Ethan Kemp

Case Study 1
09/26/2018
Toyota Supplier Relations: Fixing the Suprima Chassis
1. General Overview
Toyota was presented with a challenged related mainly related to very poor visibility and low
quality of a supplier, Chassis Co., for the Suprima model. The Japanese brand Toyota is mostly
known for its high-quality products and perfecting the “Just In Time” manufacturing process. In
1997 Toyota was launching a model of Car called the Suprima and teamed up with a company
called ChassisCo, a notorious US automotive supplier of stamped metal components. Having a
had a good trustworthy partnership for the previous six years Toyota greatly increased their
usage of ChassisCo. Toyota is now giving ChassisCo all the supply chain responsibility for a
much more technologically advanced rear suspension cradle, but problems would arise. One of
first problems that occured in this case is that ChassisCo failed to alert Toyota up front that they
were experiencing production issues. Toyota heavily miscalculated the ability of the supplier, but
when ChassisCo realized they were at 60% of the production they should have related this
information. It would become obvious that ChassisCo lacked the skills in engineering, sourcing,
logistics, and overall project management to produce the more complex rear suspension for the
2003 Toyota Suprima.
2. Case Study Questions
There are many problems concerning this case but more specifically these problems impacted
quality and capacity. To start with, one of the negative quality impacts came from sourcing.
Unlike the 1997 Suprima, for the 2003 launch Toyota would let ChassisCo take full
responsibility for sourcing parts. One of the sourcing problems would lie within one of the
suppliers from Georgia that they had picked to source parts from. Chassis would shoot for all of
the lowest bids from all of the parts suppliers in order to meet some of the very low prices that
Toyota had set, but this ultimately caused a decrease in quality. This company had never made
structural auto parts and did not understand the durability required, explaining why they had
been experiencing so many defects. Another supplier had a huge number of problems with the
die automation equipment. ChassisCo was also unable to locate parts along their supply chain
which Toyota would later fix. In addition, they were also very vertically integrated, which would
make their beginning to end procedures inadequately defined, thus explaining some of the poor
visibility of their parts. These problems are all on Toyota assuming ChassisCo had the project
management skills necessary to not only effectively audit their suppliers, but to track their parts.
Why they lack so much skill to do some of the necessary tasks were also due to the fact that most
experienced people had all been redistributed across the country which greatly decreased their
know-how. This skill gap also rose many issues to the capacity aspect of this project. The lack of
skill positions also led to issues concerning resources, 102 sets of tools needed to be qualified
and they only had a couple of engineers to do so. There were also several other technology
problems as well throughout this case. One of them was changing their manual welding process
to an automatic one that actually ended up having a negative impact on the production capacity
and quality. When welding manually the weld operators were able to look at their work in real
time making it much easier to ensure that there was a quality bond in the weld. There was no
feedback system in the robotic welder at the time to inspect defects and guarantee quality. The
automated welding system also needed more room to put in the extra capacity, but just went for
more plant density instead. Most of these problems listed all fall under the inability to implement
the “tuning” process well, which is essential to the Toyota way.
3. Financial Assessment
There is no doubt the miscalculation had a negative impact of the finances of Toyota. Toyota
continuously drained resources into the plant to keep up with the demand. They had to send high
level employees to audit the suppliers, to fix sourcing issues as well as monitor plants. The scrap
rates of the parts were also extremely high costing the plant for more money then it had planned
for. They also had to increase price to offset some of the costs for needed plant improvements.
The increase in price could have impacts on revenue discourage some consumers to buy. I was
sort confused on whether this information had gotten out to the public concerning the quality of
the rear cradle suspension system but if so would affect the public image of Toyota’s brand.
Producing the parts at nearly one third of production capacity required there were also shortages
getting the Suprima
4. Recommendations
My first recommendation to Toyota is too never assume that their suppliers are going to be able
to undertake a significant increase in responsibility, especially when they do not fully know the
Toyota way of doing things. In the future if they do attempt to make a similar partnership with a
supplier that they employ an experienced Toyota champion to oversee the entire operation for at
least a year until they are absolutely certain they are sufficient on their own. On ChassisCo’s side
when they are finding suppliers need to do a better job making sure the supplier meets all there
needs. They also need to shift their culture to that of Toyotas where they relay and address issues
first and foremost and never let an issue get to the point that it did. Also, when the know that an
issue his risen to this magnitude they need allocate their best employees.