How Negotiators Can Leverage the New Supply Model
Toyota is at it again, and manufacturers globally are following suit. This creates opportunities for suppliers to get new customers.
A few decades ago, companies around the world marvelled at Toyota’s “just in time” model for supply-chain efficiencies and economies of scale. By having suppliers deliver parts a few hours before they were used, manufacturers saved on warehouses and the people to manage them. The system worked because parts came from a small group of loyal suppliers. Carlos Tavares, the chief executive of Chrysler parent Stellantis, was quoted in the Wall Street Journal saying that 95% of the 400,000 parts used in Chrysler, Ram, Fiat, Peugeot and their other brands came from a single source (Auto Makers Retreat From 50 Years of ‘Just in Time’ Manufacturing, behind a FT pay wall).
Toyota has significantly modified its model because of shocks that disrupted supply chains – earthquakes, extreme weather, Covid, and so on. A fire at just one factory curtailed output at Toyota, Nissan, and others for months. Toyota’s new model is to identify hidden chokepoints. In many cases, supply shortfalls were not because of problems at Toyota’s direct supplier but the companies from which the suppliers got their components. In response, Toyota built a database covering 400,000 items to show their suppliers’ own supply chain, reaching as far as ten layers down. And Toyota told its suppliers to stockpile parts, especially parts which came from a single source.
The global shortfall in semiconductor chips which has curtailed output of automobiles and many other items has accelerated the campaign to identify hidden chokepoints. Many manufacturers are realizing that they can be shut down by inadequate supplies of tiny stuff they were not managing closely. This creates an opportunity for many negotiators to approach companies that previously ignored them. Clever, well-informed negotiators can make the case that their firms provide a safety valve, an alternative source of supply in case the traditional supplier gets hit by a fire, an earthquake, extreme weather, or whatever. We at Mobus Creative Negotiating offer a wide array of tips for creative brain-storming about customers who would never let you in the door before.