Page 323 - The Toyota Way Fieldbook
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298                       THE TOYOTA WAY FIELDBOOK


                John Deere in converting a traditional purchasing organization into a
                lean supply chain. With that background he was well suited to help
                Delphi extend DMS to what it calls “outside manufacturing.” Delphi
                avoids the term “supplier,” to emphasize that the quality of manufactur-
                ing is important whether it takes place inside or outside the corporate
                boundaries of Delphi.

                “Inside manufacturing” currently encompasses about 30 percent of
                the total cost at Delphi, while “outside manufacturing” makes up 50
                percent. Delphi buys about $14 billion worth of goods annually. So
                the opportunity was clear.

                Besides DMS being a well-developed system with strong training
                programs and internal lean expertise, Delphi had two other sources of
                expertise for lean supply chain. One was a set of consultants formerly
                with Toyota, and the second was direct support from Toyota, which
                has become a major Delphi customer. In fact, Toyota sent one of their
                TPS experts in purchasing to work full-time for two years within Delphi
                and to teach the Toyota Way of supplier development.

                In this case study, Delphi’s strategic sourcing system is illustrated as a
                work in progress. The case reflects Delphi’s lean supply chain progress
                after working with the process for almost three years, when Dave
                Nelson’s team rated themselves in an embryonic stage compared to
                Toyota. But Delphi felt it was headed in the right direction, and their
                approach is comprehensive, hitting all aspects of a lean supply chain.
                Nelson learned from Honda that a cornerstone of a lean supply chain
                was a strong cost management system, the heart of which was a set
                of models of key manufacturing processes. Putting various input costs
                into the model leads to a predicted total cost for a component part.
                The models are detailed, and very accurate in reflecting actual costs
                to make a part. Nelson hired a former Toyota manager who had over
                25 years experience in purchasing and with Toyota’s cost management
                system. As Delphi’s director of cost management, he became the
                internal expert, setting up and teaching a cost management system
                modeled after Toyota’s. He was assigned a team of 30 full-time people
                as “disciples” to learn and spread the cost management system, which
                Delphi considers the cornerstone of its lean supply chain.
                The Toyota veteran estimated that it would take five to six years to
                meet a minimum level of acceptability as a lean supply chain, and
                nearly three years into the program in 2004, he felt Delphi was
                on track. According to this cost management expert, a minimum
                requirement for success was to have the unwavering support of senior
                executives, which Delphi demonstrated through the supportive efforts
                of J. T. Battenberg III and Dave Nelson.
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