Toyota Global Sourcing Perspective

& Journey in India

Mr. Atsushi ToyoshimaManaging Director

Toyota Kirloskar Motor Private Limited

ACMA ANNUAL SESSION AND CONFERENCE

September 2, 2003

Content

1. Introduction

2.Toyota Global Sourcing Policy

3. Toyota Journey in India

4. Sourcing from India – Toyota initiative

Content

1. Introduction

2.Toyota Global Sourcing Policy

3. Toyota Journey in India

Overview of ToyotaTOYOTA MOTOR CORPORATION:

• Establishment August 28, 1937 • Employees 247,000 (TMC Japan:65,000)• Sales volume (2002) 6.16 million Vehicles in 160 countries• Net Revenues (2002) US $ 107,443 million • Overseas Operations 46 Manufacturing Units in 26 countries Plus 12 Plants & 11 mfg subsidiaries in Japan

3rd Largest Auto Mfr in the World

TOYOTA KIRLOSKAR MOTOR:

• Establishment October 6, 1997 • Investment Rs. 9 billion• Employees 2,300 (Two shifts)• Sales volume (02-03) 30,000 (Qualis, Corolla & Camry)• Vendors 82 Tier I Suppliers • Group Co’s Investment Rs. 3 billion (11 New Units)

Growth of Toyota In India• Start of Volume Prodn : Dec 1999• Current Capacity : 50,000 units / annum• Sales Plan (03-04) : 44,400 (all models)• Current Models : Qualis, Corolla, Camry (CBU)

3519

25361 2500629836

44400

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

TOTA

L SA

LES

APR - MAR' 00 APR- MAR ' 01 APR- MAR ' 02 APR- MAR ' 03 APR- MAR ' 04(PROJECTED)

FINANCIAL YEAR

YEAR ON YEAR SALES FIGURES

Content

1. Introduction

2.Toyota Global Sourcing Policy

3. Toyota Journey in India

Equal partnerSharing target for mutual Prosperity through Mutual trust

Supplier for Toyota is Basic Purchasing Philosophy

1. Open & Fair

2. Mutual Trust & Mutual benefit

3. Contribution to local economy through localization

Basic Purchasing Policy

Toyota`s approach to purchasing

Global Optimum Purchasing Programme

1. Global Cost comparison

2. Add New Supplier, New Technology

3. Enhance current suppliers global competitiveness

Optimum Global Purchasing programme

Application in India……..

Content

1. Introduction

2.Toyota Global Sourcing Policy

3. Toyota Journey in India

55 59

82

100+

1999 2001 2003 2005

TKM Component Supplier base Expansion

< No.of Suppliers >

Localization efforts Corolla launchExport Projects

StartupSetupSmooth startLocalization drive

Enhance (Transition) Quickly Enhance CompetitivenessBenchmark, Overall improve

ExpansionDomesticExports

Import Reduction (Qualis)2000 to 2003

Import

Local

At TKM At Supplier

Import

Local

30% Down 50% Down

TKM Parts Supplier base Expansion

55 59

82

100+

1999 2001 2003 2005

< No.of Suppliers >

Localization effortsCorolla launch

Export Projects

StartupSetupSmooth startLocalization drive

TKM Parts Supplier base Expansion

55 59

82

100+

1999 2001 2003 2005

< No.of Suppliers >

Localization effortsCorolla launch

Export Projects

StartupSetupSmooth startLocalization drive

Enhance (Transition) Quickly Enhance CompetitivenessBenchmark, Overall improve

ExpansionDomesticExports

Application of Global Policy in India

Supplier Base Study Technology, capability mapping

SE Activity Supplier participation from Concept stage

Startup & Enhance phase

Supplier Parts Tracking Team Formation(SPTT) Close interaction during development

Target Value System For Continuous improvement

Target Value System For Continuous improvement

Based on Performance,TKM to fix Challenging butAchievable New Targets

Year 1 Year 2 Year 3

Target 1

Target 2

Target 3

Suppliers to achieve targetsgradually by continuousimprovement

Performance

<Need based support from TKM>

3 Pillars of Target Value System• Delivery – Timely Supply <TKM Support> - Unique Milk run system ensures effectiveness, -TPS implementation in Supply chain Concerns Points: Transport Strike, infrastructure

• Cost- Best Cost + Continuous improvement activity ongoing through out Supply chain

Concern points: Productivity, Tax Barriers, Raw Material- not cost based

• Quality- Incoming quality (PPM) Big Gap…..needed special focused activity

Quality Case….

Big GapTraining, continuous education focusing quality

Top Management Involvement

Awareness Involvement

Prioritization Education

Supplier Company Wide awareness of Quality importance & necessity

Quality to be prioritized from Top to Last member

Approach adopted…

Incoming Parts Quality..6.86.8

1 0.5 0.8

Thailand Indonesia Australia IndiaTaiwan

1.8

Index(Thailand)

Toyota Experience

2001India

2003

1.1

3.73.7

2002

55 59

82

100+

1999 2001 2003 2005

TKM Parts Supplier base Expansion

< No.of Suppliers >

Localization effortsCorolla launch

Export Projects

StartupSetupSmooth startLocalization drive

TransitionQuickly Enhance CompetitivenessBenchmark, Overall improve

ExpansionDomesticExports

Expansion & Exports

Govt policies Aligning Global Trend

Suppliers Participation Efforts towards Target achieve

Export Initiatives

Increasing environmental awareness

Intense Competition among economies

Emergence of economic blocks & WTO

Business EnvironmentGlobal

Regional Trade Blocks

Increasing environmental awareness

Emergence of economic blocks

Competition among emerging economies

Business Environment

Aligning towards rest of the world – WTO Encouraging Government Policies- Duty Reductions -Tax reforms- Increased spending on infrastructure

Barriers coming down - Tariff - Non Tariff

Global

Local

Cost Comparision (Ex: T/M Parts)

100 109132

020406080100120140

India South East Asian Countries Japan

Countries

Cost

Inde

x

Strengths WeaknessStrong Supplier Base Volume Internal Resources Material PricingTechnology & Engineering Skills Consistent Quality

Tarrif

New Transmission Project- EOU

TOYOTA KIRLOSKAR AUTO PARTS:

• Establishment April 2002 • Investment Rs. 4.8 billion • Product Automobile Transmission• Volume 168,000 units / annum• SVP June 2004 • Nature of operation 100% EOU • Exports Destination Asia, Africa & South America

Aluminum Die-casting and machining in Kirloskar Toyoda Textile Machinery Ltd – another new EOU

Additional to Transmission EOUPart Exports..

82

0

100+

10%

2003 2005

Total Supp

Part Export

By 2005 10% of Suppliers to Export Parts

•Unique Model to Global Models

•Direct Global comparison

•Direct Opportunities

Toyota as a Global company Can be Platform to jump for Global Business It is up to Suppliers to Challenge…..

For Export competitivenessIssues to be addressed…..<Internal>

Benchmark Globally: Cost,Quality, Delivery, Quick catch up

Technology is Key Eco & Safety

Govt Initiatives Infrastructure, Tax Reduction

<External>WTO and Intl Trade

Trade Blocks, WTO commitments, Harmonization of standards, etc

CONCLUSION:

• Toyota Global Sourcing is purely based on merits of Quality, Cost and Delivery

• Toyota believes in equal partnership concept with Suppliers

• Regional trade blocks & WTO will have an impact on global sourcing policy

Thank You