TORRANCE, Calif. - For years, Toyota Motor Sales U.S.A. Inc. has worked inside what it calls a monolith that impedes its aftermarket parts deliveries.
Products arrive late to parts and service centers. Inventory moves sluggishly, sitting on shelves in a region where it is not needed and turning up scarce in areas of high demand.
The world's No. 3 automaker wants to tear apart its old ways. It has put its trust in electronic business to shore up an inefficient operation.
Toyota's Torrance-based U.S. subsidiary is spending about $60 million to transform its work with parts suppliers.
'We all came to the same conclusion. The (existing) system was not going to take us into the 21st century,' said Gerald Braga, Toyota's corporate manager of procurement for its North American parts operation.
The 22-month program, started in January, has broad implications for plastics suppliers.
They will be expected to meet Toyota's yearly demand forecasts, re-evaluated every fiscal quarter, and provide product when it is needed by Toyota's 1,500 U.S.-based dealers.
Actual delivery dates and lead times will be tracked online and production bottlenecks identified.
Suppliers negotiate on parts shipments through e-mail, before settling on a manufacturing and sales plan they can live with, Braga said.
Toyota's project is one of the few among automakers that will remake its aftermarket supply chain, instead of layering an information system over an existing business, said Kevin Prouty, research director for automotive strategy with AMR Research Inc.
'It might take longer than they expect, but it probably will work,' Prouty said.
Software provider i2 Technologies Inc. will help Toyota take its concept through to fruition. Toyota will use i2's TradeMatrix software to tear down the walls separating automaker, dealer and supplier, said Don Filipovich, i2's Southern California regional director.
The two companies are partners in another venture called iStarXchange that should launch by year's end. That company, majority owned by Toyota, will connect independent parts dealers, such as NAPA or Carquest, with suppliers.
Toyota believes it can save $100 million in three years by increasing the level of accurate ordering and inventory management, Braga said. Toyota buys more than $1 billion a year in service parts. Its top 25-30 suppliers represent about 80 percent of that product flow.
Toyota plans to use its e-business system globally, Braga said.
And i2 eventually wants to use its software within dealer showrooms: Customers would order a vehicle online, and the carmaker then would build it to order, Filipovich said.
While the technology for that is available today, the aftermarket presents the first challenge, he said.
'It's unbelievable the number of (aftermarket) parts that are thrown away each year,' Filipovich said. 'The aftermarket is so dysfunctional.'