Toyota: supply chain will be ready by autumn for next big quake

Fri Mar 2, 2012 2:59am EST
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By Chang-Ran Kim

YOKOHAMA, Japan (Reuters) - Toyota Motor Corp (7203.T: Quote) will have in place by autumn a more resilient supply chain that would recover within two weeks of another massive earthquake hitting Japan, a top executive said on Friday.

Japanese automakers have been working to disaster-proof their sprawling supply chains ever since last year's March 11 earthquake and tsunami devastated the country's northeastern coast, forcing many to halt or reduce car production for more than six months.

"We'll know by the end of March what contingency measures will be taken by all the supply sources and have those in place by around autumn," executive vice president Shinichi Sasaki, who oversees purchasing at Toyota, told a small group of reporters.

Sasaki said Toyota has now mapped the supply-chain make-up of about half of its 500-plus direct suppliers in Japan, allowing it to identify 1,500 sites responsible for Toyota's components. Of those, he estimated about 300 were "at-risk" locations that were single sources for almost 1,000 parts.

To safeguard against a disruptive earthquake, Toyota is asking those suppliers to either spread production to multiple locations or hold extra stock. Another option is to buy the part from another supplier, Sasaki said.

Those steps will be taken in tandem with efforts by Toyota to consolidate similar parts, providing suppliers with the economies of scale to set up a second facility, for instance, he said.

"Our plan is to manage risk while at the same time reducing costs," he said.

As part of broader efforts to lower costs, Toyota aims to develop common parts for about half of its 4,000-5,000 components within four years or so, Sasaki said.   Continued...