Supply Chain - The Toyota Way

The best example of a supplier’s development is Toyota. Their commitment to help their suppliers goes beyond the boundary of cost reduction. Toyota Motor Corporation have also stated in their purchasing rules that Toyota must be treated as a part of Toyota. In the stated rules of Toyota also, they have the responsibility to raise the performance of their nominated suppliers. They believe in helping the suppliers achieved their optimum level by teaching them the Toyota Production System and Total Quality Control.

Below are a video about the Japanese pattern of the supply chain:-

Strategic Considerations for Supply Chain Management

source: http://www.srgpartners.com
In Supply Chain Management, the suppliers are often considered as ‘extended enterprise’ and act as one entity for the buyers benefits. This entity is triggered by the buyer decision and the input of the buyer will cause an effect into the whole supply chain. The whole entity comprises of partnership between suppliers, manufacturers and distributors working together in fulfilling the demand of the buyer. There are many points or selection criteria in determining suppliers but as Eleni Hadjiconstantinou in her book "Quick Response in the Supply Chain", states that the basic rules of defining a partnership are:-

1) Scope of Work
2) Division of Responsibilities
3) Required Service Levels
4) Dedicated or Multi-user Facilities
5) Performance Monitoring
6) Open or Closed Book Accounting
7) Ownership of Assets
8) Length of Commitment
9) Exit Arrangements

These criteria must be well stated in the selection process as this process will lay the foundation for the relationship to grow and mature. Without these ground rules, there is high possibility that the relationship will falter.

Response Management in Supply Chain

Managing the entire supply chain requires companies to view their supply chain as a single entity. Strategic decision making and efficient management is essential in determining the success of the collaborative effort between the suppliers. Collective strategy is developed through mutual understanding and common objectives. Setting a clear goal post for the suppliers will help them in steering towards the same direction regardless of any setback they suffer along the way. Reaction to any disturbances caused by outside factors must also be dealt with collectively by suppliers as a group. The collaboration is also much stronger and enables them to compete effectively in either the local or global market.

An example of a response management in a supply chain management can be seen in this video:-