Page 88 - Toyota Under Fire

THE OIL CRISIS AND THE GREA T RECESSION

can go in there and help them with—we did that. In most cases,
though, it was a debt refinancing issue, and we couldn’t help with
that. We’re not a bank.” But Toyota did have some tools at its dis-
posal to help suppliers that were experiencing a cash crunch. “We
modified our tool and payment schedule, so that our payments
for tooling were earlier and better aligned with their actual expen-
ditures for their tool shops.” In other words, Toyota started paying
suppliers sooner. The normal response of companies that are try-
ing to restore profitability is to delay payments to suppliers.
But that wasn’t the only thing that Purchasing did to shore up
suppliers that were facing a cash crunch. The purchasing team devel-
oped a plan to do something that Toyota tries to avoid at all costs—
deliberately build up a parts inventory. Working collaboratively with
some suppliers, the purchasing department actually ramped up or-
ders beyond what it needed for production. The team had to scram-
ble to locate warehouse space—the company doesn’t have any of its
own—to store these parts. The strategy was twofold: by buying
excess inventory in advance, Toyota was creating a safety margin
for itself in case the supplier went bankrupt, but it was also help-
ing the supplier avoid bankruptcy by injecting cash into the firm.
Managing supplier relationships was especially high on
the priority list at TMMTX, since suppliers were so integrated
right on site. Not only were many of the suppliers on site, but
most of them were new to the automotive business. When Toy-
ota decided to locate the Tundra plant away from the traditional
strongholds of automotive parts supply, it needed to build a new
supplier base in Texas. A program was launched to encourage
minority-owned businesses. Toyota connected these minority
owners, many of whom didn’t have experience in the auto in-
dustry, with existing suppliers to create joint ventures that were
51 percent owned by the minority partners.

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