SUPPLY CHAIN by RICHARD B. VALDEZ Vice President, Purchasing - PowerPoint PPT Presentation

“SUPPLY CHAIN READINESS TRAINING – AUTOMOTIVE SECTOR” Acacia Hotel, Alabang , Philippines │ 29 January 2016 TOYOTA’S MANUFACTURING SUPPLY CHAIN by RICHARD B. VALDEZ Vice President, Purchasing Division Toyota Motor Philippines Corporation

Presentation Outline 1. Overview of Toyota Production Structure 2. Becoming a Toyota Supplier 3. Toyota Supply Chain: Philippine Setting 4. Key Factors for Suppliers

1) Toyota Production Structure Manufacturing supply chain strategy adapts to changing structure of production networks.  52 Production Affiliates  7 Research & Design bases  175 Distributorships Considerations  Production Expansion  Cost Efficiency  Investment Efficiency  Core Competence Focus  Control  Flexibility

1) Toyota Production Structure Vehicle production characterized by increasing regionalization --- matching demand and supply within the same region <Sample Focus: Innovative International Multi-purpose Vehicle (IMV) > 5 vehicle types, 1 IMV platform I, II, III – Hilux IV – Fortuner V – Innova TSAM – Toyota South Africa Motors (Pty) Ltd. TMP – Toyota Motor Philippines Corp. TKM – Toyota Kirloskar Motor Pvt. Ltd. TMT – Toyota Motor Thailand Co. Ltd. TMMIN – P.T. Toyota Motor Manufacturing Indonesia TASA – Toyota Argentina S.A.

1) Toyota Production Structure Evolution of purchasing system --- promotion of “local purchasing”, i.e. produce/ purchase in the country or region of vehicle production <Sample Focus: Toyota Parts Complementation Scheme in ASEAN> TKM – Toyota Kirloskar Motor TMP – Toyota Motor Philippines TMT – Toyota Motor Thailand TMV – Toyota Motor Vietnam ASSB – Assembly Services, Sdn. Bhd. TMMIN – Toyota Motor Manufacturing Indonesia

Presentation Outline 1. Overview of Toyota Production Network 2. Becoming a Toyota Supplier 3. Toyota Supply Chain: Philippine Setting 4. Key Factors for Suppliers

2) Becoming a Toyota Supplier Purchasing at Toyota takes place in accordance with the following basic policies: Open to any and all suppliers regardless of Fair competition based 1 nationality, size, or whether they have on open-door policy done business with Toyota before Long-term relationships based on mutual trust Mutual benefit based fostered by close and wide-ranging 2 on mutual trust communication with suppliers Economic and industrial contribution in Contributing to local regions with Toyota market presence through 3 economy through purchasing of parts, materials, tools, equipment localization and others from local suppliers Ref: Toyota Supplier CSR Guidelines (Dec 2012)

2) Becoming a Toyota Supplier Supplier technical evaluation process TMP TMAP TMC Evaluation of New 1 Supplier Capability General requirements  Evaluation of New 2 Design and development  Supplier Capability capability  Production engineering capability Propose to Manufacturing capability 3  Designer Quality control  Final Evaluation/ Safety  4  Environment Approval  Suppliers are chosen on the basis of business considerations.  Toyota evaluates the overall strengths of prospective suppliers.

2) Becoming a Toyota Supplier Toyota’s expectations from suppliers in the provision of products and services Safe environment for people to carry out manufacturing without Safety worry Consistent high quality to maintain the excellent reputation of Quality Toyota and enjoy the trust from customers Flexible, error-free execution in preparation for production Delivery and and delivery in a timely manner Production Most competitive cost through innovative production Cost technologies Grasp and address customer and social expectations in Technological technologies for environmental protection, safety and comfort Capability Ref: Toyota Supplier CSR Guidelines (Dec 2012)

2) Becoming a Toyota Supplier Toyota’s expectations from suppliers in the process of developing products and services  Compliance with applicable laws and regulations Legal Protection of intellectual property  Compliance Implementation of anti-corruption measures   Non-discrimination with regards to all aspects of employment Human Rights/ Compliance with labor laws and regulations  Labor Provision of safe and healthy working environment  Promote environmental preservation activities and improve  Local/Global environmental performance Quality Community Responsible material procurement  Social contribution  Ref: Toyota Supplier CSR Guidelines (Dec 2012)

2) Becoming a Toyota Supplier Toyota’s fundamental approach in supplier relations Supplier Supplier Supplier Selection Collaboration Development Leveraging expertise and Knowledge sharing Evaluating supplier • • • critical capabilities • Performance monitoring strength Optimizing supplier • • Quality audits • Establishing suppliers interaction from design to commitment to Toyota production

Presentation Outline 1. Overview of Toyota Production Network 2. Becoming a Toyota Supplier 3. Toyota Supply Chain: Philippine Setting 4. Key Factors for Suppliers

3) Toyota Philippines Supply Chain Toyota Philippines Supplier Profile <By Total Assets> <By Employment Size> <By Market Orientation> 18 (20%) 35 36 (38%) (39%) 57 56 (61%) (62%) 74 (80%) Domestic (TMP) SMEs (10~200 employees) SMEs (Up to Php 100M) Export (Direct & Indirect) Large (>200 Employees) Large (More than Php 100M)  Approximately 60% of Toyota PH local supplier base are SMEs.  Only 18 Toyota PH local suppliers are exporting; 2 of which are SMEs. Note: Indirect exporters cover only suppliers exporting thru TMP

3) Toyota Philippines Supply Chain TMP shares its successful strategies with suppliers through the Toyota Suppliers Club (TSC). Toyota Suppliers <TSC Activities> Club Improving efficiency and productivity throughout Established in 2000 with 50  the local Toyota value stream: member-companies  Toyota production System (TPS) activities  In 2015, 92 members with  Kaizen and QC Tools seminars 34,500 employees  Cost and Quality seminars  Investment: Php 1 Billion  Safety seminars [13 export suppliers]  Learning sessions on human resource development and industrial relations  Export sales of US$820 Million in 2015 [14 export suppliers]

3) Toyota Philippines Supply Chain Effects of knowledge-sharing at Toyota: Creating joint value <TPS Examples: Plastic Injection Parts> 1 2

3) Toyota Philippines Supply Chain Effects of knowledge-sharing at Toyota: Creating joint value <TPS Examples: Press Parts> 2 1

3) Toyota Philippines Supply Chain Enhancing the value chain of parts makers through collaborative partnership with Government KEY RESULT AREAS FOCUS IMPROVEMENTS PARTNERS  Operations Management  Reduce cost of doing business ECOP/Institute for Productivity  Improve quality • 5S or Good Housekeeping and Competitiveness  Support Customer-Supplier • Production Process Flow relationship DTI/Center for Industrial • Plant Layout Enhance Employer-Employee  Competitiveness Human Resource Development  relationship  Increase flexibility DOST/Technology Applications Punctual delivery  Promotion Institute <EBESE-Toyota Cluster development process> Workers Plan & Business Managers/ Supervisor Monitor & Project Selection Diagnosis Training Implement Turnover Training Evaluate

3) Toyota Philippines Supply Chain From 2005~2013, total of 98 suppliers have benefited from the EBESE-Toyota Cluster Development Program. 98 Suppliers 19 26 (27%) Tier 1 4 Tier 2 65 (66%) 14 Tier 3 7 ( 7%) <Program Benefits> 6 6 26 Significant impact on quality, productivity 1 16 improvement, efficiency, cost competitiveness and 8 waste reduction Toyota Group 13 6 1 Export Supplier

3) Toyota Philippines Supply Chain Advantages of being a Toyota Supplier: Global/ regional integration through the Toyota complementation scheme

3) Toyota Philippines Supply Chain Advantages of being a Toyota Supplier: Integration by indirect exports through Toyota Tier 1 Export Manufacturers

Presentation Outline 1. Overview of Toyota Production Network 2. Becoming a Toyota Supplier 3. Toyota Supply Chain: Philippine Setting 4. Key Factors for Suppliers

4) Key Factors for Toyota Suppliers  Cooperate with OEM initiatives to Suppliers must identify themselves improve supplier performance as part of an interdependent  Putting value in Toyota-Supplier economic network. relations  Ability to cope with OEM Supply chain management is about requirements in terms of productivity, utilizing the competitive advantage quality, engineering, cost efficiency of global/ regional sourcing and delivery  Ability to cope with supply chain Increasing globalization and transformation regionalization are redesigning  Understand the continuous need to production and supply networks upgrade competencies