Executive Briefings

How Much of Toyota's Recent Problems Stem from Loss of Quality Control Over Suppliers?

The twin accelerator and carpet problems experienced by Toyota have been widely blamed on the manufacturer's pell-mell expansion over the last several years in its effort to pass General Motors and become the leader in worldwide sales.

But the accelerator problems seem to lie instead with a parallel effort that accompanied expansion: an almost paranoid drive to cut costs by using cheaper materials.

Last month, for instance, it was reported that Toyota had "requested" its suppliers to help in reducing parts costs over the next three years to compensate for slowing sales. That's a huge number, and a "request" from a big customer like Toyota is more like an order.

Cutting individual part costs can have a telling effect on their quality. Meanwhile, Toyota also moved more parts-buying overseas, away from familiar Japanese suppliers and into unfamiliar foreign ones. That may look good on the books, but it can lead to unreliable sources.

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The twin accelerator and carpet problems experienced by Toyota have been widely blamed on the manufacturer's pell-mell expansion over the last several years in its effort to pass General Motors and become the leader in worldwide sales.

But the accelerator problems seem to lie instead with a parallel effort that accompanied expansion: an almost paranoid drive to cut costs by using cheaper materials.

Last month, for instance, it was reported that Toyota had "requested" its suppliers to help in reducing parts costs over the next three years to compensate for slowing sales. That's a huge number, and a "request" from a big customer like Toyota is more like an order.

Cutting individual part costs can have a telling effect on their quality. Meanwhile, Toyota also moved more parts-buying overseas, away from familiar Japanese suppliers and into unfamiliar foreign ones. That may look good on the books, but it can lead to unreliable sources.

Read Full Article