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Serena Nigro

Dr. Ozkul

MAN4504

21 April 2023

Causes of the Suprima Crisis

The 2004 Toyota Suprima Crisis was a car accident waiting to happen. The crisis occurred
when Toyota’s supply, ChassisCo, was unable to produce rear suspension cradles for the Suprima
crossover model at an adequate level. The Director of Production Control for TMMAGA stated
that the supply company had a “standard production rate of barely 60% of what was supposed to
be, parts sourced were frequently nonconforming, and need to improve their ability to track the
problems they did find” (Fine, Rosenfield and Bonini, 1). The crisis did not occur overnight
though. Anyone who followed along with Toyota and ChassisCo’s relations would have seen the
red flags, beginning at the start of their partnership.

To start, Toyota had a great deal of responsibility in downfall. When they started their
partnership, Toyota demanded too much from their suppliers. Just prior to their joining, Toyota
had record levels of growth, profits, and customer satisfaction. These quick amount of
improvement gave Toyota an ego. They felt they had created a way of manufacturing that others
would be jealous of which they referred to as TPs. Their two valued concepts were “jidoka,”
meaning equipment stopped production instantly when a product occurred, and “just-in-time,”
meaning products were produced due to demand from the next step to continue operations. TPS
was the first sign of concern leading to the 2004 crisis. When TPS was taught to employees, it was
described by a senior executive as “learning to play golf…The game can be explained in five
minutes. However, mastering the game of golf requires practice, coaching, and persistence over
many years” (Fine, Rosenfield and Bonini, 3). The process focused on coordination between
suppliers and factories to ensure everything ran smoothly. Unfortunately, Toyota assumed that
suppliers would alter Toyota to problems when they arose. This was the first error of the company,
as they did not do check ins until it was far too late. A common thread in the whole study was that
Toyota expected too much of their suppliers and assumed. Another error of Toyota was their 1997
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change from internal sourcing to outsourcing the rear suspension cradle. If they had not made this
change, the whole 2004 crisis would never have occurred. Once Toyota decided to adopt
ChassisCo in 1997 to build their rear suspension cradles, they made another fatal mistake. Toyota
hired a company which had no experience with “purchasing, engineering, or cost analysis” (Fine,
Rosenfield and Bonini, 6). Due to the lack of experience, Toyota decided to simplify parts of their
tasks. They assumed again that their new processes were very easy to understand, so they once
again set themselves up for failure by forgoing inspections at the supply plant. Once the new 2003
Suprima model came along, internal members of Toyota started to express their concerns over
ChassisCo and their ability to meet the higher demands with the new, more complex model. One
member of the team, Walt Bernstein was quoted saying, “We just didn’t realize the extent of the
gap between ChassisCo’s capabilities and what we were asking them to do…Several months
before the launch date, they knew they were in trouble and we knew we were in trouble” (Fine,
Rosenfield and Bonini, 8). Once Toyota realized they signed a company which could not keep up
with demand, they were too far gone and too close to their launch. They also were cited as ignoring
the supplier’s requests for support in Athens. ChassisCo was ten engineers short, lacked a supplier
management group, and kept being denied a materials manager. As the launch grew closer, both
Toyota and ChassisCo had strained relationships. Instead of operating as a group, both sides were
claimed to “have it.” The 2003 launch operated a 60% of the target production, had high levels of
scrap rates, and workers staying overtime (Fine, Rosenfield and Bonini, 11-12). The final
contribution by Toyota of their 2004 crisis was not taking all the red flags and stopping production.
Instead, the 2004 Suprima model released with five times more defects than the year prior. It was
not until this horrific launch that Toyota finally installed new procedures to oversee the suppliers
and their manufacturing.

Toyota was only one side of the problem leading to the 2004 crisis. On the other side of
operations was the ChassisCo plant in Athens. ChassisCo’s Athens plant started off as a small
supply chain focusing on one customer and one product. Due to their small size, they were doomed
from the start. From the very beginning, they were already operating past their means so there was
no way they could keep up with the Toyota boom and thus the 2004 launch. As mentioned before,
Toyota’s JIT and TPS systems were complex and hard to learn. ChassisCo had a hard time
understand the systems, therefore implementing the steps poorly. It was said that there was a great
deal of inconsistencies and defects at the plant from day one. The complex systems required major
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skills. At the time of signing a contract with Toyota, ChassisCo admitted that they were no familiar
with many aspects of operations Toyota expected them to know but were excited none the less
(Fine, Rosenfield and Bonini, 6). This was a red flag that costed both companies in the long run.
Toyota took a chance on a company because they were excited, and ChassisCo accepted a job that
they were not qualified for. In 1997, ChassisCo was tasked with creating rear suspensions for
another model of Toyotas, meaning their attention was divided and the steps got confused.
ChassisCo’s overwhelming task list continued to grow in 2003 with the launch of the Suprima.
Additionally, Toyota tasked them with “parts sourcing and incoming logistics and inventory
management” despite “the complexity facing Athens being much higher” (Fine, Rosenfield and
Bonini, 7). The group had another red flag since they were not able to keep up with the basic
demands, let alone handle every aspect of production. They struggled as they were unaware with
tuning processes, fixing problems that arose, and lacked the project management skills required
for the job. Once everyone realized how doomed the 2003 and later 2004 launches were, ChassisCo
had dug themselves a massive whole. Another contributor to the crisis was the decentralization of
ChassisCo in 2000. This meant that the people with experience were spread out internationally,
making it impossible for a solid group of experienced individuals to work on the complex Toyota
parts. Additionally, resources and support were stretched thing as a result of ChassisCo growing
globally (Fine, Rosenfield and Bonini, 9). When a problem arose in the manufacturing of parts,
the group was unable to accurately fix the issue which led to high levels of scraps and down time.
They were unable to standardize their work, lacking a defect feedback system or inspection system
(Fine, Rosenfield and Bonini, 12). When the 2004 launch came around, the supply plant was in
shambles, both figuratively and literally. Their employees were spent and overworked, and the
Toyota-ChassisCo bond was strained. The launch went so poorly that something had to change so
both companies did not go out of business.

There are a few ways that ChassisCo and Toyota can approach resolving the crisis. To start,
Toyota can simplify their production system. As shown through the case, their system in place was
difficult to understand and caused for many issues in the manufacturing of a successful product. I
would make a whole new system which has never been used before. Starting with a blank slate
would allow every member of the team to learn together and better gage how each section of the
manufacturing is preforming. Additionally, the TPS system was rooted in the 1950s JIT system. I
would update the system to the current language and way of producing. A major shortcoming of
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Toyota was their assumptions of their suppliers. They expected suppliers to come to them with
problems, and avoided doing routine quality control or check ins. I would start with implementing
weekly or biweekly check ins to ensure the suppliers are on track. Additionally, I would have
people from Toyota work at the plant to get firsthand accounts of how the production is going.
Another major change that could occur is hiring a new supplier or splitting the supply demands
between two companies. In 1993, Toyota made the switch from internal sourcing to outsourcing
the rear suspension cradle (Fine, Rosenfield and Bonini, 5). This decision seems to be a big
contributor to the 2004 crisis. Moving forward Toyota can ensure that the supplier does not get
overwhelmed by dividing the work up or by completely changing the company in charge. Toyota
has been known for their aggressive target prices that suppliers cannot reach. I would lower these
costs, even if it means we do not make as much money as we once did. This would allow suppliers
time to recover from the crisis before growing with Toyota together. ChassisCo can also resolve
the crisis in multiple ways. To start, they can implement alongside Toyota multiple month-long
training sessions, so their employees all know how to use the systems. They can also cap the
amount of time employees are allowed to work. Most employees were working “12 hours a day,
7 days a week” and still the company was falling short (Fine, Rosenfield and Bonini, 2). By
capping the amount of time one can work, employees will not be as spent and be able to resolve
issues quicker and more efficiently. Another change for ChassisCo to resolve the crisis would be
to open a larger space. In such a small space, the company struggled from day one to keep up with
demand. Most space would allow a larger amount of production to occur more efficiently.
Additionally, the group can hire a project management team and put a stage gate process in place
that had not been in place for multiple years. This would allow for issues that arose to be fixed
swiftly and prevent more in the future. ChassisCo was cited with not have a strong account system
to “recognize and separate operations expenses from pre-production or launch expenses” (Fine,
Rosenfield and Bonini, 9). I would hire a well-researched group of accountants who are experts in
this field so that production can operate to the most cost appropriate way. Finally, real time
inspections daily and the hiring of skilled workers would allow for better production. If you hire
qualified employees who understand what they are looking for to fix, the inspections would be
productive and allow for smoother manufacturing. The 2004 Toyota and ChassisCo crisis could
have been easily avoided if people were more attentive to multiple aspects of the process. By
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implementing some of these changes, the duo can pull themselves out of this crisis and thrive
together.

Fine, Charles, et al. “Toyota Supplier Relations: Fixing the Suprima Chassis.” MIT Sloan, 24
Apr. 2017, https://mitsloan.mit.edu/teaching-resources-library/toyota-supplier-relations-
fixing-suprima-chassis.