INNOVATION
and functions, rather than on a given drawing, offer them opportunity to bring in innovation resulting from their R&D. They take responsibility for innovation and, although our profitability remains high, the supplier is capturing more value by working closely with us. The approach we have adopted helps us make advances in powertrains such as hybrid, electric and hydrogen- powered cars; in contrast, in the field of connectivity and digitalisation, we need to stretch ourselves to also open our doors to disruptors and non- automotive players. This is a major challenge for us to onboard these new partners. Many of them are a different size, work to different timescales, and have a different mindset to our existing automotive partners. It’s a very good stimulus for us to adapt our ways of working. New approaches to onboarding small innovative suppliers As said, our onboarding process is a challenge for the smallest partners. Even though we need them to guarantee efficient and top quality product development, both our terms and conditions, as well as our concrete requests during development, can be perceived as intimidating for start- ups and small companies. We need to work to make that onboarding easier and change our mindset to build relationships that create trust more rapidly. We need to understand that mutual trust developed through historical partnerships cannot be given overnight to companies we don’t know. We need to speed up the pace at which we build trust with partners. Over the next decades, we’re going to see the way people travel transformed. The automotive industry needs to lead this transformation or risk being side- lined. While Toyota has become a world leader in supplier relationships in our industry – and these relationships have boosted our innovation – the techniques we have built in the past will not be enough to maintain our position in the future. By finding new ways of working with our smallest suppliers and high-tech start-ups, we can ensure our history of world-leading innovation continues long into the future.
We are looking to technology firms to help us, as a host of in-car services becomes possible. To ensure success, we need to work with them very differently to the way we do with incumbent suppliers.
New challenges in automotive and supplier relationships But to continue to make progress in these areas, we need to work with some suppliers in new ways. Not only will automotive firms buy goods and services from technology suppliers, they will also become providers of data which could become part of services involved with navigation, fuel saving, maintenance, insurance and so on. It fundamentally shifts the relationship between these suppliers and OEMs. These companies will not simply be suppliers, but partners in the way we both serve customers. We are looking to technology firms to help us in this transition, as a host of in- car services becomes possible as mobile internet is boosted by 5G mobile data. To ensure success, we need to work with technology companies very differently to the way we do with incumbent suppliers.
Success stories with supplier innovation
But it’s tough to work in new ways because we’ve had years of success built on a deep working relationship with existing suppliers. Our work with them is almost intrusive – in a good way. We are in their factories nearly every day. We support the development of their manufacturing processes and if there’s a problem. If a supplier has a crisis, we often help. We also make sure that, after deep negotiations, we sustain our word and pay our partners on-time. Late payment is not an option for us. In return, we need our supplier to focus on cost, quality, delivery and innovation. Over the last 20 years, we have helped suppliers become more involved with projects. The latitude for them to work on our generic specifications
2019 GLOBAL SRM RESEARCH REPORT
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