Toyota, suppliers rethink manufacturing

Never known for radical changes, Toyota Motor Corp. is about to make a radical change.

And it is relying heavily on its suppliers to figure out how.

Toyota’s plan to build the next-generation Corolla at a new factory in central Mexico in 2019 will take the automaker and its supply chain through a makeover on how they design, produce and deliver parts; how Toyota designs and produces vehicles from them; what materials the group uses; and how the chain makes product changes along the way.

Simply constructing an auto factory is a tall enough task for any manufacturer. Building one in a location where the automaker has no real track record is even more challenging. But when Toyota’s $1 billion plant in the Mexican state of Guanajuato comes online, it will be the first operation built from the ground up to embrace the Toyota New Global Architecture.

TNGA, as company executives call it, is a response to the Great Recession of 2009 and the economic and product-preference changes that followed. It is the result of Toyota’s decision to make its vehicles more flexible in design and lighter in weight; to make its factories smaller and nimbler; and to make supply chains all over the world better able to change course on short notice, more capable of improving their products and better able to help Toyota compete.

It’s a handful.

And until now, Toyota officials have shed scant light on the details of how it all will work. But as planning and execution get underway for the Mexico project, North American officials are beginning to reveal some of their thinking on what they want and how they will get there.

“We’ve had many, many communication meetings with suppliers,” Robert Young, Toyota’s North American senior vice president for purchasing, told Automotive News. “We’ve had this tremendous amount of go-and-see with suppliers in Mexico, to their plants in Japan as well, so we’re trying to ensure that our suppliers clearly understand what we’re trying to accomplish, how and when, so that they can align their schedules accordingly.”

Young says the conversations have been going on for the last two to three years.

“We’ve been front loading our collaboration with many of our supplier partners to try and come up with the best design solutions that allow us to optimize the manufacturing processes within our suppliers’ facilities,” he said. 

Although the project was made public only last year, meticulous planning for it has been going on for years to make sure that Toyota and its North American suppliers are in harmony when it launches.

But even then, Guanajuato will not deliver the first TNGA vehicle in North America. That distinction will fall to Toyota’s oldest North American auto plant, in Georgetown, Ky., when it delivers the next Camry sedan, likely in 2017.

By launching a new TNGA model with a seasoned work force, Georgetown will help Toyota figure out the logistics involved in the new system.

“We’re learning the capability of how to launch this in the Midwest,” said Young. “We’ll take those learning points and apply them to Mexico. So from a risk standpoint, we think we can manage it.”

What TNGA will physically involve is slowly coming into focus.

Mike Bafan is Toyota Motor Manufacturing’s president in charge of the new car plant in Celaya, Guanajuato. He is also president of Toyota Motor Manufacturing de Baja California, on the west coast of Mexico, which produces Tacoma pickups. Before coming to Toyota 10 years ago, Bafan spent 22 years with General Motors, including serving as production manager at GM’s full-size truck plant in Fort Wayne, Ind.

“TNGA allows us to produce vehicles with a lower center of gravity,” Bafan said of the new mission. “Much lighter, more compact components, delivering to customers the kind of driving performance and fuel efficiency and visibility … customers come to expect from us. So all of that has an impact on how we design our product and how we want our suppliers to be with us on the same wavelength.”

TNGA is also about using less to create more, Bafan says, meaning less raw material, less energy, less real estate and less investment. Toyota wants to bring its suppliers in on these new techniques as they produce commodities for the new architecture.

Young, who is also senior vice president for supplier engineering development, says the project is a “blank sheet of paper for our partner suppliers.”

“We’re asking our suppliers to rethink their entire process, whether it’s the production and engineering team, the conveyance and logistics team — whatever it might be — to rethink some of their legacy methodology and come up with the best solutions for TNGA.”

Toyota also is sharing its internal plans and ideas with its supply chain to show what Toyota is doing to improve its own manufacturing methods for TNGA. It is up to the individual suppliers what methods they choose to get where they need to go, but Toyota is not being shy about spreading the ideas behind TNGA across the manufacturing chain.

“We do have some hard metrics that we’ve shared with our suppliers and anyone we’ve talked to,” Bafan said. “For example, the floor space in the facility will be reduced by 40 percent compared to 2008 levels. Our investment will be reduced by 40 percent compared to 2008, and, of course, our CO2 emissions will see a 52 percent reduction versus our North American benchmark levels.”

Many things will not change under the TNGA plan, Young emphasizes.

“For the majority of our suppliers, there will be kind of a limited impact as a result of supplying Guanajuato,” he said. “We’ll maintain our just-in-time philosophy with our suppliers. But they have to be prepared to shift with us, and typically, they can do it in a shorter lead time than we’ve been able to do it historically.”

But there will be changes.

•  Toyota is working through how it will better manage bulky parts with high logistics costs. It is analyzing what large parts need to be produced near-site and which need to be on-site at the Guanajuato facility.
•  Those questions could mean that logistics are set up differently than what suppliers have been accustomed to at Toyota’s other North American Corolla production centers, near Tupelo, Miss., and in Cambridge, Ontario. Production of the model will be discontinued at Cambridge.
•  Rethinking logistics could mean a reordering of where suppliers stand in the chain, Young indicates.

“There are certain commodities where there potentially will be change,” he said. “That may mean that, all of a sudden, you become a sequence supplier and you’re delivering line-side, which is something that might be brand new to you.”

Toyota also is working through the details of picking partners in Guanajuato. It already is clear that Toyota will do things differently than it did at its Tundra plant in San Antonio. That plant was also a remote geography for Toyota’s suppliers, and Toyota resolved its needs by bringing nearly two dozen suppliers on-site at the factory, Young notes.

In contrast, Toyota sees in central Mexico not a remote patch on the supplier map but an existing supplier community with a long history of working for a variety of brands. Toyota now is picking and choosing suppliers, commodity by commodity.

“In some places, we’ll use existing supplier locations in central Mexico. In a couple of cases, of course, we’re going to be asking suppliers to please move a little bit closer to us,” he said.

Another question being ironed out for Guanajuato is how much local content the next Corolla will have. Toyota intends to use as much as possible, unless the product is simply not available in Mexico, such as some steel types and sheet aluminum.

For its direct suppliers, Toyota has a lot of options, he says. Some new suppliers will be coming on board in Mexico as the automaker weighs how to simultaneously source the next-gen Corolla at the new Mexico plant and at the plant near Tupelo.

Young says more work needs to be done down in the supply tiers in Mexico to make local content possible.

“There’s not the same experience level at the subtiers, which is a challenge for all automakers and suppliers,” he acknowledged. “We’re working with our suppliers to talk through what are the subtier solutions in central Mexico. That’s going to take time.”

Young’s sourcing teams are determining whether a part will require two suppliers in two locations or one centralized supplier handling both Corolla lines.

“That being said,” he emphasized, “we’re adding to the supplier base that can support us in central Mexico.”

The supply-chain solutions that its Mexico project finds over the coming three years will ripple through Toyota’s projects around the world, executives say. Just as Georgetown will help Guanajuato learn to launch a new TNGA vehicle, the Mexico experience will guide other new Toyota plants on how to establish their supply chains.