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The Toyota Group and the Aisin Fire

October 15, 1998 | Toshihiro Nishiguchi , Alexandre Beaudet | Strategy

The collaborative response of Toyota's suppliers to a devastating crisis holds lessons for businesses adopting the Japanese model of long-term supplier partnerships and for businesses moving away from that model. The cooperation and trust that develop in a supplier network promote flexible and coordinated responses to crises. They also foster long-term competitiveness through groupwide efforts to solve daily problems and improve performance.

On February 1, 1997, a fire erupted at one of Aisin Seiki's plants. Aisin was the sole supplier of proportioning valves, a brake-related part used in all Toyota vehicles. Because Toyota and Aisin operated in a just-in-time environment, only a small supply of stock was on hand, and a costly shutdown of Toyota-group plants seemed unavoidable. Yet, through a self-organized effort by firms inside and outside the Toyota group to establish alternative P-valve production sites, assembly plants were reopened after only two days of shutdown. The effort was orchestrated with only limited direct control from Toyota and with no conflict over technical proprietary rights or financial compensation.

The episode demonstrates the benefits of clustered firm networks. In a JIT environment, workers and managers acquire capabilities for effective problem solving. Several practices within the Toyota group, including knowledge sharing and regular transfers of employees among group firms, support efforts to develop these capabilities. These practices facilitate learning, encourage teamwork, and foster common understandings of operations among group members. Cooperation is also promoted by Toyota, which disseminates general approaches, giving firms the tools to self-organize and deal autonomously with emerging problems.

Emulating Toyota's model is not easy. Nevertheless, by investing in supplier capabilities and promoting knowledge sharing among suppliers, firms can reap substantial gains in long-term competitive performance.

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