available in something went wrong it was no longer sensible to – ‘just case’ – relegate quality inspection and rectification to the end of the production line. Instead, Toyota adopted a new mentality towards quality which had been developed in the US by Deming (1986) and Juran (1989) Total Quality – Control. This involved embedding a mentality of zero-defects into work organisation, and this required the adoption of in-process quality-at-source procedures. Thus the Toyota model moved away from the principles of mass production (large volumes of standardised products, very large in ‘just case’ inventories and end-of-line quality control) to a new system of flexible production in small batches of inventories, and quality-at-source). (‘just time’ However, at the same time, restructuring of its internal operations Toyota’s occurred in a context in which it, and its fellow Japanese auto firms, sourced much more of its inputs from external suppliers than did their US competitors. Typically a US auto firm was vertically integrated and would produce more than 60% of the value of a car internally. Henry River Rouge plant built Ford’s in 1927 pioneered the principles of mass production and took this internalisation to the extreme. It produced nearly 100% of the value of the car, including the manufacture of its own steel making plant. By contrast, Toyota (and other Japanese producers) bought in more than 60% of the value car’s from suppliers (Hoffman and Kaplinsky, 1988). The confluence of these two developments the move from mass production – to lean production, and the greater reliance on external suppliers forced – Toyota to develop a structured approach towards managing its supply chain. It realised that, unless its suppliers adopted the same just-in-time and processes which it had developed in its own plants, it would not be able to effectively make the transition towards low-cost flexible production. However, it also recognised that its suppliers were not ready themselves to make the transition to the new form of production organisation. Hence, over a period of almost two decades, Toyota established procedures to restructure operations with its supply chain, beginning with its core, first-tier suppliers. But these first tier suppliers were themselves dependent on purchases from second-tier suppliers, who in turn were dependent on third- and fourth-tier
available – ‘just in case’ something went wrong – it was no longer sensible to relegate quality inspection and rectification to the end of the production line. Instead, Toyota adopted a new mentality towards quality which had been developed in the US by Deming (1986) and Juran (1989) – Total Quality Control. This involved embedding a mentality of zero-defects into work organisation, and this required the adoption of in-process quality-at-source procedures. Thus the Toyota model moved away from the principles of mass production (large volumes of standardised products, very large ‘just in case’ inventories and end-of-line quality control) to a new system of flexible production (‘just in time’ small batches of inventories, and quality-at-source). However, at the same time, Toyota’s restructuring of its internal operations occurred in a context in which it, and its fellow Japanese auto firms, sourced much more of its inputs from external suppliers than did their US competitors. Typically a US auto firm was vertically integrated and would produce more than 60% of the value of a car internally. Henry Ford’s River Rouge plant built in 1927 pioneered the principles of mass production and took this internalisation to the extreme. It produced nearly 100% of the value of the car, including the manufacture of its own steel making plant. By contrast, Toyota (and other Japanese producers) bought in more than 60% of the car’s value from suppliers (Hoffman and Kaplinsky, 1988). The confluence of these two developments – the move from mass production to lean production, and the greater reliance on external suppliers – forced Toyota to develop a structured approach towards managing its supply chain. It realised that, unless its suppliers adopted the same just-in-time and processes which it had developed in its own plants, it would not be able to effectively make the transition towards low-cost flexible production. However, it also recognised that its suppliers were not ready themselves to make the transition to the new form of production organisation. Hence, over a period of almost two decades, Toyota established procedures to restructure operations with its supply chain, beginning with its core, first-tier suppliers. But these first tier suppliers were themselves dependent on purchases from second-tier suppliers, who in turn were dependent on third- and fourth-tier