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Knowledge Management &Building Relationships in B2BNetworkToyota Case

Project Report - Business to

Business

Group 2, Section B

Debanik Basu

Gaurav Gupta

Julie Pages

Nitin Gupta

Santosh Matala


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Toyotas Value chain (source : 100ventures.com)

In the Kaizen strategy which is followed by the company, it tries to

empower employee through mechanisms such as the system and qualitycontrol (QC) circles. Toyota's management philosophy has been reflected

in the terms like "Lean Manufacturing" and "Just In Time", which has

been adopted world over.

Overcoming the knowledge Sharing Dilemmas: Toyota

Way

There is a big challenge to any value chain for an auto maker. Challenge

for the company lies in knowledge sharing with suppliers and other

players in the value chain. But it has been seen that knowledge diffusion

occurring at Toyota Motors has been much more successful than its

competing auto makers. Toyotas has been able to effectively create and

manage network-level knowledge-sharing processes at least partially

explains the relative productivity advantages enjoyed by Toyota and its


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suppliers. The evidence is there that suppliers do learn more quickly

after participating in Toyotas knowledge-sharing network.

Lets analyse how Toyota managed its knowledge sharing dilemmas.

Encouraging Suppliers

Toyota encouraged suppliers to openly participate in sharing knowledge,

as it believed collective learning is superior. And to encourage suppliers

to participate and openly share knowledge, Toyota has heavily

subsidized the network (with knowledge and resources) during the early

stages of formation to ensure that suppliers realize substantial benefits

from participation. Suppliers are motivated to participate because theyquickly learn that participating in the collective learning processes is

vastly superior to trying to isolate their proprietary knowledge. Toyota

has also introduced a number of network-level knowledge sharing

processes that have, over time, helped create a strong identity for the

network.

Addressing free-rider problems

Network rules were setup so that suppliers can access knowledge once

they agree to share their knowledge. In such network rules, company

also included severe consequences for violating the rules, so to reduce

such violations and bring in more discipline. Finally, to ensure that the

network is efficient at tacit knowledge transfers, Toyota has created a

highly interconnected, strong tie network with a variety of processes that

facilitate knowledge transfers. The network has multiple pathways

among members (effectively eliminating most structural holes). Toyotas

strong tie network is well suited for the diffusion (exploitation) of

Toyotas production know-how (e.g., the Toyota production system) as

well as the existing know-how that resides within its suppliers.


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Creation of network identity

Toyota realized that if a network can create a shared identity among

members, then that shared identity can lower the costs of sharing

knowledge within the network. Also, the diversity of knowledge that

resides within a network is much greater than that which resides in a

single firm. Company realized that if the network can get its members to

cooperate in a social community it will create learning opportunities far

superior to firms that do not reside within such a network. Toyotas

network is effective at knowledge sharing, in part, because a strong

network identity has emerged and the network has established rules

(network norms) that support coordination, communication, and learning.

In Japan, Toyotas network is known as the Toyota Group and Toyota

openly promotes a philosophy within the Toyota Group called

coexistence and co prosperity (Kyoson kyoei in Japanese). Toyota has

also promoted this philosophy as a core value held by Toyota in a

manual (called Selling to Toyota) that they created to help U.S.

suppliers learn how to best work with Toyota.

Kyohokai / Suppliers Association


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Philosophy and Belief - Toyota promotes philosophy in network

coexistence and co-prosperity (Kyoson kyoei in Japanese) US context.

Quality Cars require Quality Suppliers.

Kyohokai Kyohokai is the suppliers region. It was first established

in 1943 to promote mutual friendship and exchange of technical

information. Later it was extended to Mutual development and training

among its members. Kyohokai is divided into 3 regional associations

based on geographical proximity. This association conducts general

meetings every month Sharing explicit knowledge on topics (cost,

quality, safety etc).

Quality Committee - Number of initiatives are taken to increase the

amount of knowledge in the network to promote product quality. Regular

Committee is set up, which picks up a theme (based on Suppliers inputs)

for the year. These committees then meet six times and and discussions

are based on the theme.

Apart from the above points, more programs are held to enhance the

transfer of both explicit and implicit knowledge. Basic quality Trainingprograms are held for suppliers. These also include excellent plant tours.

Annual quality management conference are also held which includes

lectures and case discussions- 2 plant managers cases, 2 supervisors

cases, and 2 quality circles cases.

Toyotas replicated kyohokai in the USA in 1989 - Setup Bluegrass

Automotive Manufacturers Association (BAMA)

Consulting Teams / Problem Solving Teams

Toyota established its Operations Management Consulting Division

(OMCD) in the mid- 1960s. Main objective for this division is solve

operational problems (Toyota & suppliers). OMCD is the organizational

unit within Toyota with responsibility to acquire, store, and diffuse

valuable production knowledge that resides within Toyotas production

network. This provides direct on-site free assistance to all memberssuppliers to sort out problems. Average No of visits 4.2 per year. The


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U.S. version of OMCD is setup in 1992 (TSSC Toyota Supplier Support

Center). Problems faced in transferring tacit knowledge can be the cultural

and management issues and consultancy projects are time consuming

and resource intensive.

Benefits through TSSC

Supplier started learning faster after TSSC

Inventory reduction of 75%

Productivity improvement by 124%

Problem solving teams from TSSC / QAD from Toyota

Fix quality problems and enable supplier-supplier KS

Jishuken

OMCD organized key suppliers into voluntary study groups (a.k.ajishuken). Each group had similar production processes. Members in

each group to assist each other with productivity and quality

improvements. Group formation is based on geographic proximity,

competition and relations with Toyota. Groups usually reorganized every

3 years to maintain diversity of ideas.

Activities of Jishuken :

Determine central theme for the year

Visit each others plants as consultants along with an OMCD

member

Consulting Phases

Preliminary inspection

Diagnosis and experimentation


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Presentation

Follow up/evaluation

Annual meeting of all jishuken groups to share knowledge

Plant Development Activity (PDA)

Plant development Activity or PDA was established in 1994 to replicate

jishuken model in US. Initially it was formed with 3 groups with 11

suppliers in each group, but later on 15 more suppliers were added to it.

Although , it led to problems with experienced suppliers getting frustratedwith lacking skill and knowledge base of inexperienced suppliers. To

manage that, Toyota then had to reorganize them into 4 groups based on

skill set : -

Orange (High skills; high experience)

Blue (High skill; medium experience)

Green (Medium skill; medium experience)

Purple (Low skill; low experience)

There were a certain criteria to which suppliers must meet in order to be

eligble for membership of PDA. Supplier must be member of Bluegrass

Automotive Manufacturers Association (BAMA) for atleast 1 year. This is

to ensure that suppliers are assimilated into BAMA. It would also ensure a

commitment from top management. Primary aim was to create more of a

learning team rather than jishuken which are consulting teams.


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Shukko

Shukko is the inter-firm employee transfers practice followed by Toyota

and many Japanese firms. There are number of reasons because of which

Toyota favours employing Shukko. Some of them are : -

Helping assemblers maintain control of suppliers

Opportunity to shed unwanted employees

Creating network identity

Transferring knowledge from Toyota to suppliers

Understand supplier perspective

Transfers can be permanent or temporary

Network System


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Such a network system creates a social community among suppliers. It

facilitates face-to-face interaction, while encouraging knowledge sharing;

also it enables a lower cost of participation and increases value of

participation.

Maximizing Efficiency of Knowledge Transfer

As had been discussed, Toyota employs variety of processes available for

knowledge transfer - Jishuken, Suppliers Association etc. Each type of

knowledge (tacit, explicit) is matched with the process (bilateral,

multilateral) for highest efficiency.

Toyotas US Knowledge Sharing Network

Toyota successfully replicated its knowledge sharing network in US as well

in a course of time. The following steps were taken by it for the same :


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Phase 1: Developing Weak Ties:

Relationships of suppliers with Toyota were new

No interaction b/w suppliers

Knowledge Sharing Non-Existent

Initiated Knowledge Sharing

Established Suppliers Association expl. Knowldg.

Created weak social ties among suppliers

Supplier Motivation Show commitment to get more business

Phase 2: Developing strong bilateral ties:

Consultants at Suppliers Facilities

Transferred tacit know-how

Reciprocal Knowledge Sharing

Feeling of indebtness and openness within suppliers network

Comfortable with knowledge transfer activities

Supplier Motivation Receive Knowledge Transfer from Toyota

Phase 3: Developing strong ties among suppliers

Divided Suppliers into Small learning teams Maximize learning

Subnetworks within network

Toyotas control over network Leadership position

Supplier Motivation Rapid knowledge acquisition to be more

competitive


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Evolution of knowledge sharing network

Toyotas knowledge sharing model who has implementation has been

time consumeing and resource intensive has been highly successful. Main

reasons for its success are :

Top management commitment

Nurturing Sharing culture

Flexibility in decision making

Building and maintaining high levels of trust


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Conclusion

Toyotas knowledge sharing models successfully solves three dilemmas of

value chain, which are, motivated members to participate and openly

share knowledge, prevented members from free riding and efficiently

transferred both explicit and implicit knowledge. It also shows that firms

can achieve competitive advantage by building strong relationships with

the suppliers and among the suppliers. The shared identity lowers the

costs of communication and establishes explicit and tacit rules of

coordination. Network can be more effective than a firm at the generation,

transfer, and recombination of knowledge due to greater diversity of

knowledge within a network.


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References

The knowledge value chain: a pragmatic knowledge

implementation network, Catherine L. Wang & Pervaiz K. Ahmed,

Emraldinsight

Creating and managing a highperformance knowledge-sharing

network: the Toyota case, Jeffrey H. Dyer and Kentaro Nobeoka,

Strategic Management Journal

http://en.wikipedia.org/wiki/Toyota

http://www.1000ventures.com/business_guide/im_value_chain_main.

html

History of the TPS, Toyota Motor Manufacturing Kentucky Site,

http://www.toyotageorgetown.com
http://en.wikipedia.org/wiki/Toyotahttp://www.toyotageorgetown.com/http://www.toyotageorgetown.com/http://en.wikipedia.org/wiki/Toyota

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