Integration with Suppliers

Suppliers are Key to Toyota Delivering 6+ Sigma Products

Since Toyota delivers 6+ Sigma performance. this means that it operates better than 3.4 defects per 1M opportunities, This quality metric is RTY (Rolled Throughput Yield). Since Toyota cars contain about 30% supplier content this is included in RTY. RTY is the quality of every process in a Value Stream multiplied together. A fact of RTY is that it will never be greater than its lowest value. Suppliers are an integral part of Toyota’s 6+ Sigma performance.

Toyota Sends Toyota Employees to Their Strategic Suppliers to Improve Them

Toyota never has more than 2 hours of Supplier inventory in its factory bay at any time. They can do this because of Just-in-Time deliveries. That means worldwide they have, at most. 115M Supplier parts in their bays. Increase this by 50% if they move to 3-hour deliveries.

Toyota will send employees to work with their suppliers and this is just one of the ways Toyota partners. The Toyota partnership with their suppliers has created a business benefit for Toyota resulting in just 2 hours of supplier automobile part inventory on their docs at any one time. This means that when Toyota builds a car, the materials they aren’t using only experience two hours of unproductive downtime. This is a huge competitive advantage.

When Lean Six Sigma discussed waste they used the acronym DOWNTIMES. The I in DOWNTIMES stands for Inventory. Inventory is a waste in Lean Six Sigma because it is something you are paying for, that is not being used. It is also strategic but at a tremendous cost. However, Inventory is a strategic waste.

Toyota finds that it can be a more successful company if it partners with suppliers. What they want is a low cost of inventory while maintaining a constant flow of high-quality parts. Suppliers get a fair price and Toyota’s continued business.

Toyota knows which supplies are strategic for them. I would call all suppliers that are strategic and offer just-in-time services, which would be in tier 1. Toyota wants some of their tier 1 suppliers to work so well with them that they will send Toyota employees to improve the supplier. The goal is to bring them to a level of efficiency that works for Toyota’s requirements.

Putting Suppliers into 6 Categories

  1. Strategic, Delivering Just-in-Time,
  2. Strategic, Future Jus-in-Time deliveries,
  3. Strategic, Important, but Just-in-Time is not feasible,
  4. Non-strategic, Delivering Just-in-time,
  5. Non-strategic but Large, and
  6. Non-Strategic, all other suppliers.

In Conclusion

Assign your suppliers to a tier level appropriate to their importance to you. Some suppliers are ancillary to your business such as office supplies though have an opportunity to save your System money. Though, you might consider just-in-time office supplies utilizing a two-bin system. Now that you have assigned tier levels, have a discussion with them about what it would take for them to increase the level they operate at. Validate that Tier 1 not only delivers Just-in-Time but delivers a quality product that meets your quality requirements. If they do not, then they may be a candidate for your help.