SCM 414 - Honda & Toyota Case Studyguide

As part of the quality drive in the 1980s, US companies attempted to follow the Japanese model of partnering with their suppliers through long-term contracts. Why wasn't this movement successful?

 

The US companies realized it is more beneficial to globally outsource materials, especially, from China at a much lower cost.

What was Ford's policy for obtaining the lowest prices for its components?

 

Sellers bid for the prices at which they are willing to sell their goods and services. (Reverse Auctions)

What does the term "Kaizen" refer to?

 

“Change for the better” or continuous improvement.

a strategy where employees at all levels of a company work together proactively to achieve regular, incremental improvements to the manufacturing process.

When would companies usually implement Kaizen in the supplier-partner hierarchy?

 

While jointly improving with the supplier.

How do Japanese automobile companies determine the pricing of their products?

 

They start with the price of the product they believe the market can bear and then figure out the costs they can incur to make profits on that item.

What is the key difference between how American and Japanese companies foster rivalry among their suppliers?

 

U.S manufacturers set vendors against each other and then do business with the last supplier standing, whereas Japanese manufacturers promote competition with the support of their existing suppliers.

What do Toyota and Honda teach their suppliers on-site at the beginning of product development?

 

How to collect data for the product being developed.

What is Toyota's CCC21 initiative?

 

A cost reduction initiative which aims at a 30% reduction in the prices in 21st century

Despite the low-wage cost opportunities offered by Chinese and Indian suppliers, Toyota and Honda have not switched suppliers. Why is that?

 

Suppliers' innovation capabilities are more important than their wage costs

What was the Big 3’s goal during the 1980s?

To adopt the Japanese partnering model for better supplier relations.

What strategy did the Big 3 use with suppliers?

They reduced the number of suppliers and gave long-term contracts only to key survivors.

What became the main focus for U.S. manufacturers in the 1980s?

Cost reduction

How did U.S. manufacturers treat supplier development?

They did not invest in developing suppliers and instead moved production to China.

What was Ford’s supplier strategy?

Reverse auctions for lowest price, not quality.

What was GM’s supplier strategy?

Contracts allowed switching to cheaper suppliers at any time.

How did U.S. firms treat suppliers overall?

They pressured and bullied suppliers instead of helping them develop.

What did a supplier executive say about Ford’s culture?

“Ford seems to send its people to ‘hate school’ so they learn how to hate suppliers.”

When and where did Toyota open its first U.S. manufacturing plant?

1986 in Fremont, California.

How do Japanese automakers differ from U.S. automakers in supplier relations?

• Build long-term, trusting partnerships.

• Focus on teamwork, quality, and efficiency.

• Help suppliers improve instead of pressuring them on cost.

What is Keiretsu?

close-knit networks of vendors that continuously learn, improve, and prosper along with their parent companies.

Refers to a business network made up of different companies, including manufacturers, supply chain partners, distributors, and occasionally financiers, where each player continuously learns, improves, and prospers along with their parent companies.

What is Gemba (Genchi)?

“The real place” – where work actually happens.

What is Kanban?

‘A sign’ or a ‘large visual board’.

What is Jikon?

‘A top management meeting’.

What is Jishuken?

‘A study group’ for suppliers and manufacturers to learn together.

What is “Tough Love” in Japanese supplier relations?

a philosophy where these companies expect a lot from their suppliers, but they also help them reach those goals, for mutual success.

What role do Toyota engineers play at suppliers’ plants?

They work on-site to support and improve supplier performance (Genba practice).

Why develop supplier relationships when you can purchase from more affordable sources?

• Leads to higher quality, reliability, and innovation.

• Reduces delays and long-term costs.

• Keeps companies competitive over time.

Why do Western Manufacturers feel that keiretsu model is inefficient and inflexible?

• Locks companies into working with the same suppliers, even if cheaper or better options exist.

• It limits flexibility and competition.

• Can result in higher costs and slower innovation.

• Works best in Japan’s culture of long-term trust.

Can managers always do Gemba in person?

Not always — because it means going to the actual place to see the work happening, which isn’t always possible. However, Gemba technology like video calls, cameras, and digital tools lets managers observe and solve problems remotely when they can’t be there in person.

The Supplier-partnering hierarchy

1) Understand the supplier (Toyota engineers spending whole year at supplier plant -Gemba)

2) Rivalry into opportunity (source from diff supplier, set common goals)

3) Supervise the suppliers

4) Enhance capabilities (investing in supplier development (guest Engineer programs)

5) Information Sharing (effective communication (jikon))

6) Continuous Improvement (Kaizen, ERP Integration)