Japanese Automakers, U.S. Suppliers and Supply-Chain Superiority

U.S. automakers have followed the lead of Japanese-owned operations in the United States and are practicing lean manufacturing, which focuses on delivering the best product of the highest quality at the lowest cost on time every time. A key part of lean manufacturing is just-in-time (JIT) delivery -- getting the right part to the right place at the right time.

For automakers to effectively practice a lean approach, it would seem critical that suppliers make the transition from traditional mass-production systems to lean systems internally and in their logistics practices. In fact, the logistics practices and internal management policies of the automakers -- in other words, of the customers themselves -- have an even more profound impact on the supplier's ability to respond with lean systems.

So found the authors in an unprecedented study on the performance of U.S. suppliers to the automotive industry in North America. To compare the policies and practices of the Big Three automakers and the Japanese transplants, the authors surveyed supplier plants that made comparable products for both U.S. and Japanese customers. Their comprehensive data demonstrate the impact of customer policies on supply-chain management: U.S. suppliers perform at much higher levels when they are supplying Japanese automakers than when working with U.S. automakers.

How did the Japanese transplants develop superior, lean supply chains in North America? They worked with their suppliers to develop lean capabilities. They leveled their own production schedules to avoid big spikes in demand, which enables suppliers to hold less inventory. They created a disciplined system of delivery "time windows" that designate when specific parts shipments are due. They developed lean transportation systems to handle mixed-load, small-lot deliveries. They encouraged suppliers to ship only what was needed by the assembly plant at a particular time. Most important, the Japanese operations understand that creating a lean supply chain requires a give-and-take partnership across all the links in the supply chain.