“SUPPLY CHAIN READINESS TRAINING – AUTOMOTIVE SECTOR”

Acacia Hotel, Alabang, Philippines │ 29 January 2016

TOYOTA’S MANUFACTURING
SUPPLY CHAIN

by

RICHARD B. VALDEZ
Vice President, Purchasing Division
Toyota Motor Philippines Corporation
 Presentation Outline

1. Overview of Toyota Production Structure

2. Becoming a Toyota Supplier
3. Toyota Supply Chain: Philippine Setting
4. Key Factors for Suppliers
1) Toyota Production Structure
Manufacturing supply chain strategy adapts to changing
structure of production networks.

 52 Production Affiliates
 7 Research & Design bases
 175 Distributorships

Considerations
 Production Expansion
 Cost Efficiency
 Investment Efficiency
 Core Competence Focus
 Control
 Flexibility
1) Toyota Production Structure
Vehicle production characterized by increasing regionalization
--- matching demand and supply within the same region

<Sample Focus: Innovative

International Multi-purpose
Vehicle (IMV) >

5 vehicle types,
1 IMV platform

I, II, III – Hilux

IV – Fortuner
V – Innova

TSAM – Toyota South Africa Motors (Pty) Ltd. TMP – Toyota Motor Philippines Corp.
TKM – Toyota Kirloskar Motor Pvt. Ltd. TMT – Toyota Motor Thailand Co. Ltd.
TMMIN – P.T. Toyota Motor Manufacturing Indonesia TASA – Toyota Argentina S.A.
1) Toyota Production Structure
Evolution of purchasing system --- promotion of “local
purchasing”, i.e. produce/ purchase in the country or region of
vehicle production
<Sample Focus: Toyota
Parts Complementation
Scheme in ASEAN>

TKM – Toyota Kirloskar Motor TMP – Toyota Motor Philippines

TMT – Toyota Motor Thailand TMV – Toyota Motor Vietnam
ASSB – Assembly Services, Sdn. Bhd. TMMIN – Toyota Motor Manufacturing Indonesia
 Presentation Outline

1. Overview of Toyota Production Network

2. Becoming a Toyota Supplier
3. Toyota Supply Chain: Philippine Setting
4. Key Factors for Suppliers
2) Becoming a Toyota Supplier
Purchasing at Toyota takes place in accordance with the
following basic policies:

Fair competition based Open to any and all suppliers regardless of

1 on open-door policy nationality, size, or whether they have
done business with Toyota before

Long-term relationships based on mutual trust

Mutual benefit based fostered by close and wide-ranging
2 on mutual trust communication with suppliers

Economic and industrial contribution in

Contributing to local
regions with Toyota market presence through
3 economy through
purchasing of parts, materials, tools, equipment
localization
and others from local suppliers
Ref: Toyota Supplier CSR Guidelines (Dec 2012)
2) Becoming a Toyota Supplier
Supplier technical evaluation process

TMP TMAP TMC

1 Evaluation of New
Supplier Capability
 General requirements Evaluation of New
2
 Design and development
Supplier Capability
capability
 Production engineering capability
 Manufacturing capability 3 Propose to
 Quality control Designer
 Safety 4 Final Evaluation/
 Environment Approval

 Suppliers are chosen on the basis of business considerations.

 Toyota evaluates the overall strengths of prospective suppliers.
2) Becoming a Toyota Supplier
Toyota’s expectations from suppliers in the provision of
products and services

Safety Safe environment for people to carry out manufacturing without

worry

Consistent high quality to maintain the excellent reputation of

Quality Toyota and enjoy the trust from customers

Delivery and Flexible, error-free execution in preparation for production

Production and delivery in a timely manner

Most competitive cost through innovative production

Cost technologies

Technological Grasp and address customer and social expectations in

Capability technologies for environmental protection, safety and comfort
Ref: Toyota Supplier CSR Guidelines (Dec 2012)
2) Becoming a Toyota Supplier
Toyota’s expectations from suppliers in the process of
developing products and services

 Compliance with applicable laws and regulations

Legal  Protection of intellectual property
Compliance  Implementation of anti-corruption measures

 Non-discrimination with regards to all aspects of employment

Human Rights/
 Compliance with labor laws and regulations
Labor  Provision of safe and healthy working environment

 Promote environmental preservation activities and improve

Local/Global environmental performance
Quality
Community  Responsible material procurement
 Social contribution
Ref: Toyota Supplier CSR Guidelines (Dec 2012)
2) Becoming a Toyota Supplier
Toyota’s fundamental approach in supplier relations

Supplier Supplier Supplier

Selection Collaboration Development

• Evaluating supplier • Leveraging expertise and • Knowledge sharing

strength critical capabilities • Performance monitoring
• Establishing suppliers • Optimizing supplier • Quality audits
commitment to Toyota interaction from design to
production
 Presentation Outline

1. Overview of Toyota Production Network

2. Becoming a Toyota Supplier
3. Toyota Supply Chain: Philippine Setting
4. Key Factors for Suppliers
3) Toyota Philippines Supply Chain
Toyota Philippines Supplier Profile

<By Total Assets> <By Employment Size> <By Market Orientation>

18
35 (20%)
36
(38%) (39%)
57 56
(62%) (61%) 74
(80%)

SMEs (Up to Php 100M) SMEs (10~200 employees) Domestic (TMP)

Large (More than Php 100M) Large (>200 Employees) Export (Direct & Indirect)

 Approximately 60% of Toyota PH local supplier base are SMEs.

 Only 18 Toyota PH local suppliers are exporting; 2 of which are SMEs.
Note: Indirect exporters cover only suppliers exporting thru TMP
3) Toyota Philippines Supply Chain
TMP shares its successful strategies with suppliers through the
Toyota Suppliers Club (TSC).

Toyota Suppliers <TSC Activities>

Club
Improving efficiency and productivity throughout
 Established in 2000 with 50 the local Toyota value stream:
member-companies
 Toyota production System (TPS) activities
 In 2015, 92 members with
 Kaizen and QC Tools seminars
34,500 employees
 Cost and Quality seminars
 Investment: Php 1 Billion  Safety seminars
[13 export suppliers]  Learning sessions on human resource
 Export sales of US$820 Million development and industrial relations
in 2015 [14 export suppliers]
 3) Toyota Philippines Supply Chain
Effects of knowledge-sharing at Toyota: Creating joint value

<TPS Examples: Plastic Injection Parts>

1 2
 3) Toyota Philippines Supply Chain
Effects of knowledge-sharing at Toyota: Creating joint value
<TPS Examples: Press Parts>
1 2
3) Toyota Philippines Supply Chain
Enhancing the value chain of parts makers through collaborative
partnership with Government

PARTNERS FOCUS IMPROVEMENTS KEY RESULT AREAS

ECOP/Institute for Productivity  Operations Management  Reduce cost of doing business

and Competitiveness • 5S or Good Housekeeping  Improve quality
• Production Process Flow  Support Customer-Supplier
DTI/Center for Industrial • Plant Layout relationship
Competitiveness  Enhance Employer-Employee
 Human Resource Development
relationship
DOST/Technology Applications  Increase flexibility
Promotion Institute  Punctual delivery

<EBESE-Toyota Cluster development process>

Business Managers/ Supervisor Workers Plan & Monitor & Project
Selection Diagnosis Training Implement Turnover
Training Evaluate
3) Toyota Philippines Supply Chain
From 2005~2013, total of 98 suppliers have benefited from the
EBESE-Toyota Cluster Development Program.

19 98 Suppliers
Tier 1 26 (27%)
4
14 Tier 2 65 (66%)
Tier 3 7 ( 7%)

6 6 <Program Benefits>
26
Significant impact on
1
16 quality, productivity
improvement, efficiency,
8 cost competitiveness and
6 13
1
Toyota Group waste reduction
Export Supplier
3) Toyota Philippines Supply Chain
Advantages of being a Toyota Supplier: Global/ regional
integration through the Toyota complementation scheme
3) Toyota Philippines Supply Chain
Advantages of being a Toyota Supplier: Integration by indirect
exports through Toyota Tier 1 Export Manufacturers
 Presentation Outline

1. Overview of Toyota Production Network

2. Becoming a Toyota Supplier
3. Toyota Supply Chain: Philippine Setting
4. Key Factors for Suppliers
4) Key Factors for Toyota Suppliers
Suppliers must identify themselves  Cooperate with OEM initiatives to
as part of an interdependent improve supplier performance
economic network.  Putting value in Toyota-Supplier
relations

Supply chain management is about  Ability to cope with OEM

utilizing the competitive advantage requirements in terms of productivity,
of global/ regional sourcing quality, engineering, cost efficiency
and delivery

Increasing globalization and  Ability to cope with supply chain

regionalization are redesigning transformation
production and supply networks  Understand the continuous need to
upgrade competencies
4) Key Factors for PH Suppliers
Common factors affecting PH SME parts makers competitiveness
 Lack of design capability  Lack of testing facilities
 Lack of research and development  No available local raw materials

Some considerations for suppliers/ policymakers

 Develop research & development, design and testing capability of SMEs
• Pre-requisites to becoming direct OEM supplier or Tier 1 supplier.
 Suppliers should exploit technology and innovation to gain competitive advantage.
• When technological capacity is low and resources are limited for in-house R&D,
firms should use other channels to acquire technology (e.g. Joint Venture, Technical
Agreements)
 Establishment of shared service facilities (including testing facilities) for auto parts
“SUPPLY CHAIN READINESS TRAINING – AUTOMOTIVE SECTOR”
Acacia Hotel, Alabang, Philippines │ 29 January 2016

TOYOTA’S MANUFACTURING
SUPPLY CHAIN

by

RICHARD B. VALDEZ
Vice President, Purchasing Division
Toyota Motor Philippines Corporation