CASE STUDY 2 – TOYOTA

Toyota is well known for its supplier development and JIT system. In addition, Toyota Production System and Total Quality Control activities are taught to suppliers. This facilitates suppliers to build their capabilities. Toyota also ensure suppliers learn from one another. Toyota Motor Corporation’s purchasing philosophy established in the 1939 Purchasing Rules states that : ‘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’ (TMC 1988 p.76; Kyohokai 1994, p.18). The Toyota keiretsu (in practice Toyota and its 21 key suppliers) takes into consideration four criteria, namely the existence of a management policy, productivity improvement, quality improvement, and the fulfillment of production plans (Kyohokai 1967, p.24). This resulted in lectures and seminars on quality control aimed at top and middle managers of supplier companies in Kyohokai, which eventually established its Quality Control Committee in 1961. Toyota won the Deming Award in 1965. The JUSE (Japanese Union of Scientists and Engineers) indicated the difference in quality standards between Toyota and parts suppliers (Nemoto 1983, p.151). The Purchasing Control Department was established in 1965 to promote Toyota Production System (TPS) among suppliers and to teach Total Quality Control (TQC) to the suppliers. Toyota’s suppliers are able to build their capabilities from combining TQC and TPS. Questions : 1. Discuss the following statement : Purchasing not only buys parts or services from suppliers – it buys a supplier’s performance capability. 2. What principles of total quality management do supplier measurement systems satisfy ? 3. Discuss the possible advantages of negotiating quality requirements directly into supplier contracts.

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