Et Tu Toyota …
Reading about the Toyota Accelerator Pedal recall (around 2.3 million vehicles to quote a figure), one can’t help but wonder how a company with its squeaky clean quality and safety reputation, a temple of learning for supplier collaboration processes, could falter on such a grand scale.
The accelerator pedal in question is sourced by Toyota from two suppliers, Denso in Japan and CTS in Indiana US, with the recalled parts coming from CTS only. Now CTS is not an exclusive Toyota supplier, it also supplies similar parts to other automakers as well. But the only ones that face issues are the Toyota pedals.
Till the late 1990s, Toyota used to practice a risky strategy of having just one supplier for a part, leaving it vulnerable to production disruption. After a fire in one of the critical supplier plants shut down production for 5 days, Toyota started having multiple suppliers for same parts. Toyota as a company is considered a benchmark in the supply chain world when it comes to supplier collaboration and parts standardization, but somewhere in pursuit of risk mitigation and cost reduction in recessionary times, it did not standardize the designs for accelerator pedals across its suppliers. It seems that designs for the pedals manufactured by Denso and CTS are different.
Which begs the question: Is Toyota wrong to have two different suppliers and two different designs? Well, there is nothing wrong in having two suppliers, but for an automobile company that consciously tries to carry minimal inventory, having varying designs across suppliers is inherently dangerous. It kind of defeats the purpose of having multiple suppliers to mitigate supply risk. If one supplier goes down, the other may not be able to ramp up production with an exact substitute. Not having standardization also increases the complexity and oversight required for quality control, which may have also led to the current situation.
It will take Toyota some time to come out of the situation that it finds itself in (sales are down 16% in January 2010 and the recalls will cost almost $2 billion) but hopefully it will get back to its “Toyota Way(s)” pretty soon.