produce more than 10 million
Toyota, after extensive time in the car manufacturing industry, came to a revolutionary conclusion that their operations were a product of their suppliers (Kalvar, 2012).
Toyota has implemented Keiretsu supplying strategy (a system which emphasizes obligated relationships based on trust and goodwill) (Lennerfores, 2013). This basically means that Toyota has come to some means of control through a stake in each company down their supply chain to ensure they can control some key considerations such as cost, quality, delivery, and time to market.
By having a stake in their supplier’s operations, Toyota treats their suppliers as partners, rather than “suppliers”. Through this they are able to reduce risks within this environment directly.
Keiretsu supply chain strategy mainly (1) aims to reduce risk amongst supplier financial risk, quality control and risk of supply chain disruptions (Kalvar, 2012), (2) promotes supplier competiveness ultimately driving down cost and increasing quality and (3) achieve market growth strengthen supplier relations through consistent business therefore achieving reduced costs through volumed purchasing.
However, being a multi-national company, comprising utterly to a traditional Keiretsu system would be rather difficult in practice. Toyota differs from this in some forms;
• Rather than exclusively dealing with organisations that they have long-term relationships with, Toyota also source from the global market, in which they are able to incur extremely low prices taking advantage of economies of scale. Spoilt for choice, they are able to select suppliers that underpin their goals that a traditional Keiretsu system aspires for. (Lennerfores, 2013).
• When assessing goals for prices with long-term suppliers, Toyota looks at prices offered from a variety of global companies. (Lennerfores, 2013).
• Rather than purchasing singular parts, Toyota demands that their suppliers provide integrated systems of components. This assists in the development of consistent high quality products while simultaneously reducing costs and time to Toyota. (Lennerfores, 2013).
• Toyota consistently suppliers to continually improve their ability to provided the necessary integrated systems and to become involved in product development and the planning stage. (Lennerfores, 2013).
This Keiretsu supply chain strategy comprised within Toyota’s operation perfectly under pins the definitions and concepts under “lean” elements of production. Toyota is then able to ensure its variety of suppliers are not, over-producing, waiting, inefficient at transportation, over-processing, holding excess inventory, inefficient at managing staff, scraping and re-working through consistent, genuine and efficient communication with their suppliers given the nature of these relationships.
Being a global leader in a globalised market of car manufacture, Toyota have clearly found several keys to success. Alongside the Keiretsu supplying strategy, Toyota incorporates other witty and proven techniques in their overall sourcing strategy. Operating and designing in all corners of the globe, Toyota cannot simply design standardise products and expect them to flourish (Kotabe, Murray, 2004). Toyota’s strategy is swift and adaptable with designs suited for all markets that they operate in. Alongside this adaptably within their designs, comes an exploitation of their global presence in terms of their sourcing strategy. Every region that they operate specialises in areas where others do not. This allows Toyota to pick and choose exactly where certain areas of their manufacture and design are sourced from. Gasoline engines in Indonesia, steering components in Malaysia, transmissions in the Philippines, and diesel engines in Thailand (Kotabe, Murray, 2004). These techniques continue to under pin “lean” production. Through a global insight with a high level of comparability Toyota can efficiently analyze where the high level value added production and design steps are and emphasize them on a global level.
In general, Toyota anticipates its suppliers to go further in quality, cost, delivery, engineering, including technology, and management. These five key areas that are essential in shaping competitive entrepreneurs and ensuring their consistent domination in a highly competitive environment. Thus, Toyota strictly demands its suppliers to maintain constant high quality levels which can be evaluated in terms of the number of defect parts per million. Toyota also require suppliers to build and to maintain a relatively high position regarding unique designs or special technologies, while being a cost leader. They also need to critically asses’ trends in information technology and be able to tunefully merge state-of-the-art technology with their organization (Muramatsu, 2014)
These requirements are consistently met given Toyota’s dedication to the Keiretsu system, given the efficient communication streams and fulfilled relationships between them and their variety of suppliers.