While looking through our archives of materials related to Toyota associated operations, I ran across a posting that I included in an early internal publication.  It illustrates the early thinking (pre-1995) on how to implement parts consolidation to maximize the transportation economics while also minimizing unnecessary inventory.  The added benefit was the saving of space which could be used for more productive operations.  Our approach included both domestic and overseas sources that produced components which required a complex system combining system driven forecasting and manual/system driven Kanban for parts generation and movement.

So, what does all this mean?  I have included below an enlarged view of the above article graphic that addresses Expanded Parts Consolidation Plan.  This diagram shows how parts from both US Sources and Overseas Sources feed into the Parts Distribution Center (PDC) or into the manufacturing facility.  Basically, the raw material to be formed was received into the main facility and sub-assemblies and already formed components were received into the PDC.  As in the diagram, the domestic parts feeding into the PDC are transported from the suppliers to the PDC using a “milk run” approach as explained in the above diagram.  In volume 16 of From the Archives of a Common Sensei we discussed how the basic early US JIT model projected out 3-6 months at a time and was locked 1 month.  The actual delivery of domestic components was “pulled” from the PDC or raw stock using Kanban (component order release cards or “signals”) from our production lines.  Generally, the most expensive components would be in and out of the PDC within a week and often eventually were sent directly to the manufacturing line directly from the inbound container/truck.  Also, we eventually got to a situation where major components (e.g., engines) could be scheduled for packing at the source (both overseas and domestic) such that they would be offloaded in the sequence that the assembly line required them at TIEM.  That is sequential JIT!

The takeaway from all this is: analyze your components (perhaps using a simple 80/20 rule) to decide where to place your emphasis.  Generally, 20% of the components will make up 80% of the cost.  We tried to “direct source/supply” our most expensive components and spent a lot of time and effort in getting that right!  Scheduling and component design for interchangeability are important for correct and JIT assembly sequencing.  Yes, you also need to pay attention to getting the 80% of the components right, but generally, they will likely be common and cross over various assembly models, thus requiring less sequencing concern.

While some of this may seem common sense practice, I have worked with many businesses where trouble shooting and immediate result pressures override taking a more “systems thinking” approach.  While at TIEM, there was plenty of trouble shooting in the early days to make progress while starting up.  As this proved exhausting for everyone, we began to do the firefighting for some actions necessary for “today” but moved toward a “systems thinking” means for growth.  If we were spending 80% of our time fighting fires, we began to shift that to below 20% so long-term practices became the way of working.

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From the Archives of a Common Sensei Volume 17: SUPPLIER RATING SYSTEM (example from early US Toyota Operation)

In this volume of From the Archives of a Common Sensei, we are providing an example of the “Supplier Rating System for Parts and Raw Materials”. This example provides a foundational, but beneficial, means for evaluating your suppliers by rating their performance against your expectations. At Toyota Industrial Equipment, in the early days (1994), we assessed supplier performance against the foundational classifications of quality, cost, and delivery. Within these categories, we used sub-categories to provide additional detail and validation. These in turn were rated using a 6 (exceptional) to 1 (unsatisfactory) scale. By using the calculations on page 2 through page 7 to provide data for each supplier delivery, you can transfer those points to page one to calculate the overall picture for that specific supplier’s delivery. By accumulating these ratings, they can be used as valuable input to future supply contract winner negotiations and determination. Couple this type of supplier rating with physical operations visits and financial review and you will have a surprisingly good view of how that supplier will perform in the future.

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