Small Business
Business INSIGHTS e-News for Manufacturers
Surviving Tough Times

Operational flexibility can make the best of a challenging situation.

Toyota's global sourcing strategies faced serious tests in 2011, and it was supply chain managers for both parts and people that helped handle the unexpected. Just as Toyota's production rose during the economic recovery - 18% in 2010 - it was hit by the Japanese earthquake and tsunami in March 2011. Suddenly, critical parts for North American vehicles were unavailable.

In response, Toyota assembly plants in North America scheduled non-production days. No vehicles were produced on Mondays or Fridays, and only 50% of normal production was scheduled for Tuesdays, Wednesdays and Thursdays through June 3. There were no layoffs. Instead, employees participated in training or improvement activities when the line wasn't running.

The supply-chain management group worked on countermeasures to alleviate the shortage of about 150 parts, with solutions like sourcing substitute parts from other suppliers. By June, North American production reached 70% of normal and by September it reached 100%. Then November's floods in Thailand stressed the company's global supply chains again. Toyota cut scheduled overtime until November 14 to conserve parts.

With its sub-tier supplier weaknesses exposed, Toyota is now mapping its entire supply network to better identify and plan for risk.

Toyota also uses a workforce supply chain, contracting with temporary employment companies like Kelly Services. The size of the contingent workforce can flex up and down as needed. Workers understand not only the conditions of temporary employment, but also the opportunity: Toyota often hires permanent employees from this pool. Contract workers receive training and learn how Toyota works, and managers see who would make the best Toyota associates.

Smaller companies can keep these thoughts in mind:

  • Using a good temporary employment company when production grows allows you to reduce staff if needed without laying-off company employees.
  • Lowering production rather than completely shutting down requires planning, as well as equipment that can run at varying rates, but does not cause inventory buildup or stock outs.
  • Using down time for training makes employees more valuable.
  • Process-improvement activities can set the stage for higher productivity and lower costs when things pick up.


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