From SCDigest's On-Target e-Magazine
March 7 , 2012
Global Supply Chain News: Toyota Taking Massive Effort to Reduce Its Supply Chain Risk in Japan
Says it will Reduce Its Time to Recovery from Major Disruption from Six Months to Two Weeks; Exec Says Company's Grip on Its Supply Chain was "Illusion"
SCDigest Editorial Staff
After taking a huge supply chain hit from the March 2011 earthquake and tsunami in Japan that caused it to have to dramatically throttle back production to a level that cost the company its position as the world's top automaker in 2011, Toyota announced last week that it would soon release a plan that will dramatically lower its supply chain risk.
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Sasaki said the suppliers that did not want to fully disclose their supply chains have made commitments to make changes that will ensure a production recovery within two weeks.
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The Japan disaster last year caused many of Toyota's part suppliers - often single sourced - to be unable to deliver products at expected volumes - if even at all - for many months. All told, Toyota says it took at least six months for its supply chain to fully recover from the earthquake damage.
Now, the company says that is close to the end of a massive effort that will lead to a dramatic reduction in its supply chain risk from future disasters, with the effort in large part focused on reducing its Time-to-Recovery from the six months experienced last year down to as little as just two weeks.
According to Reuters, Toyota executive vice president Shinichi Sasaki, who is in charge of purchasing at Toyota, told a small group of reporters last week that the company would "know by the end of March what contingency measures will be taken by all the supply sources and have those in place by around autumn."
Those plans come after a major project to full map its supply chain in terms of direct suppliers to Toyota and its suppliers' suppliers.
Sasaki said Toyota has now mapped the supply chain for about half of its 500-plus direct suppliers in Japan. The other half of its suppliers did not want to give Toyota full visibility to their own suppliers and locations for competitive reasons.
The effort this far has shown that there were about 1,500 sites producing components for Toyota. Of those, Sasaki estimated that about 300 were "at-risk" locations that were the sole source for almost 1,000 parts in total. Those "at risk" locations seem meant those in regions of Japan most susceptible to earthquakes and resulting damage, within the so-called "Ring of Fire" in the country.
Toyota said the plans in part would involve Toyota asking those suppliers to either spread production to multiple locations or hold extra inventory buffers. Sasaki said Toyota will also be looking at more dual sourcing of parts.
(Global Supply Chain Article Continued Below)
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"Our plan is to manage risk while at the same time reducing costs," Sasaki said, according to Reuters.