SUP 3063 - Purchasing

Test 1

Date: 2/11/2023
Program/Term/Group: Supply Chain
Management – Term 1

Toyota Motor Corporation is a Japanese car manufacturing company. Founded in 1933 by

Kiichiro Toyoda, its main headquarters is located in Toyota (Aichi) and Bunkyō (Tokyo), although,
due to its multinational nature, it has factories and offices in various countries.

In 2023, it has been ranked as the second-largest automobile brand in the world in terms
of high revenue, with 260 billion, just below Volkswagen.

1. It is of vital importance that the purchasing policy is integrated with the

organizational culture because in this way the following can be achieved:

• Strategic alignment: It ensures that purchases are made consistently and achieve the
company's objectives.

• Cost control: It is essential to minimize unnecessary costs and maximize efficiency.

• Risk management: Through supplier evaluation, diversification of supply sources, and

the implementation of strategies to mitigate risks in the supply chain.

• Improvement in quality and innovation: It promotes collaboration with suppliers who

share the company's vision and values, which can result in higher-quality products or services and
the introduction of new solutions.

This concept is well understood by Toyota because its purchasing policy, which is based on
obtaining the highest quality products from the best suppliers at the best price, aligns with its
organizational goals. Their vision and philosophy are based on a commitment to quality,
continuous innovation, and respect for the planet. They strive to exceed expectations and be
rewarded with a smile. This can also be better understood through the lens of their philosophy.
 (Toyota, s.f.)

2. A strong relationship between suppliers and buyers is key to the success

of both parties involved. To achieve this, it is necessary to implement various strategies,
such as:
 Open and transparent communication: Establish clear and effective
communication channels to discuss expectations, issues, and any changes the
company wishes to implement.
 Setting clear expectations: Agree on deadlines, product or service quality,
quantities, prices, and other relevant aspects.
 Collaboration in planning: It is crucial to involve suppliers in the planning and
decision-making process whenever possible.
 Joint development program: Work on continuous improvement, sharing best
practices, training, and shared development.

Toyota seeks a win-win relationship with its suppliers, aiming for long-term contracts with
strict criteria. The selection process is rigorous and extended to reduce risks and establish clear
objectives. In addition, Toyota believes that realizing its "mutual benefit based on mutual trust"
policy means that suppliers must conduct their operations reliably and require a united approach
to support each other in good and bad times and overcome challenges together.
 Toyota also awards 68 annual prizes to suppliers who exceed performance targets. This
recognition program highlights the importance of supplier relationships in supporting a
commitment to excellence in quality, promoting new ideas, and sustainability, which are crucial
elements in achieving objectives. To achieve this, suppliers are evaluated across various
performance dimensions through an internal rating system that includes specific Key Performance
Indicators (KPIs) like quality and Kanban. Here are some of the suppliers who have received the
award.
 (2022, https://pressroom.toyota.com/toyota-recognizes-excellence-among-north-american-
suppliers-for-2022/, s.f.)
3. Toyota employs a systematic and "just-in-time" design approach to
establish a highly effective master plan closely linked to each of its products. Supplier
engineering requirements are derived from the specific design process needs. For
instance, if a supplier is creating a front headlight for a side module, they are given a
deadline to provide Toyota with the external dimensions of that headlight, instead of
requesting the entire headlight design, as internal specifications are likely to evolve during
the design process. The accuracy in anticipating what information will be needed at
specific dates enables the efficient use of in-house and supplier research and development
capabilities, minimizing waste. This significantly differs from the common multiple delays
and efforts seen in many companies in the same industry.

We can also add that fostering collaboration in knowledge networks is a practice to

strengthen the skills of its suppliers. These networks encompass various approaches, such as
business alliances that facilitate the provision of resources, groups dedicated to problem-solving,
and volunteer-based learning teams.
 4. Toyota has a supplier code of conduct that specifies the minimum values
suppliers must adhere to. This code is based on several key areas:
• Labor and Human Rights: It specifies how workers should be treated, anti-
discrimination measures, prohibition of child labor, working hours, and protection
of young workers.
• Health and Safety: Covers all aspects related to potential workplace accidents and
ergonomics.
• Environmental Impact: Includes solid waste management, wastewater, and
emissions control.
• Ethics: Suppliers are required to adopt the strictest ethical conduct standards in
their dealings with workers, suppliers, and customers.
• Commitment to Management: Involves audits and evaluations.
• Promotes compliance with local, national, and international laws and regulations,
as well as the terms and conditions of contracts.

To ensure compliance with this purchasing policy, Toyota conducts periodic training
sessions and monitors and updates the announced procedures.

5. When Toyota evaluates a supplier's profile, it takes into account five

essential elements that allow them to align their supply capabilities and requirements:
 Kaizen (Continuous Improvement): Is the supplier willing to continually
improve its performance? Can they identify and address the root causes of issues and take
corrective actions? Are they constantly dissatisfied with the current state and willing to
continuously enhance their performance?
 Logical Reasoning: Does the supplier use fact-based decision-making
processes? Do they deeply understand the rationale behind each decision? Can they
tolerate detailed inquiries from Toyota's engineers and provide a comprehensive
explanation of processes and product specifications?
 Cross-Functional Teams: Does the supplier promote a team-based
organizational culture? Does the supplier's top management participate in all operational
areas? Do they practice meticulous and collaborative coordination in cross-functional
matters?
  Sharing of Information and Knowledge: Is the supplier willing to share
details about their costs, quality, and technology with Toyota? Are they open to
transparent quality audits, revealing relevant information, and providing access to their
records?
 Responsiveness: Does the supplier respond promptly to requests and
deliver exactly as promised? Can Toyota rely on receiving responses even during
weekends? How long does it take for the supplier to provide a response?
 References

Brown, M. (n.d.). Toyota. Forbes. Retrieved November 3, 2023, from

https://www.forbes.com/companies/toyota-motor/?sh=1e66436552bd

Top 10 car brands in the world 2023. (2018, May 16). MBA Skool.

https://www.mbaskool.com/business-lists/top-brands/17621-top-10-car-brands-in-the-

world.html

TOYOTA MOTOR CORPORATION. (n.d.-a). Intellectual Property. Toyota Motor Corporation Official

Global Website. Retrieved November 3, 2023, from

https://global.toyota/en/sustainability/esg/intellectual-property/?

padid=ag478_from_header_menu

TOYOTA MOTOR CORPORATION. (n.d.-b). Toyota Way 2020 / Toyota Code of Conduct. Toyota

Motor Corporation Official Global Website. Retrieved November 3, 2023, from

https://global.toyota/en/company/vision-and-philosophy/toyotaway_code-of-conduct/?

padid=ag478_from_right_side

Toyota motor corporation global website. (n.d.). Toyota-global.com. Retrieved November 3, 2023,

from https://www.toyota-global.com/company/history_of_toyota/75years/data/

automotive_business/production/purchasing/overview/index.html