Toyota redraws N.A. supplier map

PRINCETON, Ind. — Toyota last month announced a multistep plan to shuffle vehicle production at its North American assembly plants, grouping together models of shared architecture.

It is a significant move for Toyota, in that it departs from the practice of having diverse products at assembly plants to protect them from shifts in market demand.

And the rearrangement has implications for Toyota's North American supply chain.

Some vehicles will move hundreds of miles, such as the Sequoia large SUV shifting from Indiana to Texas, and some suppliers will be expected to shuffle their own locations to accommodate the changes.

Robert Young, 53, Toyota North America's group vice president for purchasing, supplier engineering development and cost planning, spoke about the plans with News Editor Lindsay Chappell during a visit to Toyota's Highlander and Sequoia plant here. The following are edited excerpts.

Q: Toyota has just announced these plans to move vehicle production. But when did you begin talking to suppliers about it?

A: In 2014. We knew we were going to have to transition some of our legacy sourcing decisions. And we put it out there and had a lot of discussions with the supply base about how this might impact them.

We're cognizant of the impact every time we make a sourcing decision. We knew we wanted a voice for suppliers in North America for the global architecture to ensure we didn't end up with a design structure that was inefficient or difficult to make for the North American market. But at the end of the day, it's all about economies of scale.

I assume these changes might mean some suppliers will have to give up a program. But will they also gain something?

In a lot of cases, there are product commonalities. Our question is: How can we all benefit from that?

They might give up this, but in return, get more of that. That's part of the thought process. Hopefully, everybody's being given an offer to grow. That's what we all want.

Think of the supplier opportunity as centers of gravity. There will be a center of gravity for our two vehicle plants in Canada. There's a Midwest center of gravity, with a family platform in Kentucky and one here in Indiana. There will be a Mazda-Toyota joint venture in Alabama, with future products in that center of gravity. And also for Texas, with our future truck platform strategy.

When the San Antonio truck plant opened more than a decade ago, it was something of a challenge for Toyota to create a supply base for it. Have you gotten that situation where you want it?

There are not many suppliers that far west. Today, we have 23 on-site suppliers in Texas. And at our newer truck plant in central Mexico, we have six on-site suppliers, and many of them are common with our Texas base.

There's always opportunity to make progress. We're always looking at big, bulky parts with a high logistics cost and how we can reduce costs on moving them around. But it's not always about proximity.

Not all suppliers are equal from a competitiveness point of view. Sometimes to use the most competitive supplier, we face a logistics penalty. But it's still the right decision to use them anyway, when you consider the entire cost.

Has Toyota determined how many suppliers will be affected by the decision to group vehicles by family?

Not specifically. But we have a discussion about logistics costs every time we source a commodity.

It's also a moving target. As we bring new products into this new arrangement, our chief engineers are talking about finding new ways to use common parts among vehicles. That's a big focus at Toyota right now — for the individual chief engineers to consider opportunities for common parts.

Toyota is attempting to create more North American production capacity. But that also means boosting your supply chain's capacity. Are you working with suppliers to help them produce more?

Yes. And a part of that problem is finding all the people they need to do that. We're talking to our suppliers about trying to help them with best practices for attracting and retaining labor in their area.

That's not a problem everywhere. But you go into some areas and — bang!— everybody in that state is struggling. And every time a new employer moves into your area, it has an impact.

Our local plants are very attentive to the situation, and when it shows up, we'll dispatch people to see if they can help the supplier with employment needs.