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OM in the News: Toyota Airbag Cuts Open Doors to Global Suppliers

June 21, 2013
Cut-away of Toyota's Auris hybrid at Paris auto show

Cut-away of Toyota’s Auris hybrid at Paris auto show

Toyota has decided it no longer needs 50 kinds of airbags to protect drivers’ knees. Ten, the company says, ought to suffice. In one of Toyota’s biggest initiatives since 2009, reports Bloomberg (June 10, 2013), the carmaker is winnowing the number of parts it uses and increasing common components across models. The plan will cut both the time and cost for creating new models by as much as 30%. The automaker spent $9.6 billion in R&D last year.

In the past, Toyota focused on developing custom parts. It needed 50 types of knee-level airbags because seats for various models had different profiles. By standardizing “hip heights” across models, Toyota is reducing knee airbag variants by 80%. Last year, it had slashed radiators to 21 models from about 100. And it is reducing the number of cylinder sizes in its engines to 6 from more than 18. “From now on, Toyota will seek the compatibility of certain parts it uses with standard parts used by many automakers globally,” says the firm.

Toyota’s goal should make the company less vulnerable to supply disruptions by using parts from the largest manufacturers that can be substituted globally. The 2011 earthquake and tsunami in Japan forced Toyota to confront the complexity and risks of relying on thousands of suppliers, sub-contractors and sub-subcontractors making customized parts. The earthquake “really made us to look into our supply chain in great detail and see certain weaknesses there and look into things that needed to be fixed,” said Toyota’s spokesman.

International component makers such as Johnson Controls, Bosch GmbH and TRW Automotive are betting Toyota’s campaign will help them win contracts currently held by smaller Japanese companies. “This should mean more opportunities for global mega-suppliers with worldwide capacity and design expertise,” said one analyst.

Discussion questions:

1. Why is Toyota modifying its component options?

2. Why is this a supply chain issue and what are the potential downfalls?

One Comment leave one →
  1. July 4, 2013 5:57 pm

    So, is Toyota shifting from differentiation to a low cost competitive advantage? How will standardized components limit their ability to innovate in car models?

    I believe Toyota is shifting to a low cost model. Honestly, it has been many years since I judged Toyota cars to be novel.

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