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Toyota's chip management provides lessons for GM, Ford and others

Jamie L. LaReau, Detroit Free Press on

Published in Business News

General Motors' virtual command center has been running 24 hours nearly every day since the first of this year.

There, supply-chain managers act like air traffic controllers. They talk to every level of supplier, down to the smallest to direct scarce parts with semiconductor chips to factories that build GM's bestselling and biggest profit-making vehicles.

GM says it has mitigated the ongoing worldwide chip crisis because of improved supplier relations, played out daily in its virtual command center.

But it wasn’t always that way for GM. It certainly is not that way for Ford Motor Co. and Stellantis. The latter two companies have lost points on Plante Moran's 2021 North American Automotive Manufacturer - Supplier Working Relations Index. But GM gained 20 points in this year's index to lock down third place behind Honda and No. 1 Toyota.

Toyota's had consistently strong supplier relations. It's partly for that reason that some industry experts say Toyota has fared the best so far in the chips crisis.

Plus, Toyota's dealers are used to operating with low inventory. And Toyota has perfected building only the fastest-turning combination of vehicles, creating efficiencies in pushing sales volume, even amid the crisis.

 

Proof is in the fact that Toyota outsold GM in the U.S. last quarter. It was the first time GM has not been the top-seller in this country since 1998, though Toyota's sales boss on Wednesday said it is likely unsustainable.

Still, the Japanese automaker could provide some lessons to the Detroit Three, some industry experts say.

"The auto industry is getting better at managing their first-tier suppliers, but they figure, 'If I do a good job at managing my first tier, everyone else will fall into place,' " said Steve Melnyk, professor of supply chain management at Michigan State University. "What Toyota learned in the 2011 tsunami is that you have to cover the critical elements of your supply chain and that’s the second and third, the lower tiers of the supply chain."

A shared suffering

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