Suppliers Innovation of Toyota

Toyota supplier innovation

1. Introduction

In 2003, Toyota Motor Corporation reported higher profits than its three largest competitors including GM, Ford and Daimler Chrysler. The main cause of this phenomenon was that Toyota paid attention to the importance of knowledge-sharing networks. In order to facilitate the transfer of both explicit and tacit knowledge (the meaning can be seen in appendix 1) within its supplier network, Toyota developed an infrastructure and different kinds of inter-organizational steps, which consisted of supplier association, consulting groups and learning teams.

1. Main processes involved in Toyota supplier innovation

1. Supplier associations of Toyota

In the past, suppliers were reluctant to sharing information about their companies because it was confidential information. For the purpose of changing the situation, Toyota established an association to provide a regular place for suppliers to share feedback which varied from explicit knowledge (production plans, policies, market trends) to particular subject areas (cost quality, safety and social activity). Over the years, such efforts have helped to build closer relationship among participating suppliers.

1. Consulting groups of Toyota

In 1992, Toyota established the Toyota Supplier Support Center (TSSC), it provided expert consultants for suppliers to solve their problems. TSSC required that participating suppliers shared their achievements with other suppliers. From all the projects results, TSSC concluded the best practice that have been put into use and then recommended the excellent working template for other suppliers. Therefore, those suppliers can successfully replicate that knowledge into their own production. The achievements were impressive, TSSC has helped suppliers to increase productivity by 123% and to decrease inventory by 74%.

1. Voluntary learning teams of Toyota

At the basis of former two steps, Toyota further organized over 50 suppliers into voluntary study groups. They worked together to improve productivity and quality. Actually, this was an advanced knowledge-sharing mechanism and all the members learned together and created new ideas. All the measures are beneficial to transferring tacit knowledge among suppliers.

1. Evolution of knowledge-sharing network

At the beginning of a knowledge-sharing network, Toyota strengthened bilateral relationship with substantial suppliers. However, there was little communication among suppliers because they were unwilling to share companies’ confidential information. Under the construction of supplier association, consulting groups and learning teams by Toyota, the suppliers started to form ties with each other in nested sub-networks. These multilateral relationships among suppliers are favorable to sharing knowledge, which can help participating suppliers to learn quicker than competitors.