Toyota looks to develop ways to disaster-proof its supply chains

Toyota Motor Corp. has been applying its kaizen (continuous improvement) principle to the management of its parts suppliers so that it can maintain or swiftly resume production in the event of natural disasters.

As it took the firm weeks to confirm the damage to its suppliers following the 2011 Great East Japan Earthquake, forcing it to reduce production for months, Toyota has developed a supplier database to quickly grasp the effects of disasters on its supply chain and mitigate the impact of disruptions by securing alternative suppliers.

When a major earthquake hit Niigata Prefecture on June 18, registering an upper 6 on the Japanese seismic intensity scale of 7, the firm managed to confirm in half a day — thanks to the risk management database — that no damage was caused to its parts supply system.

Since a vehicle is made up of some 30,000 parts, Toyota’s complex network of suppliers across various tiers is spread widely like the branches of a tree.

At the time of the 2011 disasters, although Toyota employees worked day and night, it took three weeks to identify the damage to the supply chain. The automaker had to halt production for two weeks and reduce production for another six months.

The delay in the initial response forced the firm to reduce its planned vehicle production up to June 2011 by 760,000, although it managed to make up for much of it after production returned to normal later in the year.

Learning from this experience, Toyota in 2013 worked with tier one suppliers to develop the Rescue System, a database to visualize supply networks according to each component. In the case of car lights, for instance, suppliers of lenses and companies in charge of treating the lens surface, resin materials, paints and additives are shown in a diagram along with information such as the location of their production facilities.

Currently, as many as 400,000 parts suppliers are registered on the system. If a disaster occurs in a certain area, Toyota can immediately identify parts at risk.

Visualizing the supply chain also helps identify components that are supplied by only one manufacturer and are difficult to replace with alternatives.

Toyota is working to decrease dependence on such components by reducing unique designs and sharing information on equipment specifications among its in-house parts production facilities and suppliers.

In doing so, Toyota has succeeded in securing alternative supply chains for most of its parts, except for some components such as semiconductors that need complex processing, but which Toyota would stock up on.

Establishing this backup system means suppliers have to disclose some of their know-how, which might include industrial secrets, but cooperation went smoothly because of the longtime tradition of Toyota group firms and suppliers supporting each other — including rival firms — during disasters and emergencies.

Still, concerns remain for Toyota’s suppliers, many of which are concentrated in Aichi Prefecture, as a massive earthquake is predicted to occur within the next 30 years along the Nankai Trough, which extends southwest along the Pacific coast of central Japan.

Moreover, the supply chain itself is constantly evolving along with changes in consumer needs, such as the growing popularity of hybrid vehicles and electric cars.

“There is no end to efforts to prepare for disasters, in the same way as everyday kaizen activities,” said Toyota’s senior employee in charge of procurement. “We will continue identifying new challenges and take measures to cope with them.”

26 July 2019 | CHUNICHI SHIMBUN | Japan Times

https://www.japantimes.co.jp/news/2019/07/26/business/corporate-business/toyota-looks-develop-ways-disaster-proof-supply-chains/#.XTs3V5NKjBI