Toyota Supply Chain Case Study
To contain the impact of a disruption a company may also choose to regionalize its supply chain (Chopra & Sodhi, 2014). It does so by dividing its global supply chain in smaller regions, each having its own local suppliers and distribution. By doing so a company can ensure the impact of a supply chain disruption is easier to contain in a given region, avoiding the potential “domino effect” of disruptive risks.
For instance, Toyota’s assembly plants in North America source about 75% of components from regional suppliers. The remainder is mainly from or comes via Japan. (Ludwig, 2013). JIT manufacturing promotes this kind of strategy, as minimizing stocks of components usually means suppliers need to be close …show more content…
Hence, managers need to find the right balance for between better cost-efficiency and higher expected cost of disruption.
[5.5] Toyota’s 2009-11 Recall Crisis
The series of recalls of Toyota vehicles started at the end of 2009 weren’t caused by a single event. Rather they are the combination of a series of factors, such as Toyota’s rapid growth in the previous decade and resulting growing complexity, slow response to customer complaints, poor supplier-assembler flexibility, excessive use of standard components, etc. One of the recalls was linked to a problem with sticky pedal accelerators. This was found to be caused by a design issue in one accelerator component. This problem affected more than a dozen of different car models (Gu, 2010) as the component was common across them. The component was manufactured in North America since 2005 by CTS Corp., a DS tier-two supplier (Liker, 2010). This didn’t mean however that CTS was the sole source of this component. In fact, Denso, a DA tier-one supplier with a long-standing relationship with Toyota, had been producing, in Japan, an analogous component that did not experience these design issues. These is why vehicles built in Japan weren’t subject to the …show more content…
We recommend Toyota to give more attention to the trade-offs between these two focuses. Fortunately, Toyota already has most of the tools it needs to improve this situation: it needs to re-discover past practices and re-examine its current heading. We suggest Toyota should continue implementing its parallel sourcing model, though we recommend to make it more responsive, even if it means increasing the capacity of some of the current alternative suppliers. In order to minimize risk, Toyota should focus on the responsiveness of DA and/or tier-one suppliers as those already have long-term experience with Toyota’s requirements for quality and performance. DA suppliers also have the added benefit of being liable for the design of components, so the responsibility of having a safety problem is mostly limited to the