Toyota, the outsourcing recall

Outsourcing is focused to reduce costs, although there are additional advantages such us :
- risk pooling
- reduce capital investment
- focus on core competency
- Increased flexibility

Weshould differentiate between integration (dependency on knowledge) and outsourcing (dependency on capacity). In both cases there is an external supplier producing for the client. The difference resides inwho has the deep knowledge of the product and the know-how of the process. The client may transfer the technology to its supplier, but it is not easy to pass on the expertise.

We find obvious tointegrate a radio. We find logical to outsource the production of the auxiliary components. But Toyota has outsourced not only the production of low valued components, also main subsystems astransmissions, and even the design and production of the vehicle electronic systems. We realize outsourcing is an effective business operation to make the most of an activity. But this should be limited tolow-value components (productive value scale) with reduced incidence on the final product quality (functional scale).

Most failures detected in the Toyota's recalled vehicles point to subcontractedcomponents. Specialists have found leaky brakes, faulty fuel pumps, raw materials quality and modifications of the accelerator pedal design. Obviously, subcontractors as Chicago Telephone Supply Coshare with Toyota the same objectives : high benefits and reduced costs.

Toyota should revise :
- Outsourcing extremist policy :
. Only 30% of the car components are in-sourced. Last problemsshould help Toyota to identify (same waste concept of the TPS kaizen methodology) which processes are giving an added value to the product.
. Process improvements are mainly driven directly fromthe own process.
. The Toyota's just-in-time method applied to its suppliers is turned into just-on-time. So, almost all efforts are dedicated to productive activities. R&D and Quality,...