OSCM 4080 – Case Study
28 February 2019
This case details how two leading companies in the automotive manufacturing industry, Toyota and Honda, develop close-knit and sustainable relationships with their supply base. These two companies have outperformed and outscored their competitors for years due in large part to the strategy they have implemented to build relationships with their most important suppliers. The supplier-partnering hierarchy outlines the major components of this strategy and will be summarized in this paper.
The first step in developing positive relationships is to take the time to gain a detailed understanding of how suppliers operate. By making this investment, Toyota and Honda can ensure that a supplier is the right fit for them from an operations and culture perspective. This also opens the door for the opportunity to share knowledge and improve the supplier’s operations which can benefit both companies going forward.
The next component of this model details the strategy that Toyota and Honda use to fuel competition between suppliers while avoiding the American method of pitting vendors against one another. The keiretsu system involves using a small number of suppliers for each component and encouraging competition at the earliest stages. The case details how Toyota approached several suppliers to design tires for its vehicles. They awarded their business based after extensive testing to the highest scoring suppliers under the condition that quality and performance would not decline over the life of the contract. This is a much healthier way of creating competition as it sets both sides up for long term success.
Another way in which these companies maintain relationships is by closely monitoring and evaluating suppliers’ performance. Honda monitors their critical supply base with monthly scorecards that evaluates them extensively on a wide range of criteria. When suppliers encounter issues and miss their targets, Honda immediately demands that their suppliers, often senior management, determine the root cause of the problem and put the necessary steps in place to solve it. By being...